College House Hacking

[Jt Marting]

I would like to purchase a house hack prior to attending FSU in the fall if the opportunity presents itself. When looking at the market near campus and doing some analysis, it seems as if the rents by the bedroom are so low it wouldn't really be a profitable strategy. Does anyone have any thoughts? I really want to just get my first property but it doesn't seem like the area would really make this feasible. Thanks!!

[Charles Kennedy]

JT - here are my thoughts.

Rents - don't plug in $400/bed every time. Use your judgement on a property by property case, but I'd say that's a good baseline.

Vacancy - I'd assume less, I generally assume 4.16%, which is 1/24. I assume 2 weeks of downtime when I turnover units, although I only generally have 1. I'm mostly 100% leased, but you should account for it.

Mgmt - Probably fair, but it could actually be much more when they take leasing fees. I self manage and pay someone to show my units and never do any repairs myself as I'm not local. You should self manage if you are house hacking, but tell them your parents own it and you are just managing it. I wouldn't want my college roommates (where everyone is broke) to know I own the house and am making cash flow every month.

CAPEX - I always think doing this as a % is a mistake. Total the cost of the roof, HVAC, and water heater and divide it by the number of useful years remaining. Make that $/month your lowest for CAPEX.

Maintenance - Almost all of my maintenance is driven by AC and plumbing repairs with the occasional other items. Having a newer HVAC will solve a lot of those problems and I'd recommend replacing toilets and supply lines up front to reduce these. I generally put maintenance and repairs at 10% minimum. 

Insurance - My duplex is at $1,329/year (3/1 and 2/1), my single family (3/1) is $915/year. Both are 1950s construction. Newer built will be less. 

Utilities - These should be paid by the tenant. Your roommates should split this with you.

Lawn care and trash should one in the same and I'd estimate about $75/month ($30-$40 per service, twice a month). Your lawn guy should also pick up small trash around the property if he's good. I had to fire my previous one who was terrible about service and am so happy I did.

Other - I'd add a recurring pest control, which is about $85/3months so a little less than $30/month.

You should self manage and self pest control while you live there. I also add in cleaning fees to my leases where a portion of the security deposit is non-refundable to help reduce the cost of turnover, which is generally captured in my R+M (as I do pay a professional cleaner to come after each turnover).