My First Deal: Student Rental

[Michael Moskos]

Dear Bigger Pockets community,

I am working on acquiring my first rental property. The property is a student rental located in the Midwest. I am from the Chicago suburbs and the property is 3 hours from my residence. I have been told my first rental should not be so distant. Based on my market analysis, the numbers are in my favor and work for this property. I was hoping to solicit feedback from the community as to any experiences or advice you may have regarding this. My objective would be to hire a property manager.

Here are the numbers:

Purchase Price: $90,000

Monthly Rental Income/Revenue (Based on past and current rents): $1,300

Monthly Mortgage: $365

Expenses (Includes Property Manager, Maintenance, Utitlityes, Property Taxes, Insurance and Other Misc.: $630

I have my Cash on Cash return at 17% which is higher than my ROI%. Based on this I am also meeting the 1% rule. The numbers do meet my criteria, but I want to make sure I account for other factors such as property management risk, risk of living far away, etc. I was hoping to solicit feedback/experience from anyone who has been in a similar situation or has a lot of experience. Thanks BP Community!

[Patrick Liska]

Michael,

My first property was a student rental 3 hrs away from me, i am now in the process of my 10th purchase there. I would definitely hire a PM to manage the property, make sure you go through their management agreement and become familiar with whatever fees they may charge. there may also be a leasing fee and an added percent to the cost of any maintenance that they may do with their crew. as far as utilities paid, you can usually have the tenants / Students pay for the electric ( which is usually the lights, stove, hot water heater and washer/ dryer if you have them there for them. you could try and have them pay for gas/ oil or set a limit and have them pay anything over that limit. i usually include heat, water, sewer and trash pick up as well as provide them free internet.  is this a 3 or 4 bedroom? can you raise the rents any or is the rents at market price right now? it is still a good deal if you have accounted for everything and they will be paying down the equity for you. after you purchase and hire a PM, surprise visits out there every once in a while with an email to them after will keep them on their toes a little. make sure the PM sends you statements every month, and go through them, i do it every month.