Evaluating a Potential First Purchase

[Jack Payne]

Hello Everyone!

I'm in the process of evaluating several houses in the Athens, GA area. Main pull to the area is the college town and renting to college students. My Dad and I are planning on going in on the deal together and he is willing to front a significant amount of capital for the down payment. I am currently looking at a few deals and due to the generous amount he is willing to front, I have found that the houses fall under the 1% rule and they have potential to cash flow. They are in good areas that are relatively close to the schools and bars, which is great! The only downside really is that when calculating the CoCROI the numbers are relatively low... like 2%-3%.  Due to the location and growing population, which can help increase rent prices in the future, do people still view this as a good deal?

[Kalim Kalla]

Hey Jack UGA grad here so super familiar with the area. One of my biggest regrets is not buying a house and house hacking it while I was in college. The biggest reason you are probably only seeing 2-3% CoC is more than likely due to the increase in interest rates and the lag that rents have in catching up with home price increases. The combined effect has decreased CoC on any new buy and hold opportunities. The biggest thing that I would say is of importance is the type of opportunity that you are looking for STR/ LTR. LTR is solid and chances are you could face a significant amount of wear each year on the property and can handle that using deposits.

I have a friend that actually does homes and condos STR in Athens and although he may not have occupancy rates as high as LTR, He often makes the equivalent of 1 months rent on 1 game day weekend. Just some food for thought if you see CoC returns lower than your ideal metric there are other ways to increase that cash flow number. (AirBnB being one of the most common). Another target audience in Athens is the international student community that often come for 1 semester and are not looking to get into the long term lease options thrown at students with majority of the housing. That target audience will pay a premium for Airbnb long term stays and could increase your avg nightly rate with longer occupancy times. The audience is there its just about getting the execution right on a specific property.