Just Made My First Offer

[Lin Yang]

Hi all! I've been binging on BP podcasts and recently just made my first offer on an income property back in my home state of Michigan. 

Link to the BP analysis: https://www.biggerpockets.com/calculators/shared/7...

Highlights: 

• $239k is the counter-offer seller made
• College rental with 10 bedrooms (1 2-bedroom unit, main house is 8 bedrooms)
• Fully rented it's grossing $4k monthly

What I'd love to hear from you guys:

• What am I missing? I've put in buffers for management company, vacancies, utilities, etc.
• Has anyone else ever purchased a college rental of this size?
• How do I agree on a fair price with the seller? There aren't really any comps given how big the house is.

Thanks for your thoughts!

[John Leavelle]

Howdy @Lin Yang

Congratulations on moving forward.  I have not worked with college rentals.  However, I have thought about it.  Your initial analysis looks very good to me.  A couple of things you might check on:

Is lawn care/Snow removal included in your expenses?  A lot of times it can be done by tenants.  But, probably not students.

What are the Market Rental rates for student rooms in the area?

Are rooms occupied for the whole year or they vacant in the summer?

How much and how often is there turn-over?

Is there any deferred maintenance to consider?  How much?  Have the property inspected to determine condition and life expectancy of major components and appliances.  You may be able to negotiate credit or discount in price.

The purchase price does seem fair considering the stated monthly income and your projected COCROI.  However, what you find during due diligence and the property inspection can change that.

Hope this helps.