Dallas, TX · Member since 2014 · 650 posts · 53 votes
Should this be avoided due to the obvious liability issues?
I have a line on a duplex for that rents for about $3,200 in gross rents. If i assume insurance runs about $3,000 / year and assume the 50% rule based on a 30 year note with 25% down at 4.8%, i'd have to get annual expenses to be around $10,000 / year (including the other expenses that would get me to 50% for the rule of thumb).
Those expenses seem high for a property that is < 10 years old, but given it's a college property, maybe that's more reasonable. At that price point, it's not worth it. If it's half that, it may be a bit of a gem.
so questions:
1) would you avoid it due to the clientele?
2) what is a reasonable expense ration to assume on a college rental at the upper end of the payment scale?
Hi Steve, I think you have to do the grunt work on this one. Especially, if you've never done college rentals before. Do a full assessment on the BP calculator. Think through all of the major systems of the house. E.g. the roof is 10 years old, has 15 more years of expected life, expected cost is $XX, amortize that over the 15 years.
It's obviously a lot of work, but you'll get a good sense of what the expenses will really be.
If your gross rents are $3200/month, or $38,400/year, the 50% rule would expect $19,200/year in expenses before debt service. Not sure where $10k came from.
What's the asking price?
Last thought, college rentals work our very well for some people. Been a few podcasts with investors who have great tips. Just go in with your eyes open.
Hi Steve, I think you have to do the grunt work on this one. Especially, if you've never done college rentals before. Do a full assessment on the BP calculator. Think through all of the major systems of the house. E.g. the roof is 10 years old, has 15 more years of expected life, expected cost is $XX, amortize that over the 15 years.
It's obviously a lot of work, but you'll get a good sense of what the expenses will really be.
If your gross rents are $3200/month, or $38,400/year, the 50% rule would expect $19,200/year in expenses before debt service. Not sure where $10k came from.
What's the asking price?
Last thought, college rentals work our very well for some people. Been a few podcasts with investors who have great tips. Just go in with your eyes open.
Thanks for the thoughts. I just didn't show all my math. PITI plus other small costs plus $10,000 got me to about $19,000. I'll work up the math and list in my next post
Hi Steve, I think you have to do the grunt work on this one. Especially, if you've never done college rentals before. Do a full assessment on the BP calculator. Think through all of the major systems of the house. E.g. the roof is 10 years old, has 15 more years of expected life, expected cost is $XX, amortize that over the 15 years.
It's obviously a lot of work, but you'll get a good sense of what the expenses will really be.
If your gross rents are $3200/month, or $38,400/year, the 50% rule would expect $19,200/year in expenses before debt service. Not sure where $10k came from.
What's the asking price?
Last thought, college rentals work our very well for some people. Been a few podcasts with investors who have great tips. Just go in with your eyes open.
So to follow up with some more details, based on a 4.8% mortgage over 30 years with 25% down, the Principal and Interest would be a total of $1,295 per month.
If gross rents are $3,200 then with 50% rule expenses would be $1,600 + the mortgage and interest of $1,295 totals $2,895 leaving $305 in profit per month.