Buying College Student Rental Property


Buying College Student Rental Property
By Scott Rogers • December 20, 2007
Lots of people consider buying investment properties -- and in Harrisonburg many people start by investigating college housing. Some don't end up buying, and here is why . . . Limited Choices Most of the student housing that exists in Harrisonburg today is corporately owned --- each unit isn't owned by one or more people, the entire complex is owned by a corporation. Thus, if we look just at housing for JMU students, where individual housing units can be purchased, the choices quickly become boiled down to: Hunters Ridge (condominium or townhouse, on Port Republic Road) Madison Manor (condominiums or townhouses, on Blue Ridge Drive) Townhouses close to campus (Liberty Square, Stonewall Heights, Avalon Woods, etc) Single family homes close to campus (Mason St, Main St, Liberty St, High St, etc) However, the properties that JMU students, JMU parents, JMU alumni, and investors as a whole are most interested in are at Hunters Ridge, because of its close proximity to campus. Limited Monthly Cash Flow Many investors aim to at least break even on a monthly basis -- they don't want to be losing money each month that they own an investment property. With this assumption, let's take a look at how the cash flow might work on a monthly basis for 1346-D Hunters Road, one example of a Hunters Ridge condominium for sale as of 12/20/2007. Price of $105k, 80% financed at 7.25%, self-managed Rental Income + $770 Mortgage (Principal & Interest) - $573 Condo Association Fee - $155 Real Estate Taxes - $45 Insurance - $35 Monthly Profit - $38 (a small loss) However, many potential investors call and indicate that they only want to use a 10% down payment, and that they plan to have a property management company take care of the property. Things get worse . . . Price of $105k, 90% financed at 7.25%, property management Rental Income + $770 Mortgage (Principal & Interest) - $645 Condo Association Fee - $155 Property Management - $77 Real Estate Taxes - $45 Insurance - $35 Monthly Profit - $225 (a big loss) Then Why??? With these monthly losses, you might wonder why someone would buy an investment property. There are a lot of possible reasons why someone might buy, or why the numbers might work differently for them: If an investor is financing less than 80% (and thus has more than a 20% down payment), cash flow will improve. Losses on investment property can be good from a tax perspective. Some investors are comfortable with some losses, in order to take advantage of future appreciation of property values. Lots of people have become very wealthy investing in real estate --- however, as explained here --- every investment is not necessarily a good one for every investor. Check the cash flow! Receive Updates by Email Recent Articles: There Are Plenty Of Types Of Houses That Exist That Just Are Not Available To Purchase Home Sales By Price Range In The City Of Harrisonburg Are You Compromising On Aspects Of Your Next Home That You Can Or Cannot Change Later? How Much Slower Are The Winter Months In Our Local Housing Market? Rockingham County and New Home Sales Drive Surge in Area Housing Market Find The Balance Between Optimistic And Realistic Home Pricing Room Size Is Difficult To Understand Solely From Real Estate Photos How Much Would You Value Not Having To Prepare Your Home For Showings? One Out Of Four Homes Is Taking Longer Than A Month To Sell Consider The Cost Of Your Planned Renovations When Planning Your Offer
Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com
Based on information from the Harrisonburg-Rockingham Association of REALTORS® or its MLS, for the period Jan 1, 2000 through Nov 21, 2024 (unless otherwise noted).
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