College rental analysis

[Kyle Soderman]

I have been analyzing some deals in my area and have come across one that is of interest to me. This will be a college rental that is only 3 blocks off campus which is prime location for a college rental. 4 bed 1 bath SFR. Description: Updated Electrical. Spacious Kitchen. Cute Breakfast bar. Close to Campus. Onsite Parking. Convenient to Lake George, Gas Station, Food, and Bookstore. Large, Flat, Corner, Yard! 24 hour notice for showings. 

Here are the numbers:

Asking price: 89,900

Purchase price: 75,000 (this is the price that make the numbers work)

Operating costs:

Water: 75

Sewer: 25

Garbage: 25

Electric: 0

Insurance: 50

Lawn/ Snow: 50

Property tax: 1416.... 118/month

Vacancy: (3%) 38.40

Repairs: (7%) 89.60

Cap Ex: (10%) 128

Prop mgmt: (9%) 115.20  (I plan to self manage at first but later move to a PM)

Total operating expenses: 714.20/ Month

P&I: 286.45

Overall total expenses: 1,000.65/ Month

Total income: 320 per door= 1,280/ Month

Cashflow: 279.35/ Month   3,352.20/ Yr.

Closing cost: 2,000

Repair cost: 3,000 (have not walked the property yet, I am thinking it does not need much if any rehab)

Down payment: (20%) 15,000

Total cash needed: 20,000

COC ROI: 3,352.20/20,000= 16.76%

Sorry for the lengthy post. I would like to see what you all think of my numbers. Anything you notice may not be correct? Thanks!

[Phil Gearhart]

Originally posted by @Kyle Soderman:

Originally posted by @Brent Coombs:

@Kyle Soderman, student vacancy = only 3% per year? Just asking...

 It is exceptionally easy to rent out college houses in the area I am, especially 3 blocks off campus. Many landlords in the area have had 100% occupancy in the same area. It is also the norm to lease the house around 6 months in advance.

 hi kyle,

i have some student housing 1 1/2 blocks from USC.  no one gets 100% over any length of time.  student housing is extremely problematic.  students are not adults so you cannot expect them to treat your property with respect.  yes you are covered by the deposit, but you're going to have down time getting the house ready for the next tenants. a previous post mentioned "hardened"; very appropriate. 

over the long run even during the semester let alone the summer, some students are going to leave...guaranteed!  the other three students are not going to pay that students share.  you'll be faced with accepting rent from only 3 students until either they get a another roommate, somehow you get the other students parents to kick in or the lease turns over.  

there's great money in student housing, but it's more work and more costly than the equivalent standard housing.  the best way to make money in this situation is if the previous owner had not maximized the square footage and you were able to get an extra bed in there.

good luck!  you'll learn a ton about student housing, get your start on "mailbox money" and know how to look for square footage and layout that's going to get you that extra bed.

phil