College Rental Analysis

[Michael McKay]

Hi Everyone. Looking for feedback on a college rental I'm considering moving forward on.  Here is a link to the BP analysis that I ran. Below are a few notes:

• The house is a 4 bedroom and I'm going to make the dining room a 5th bedroom to add value.
• $3,000 for rent is a conservative estimate. I spoke to 50 students and several landlords and $600/room is the lower end of what they pay/charge per room. Many pay $700, but I'd rather rent it quickly the first year to get it cash flowing than sit on a vacant property.
• 1 year leases are standard in the area even for students. The students I spoke to all expected to sign for a full year.
• $200 Misc is for lawn care and snow removal, since I can't rely on students to take care of this. Again, I was conservative with this. Most landlords are paying $75-100/month for this
• I put 5% of the rent for vacancy, 5% for capex, and 5% for maintenance
• $25,000 maintenance is for a new roof, building a wall and door for the dining room, painting the entire inside of the house, planting new grass, and fixing the concrete deck. I also have an inspection contingency in case something expensive comes up during the inspection.
• Special insurance is needed for college students, hence $150/month.
• I'll be self-managing, but set aside 10% for a property manager.

Any feedback would be greatly appreciated!

[Roy N.]

@Michael McKay

Some quick observations from our experience with Student Housing:

1) Check the zoning / by-laws for the area to confirm the maximum number of unrelated adults permitted in a single dwelling.  College towns often have restrictions of 3 - 4 per dwelling to keep folks from packing students into houses like sardines.

2) We always use 8.33 (1mth per year) to 10% vacancy when analysing the purchase of a student house ... always best to have pleasant surprises.

3) 5% or maintenance and CAPEx is low

4) Your $25K make ready should give you an idea on CAPEx.

Are you planing to rent the entire house on a single lease or rent individual rooms?

An individual lease is easier administratively and you can pass all utility (including water) costs on to the tenants {we use a Utilities budget program whereby the utilities remain in our name, but the tenants pre-pay into an account every month.  We provide them with copies of the bills and every 3-months we reconcile}.