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Any feedback on investing in student housing? I have a friend who does it in Minneapolis and he does very well, he ended up buying a property adjacent to one of his homes, demolished it and now he is building a new student building right across from the University of Minnesota.
I have done a lot of research for the last year, travelled to a few different states to research local markets and I think I can make it work, as with any investment, I was wondering what some of the potential risks may be.
Any feedback on investing in student housing? I have a friend who does it in Minneapolis and he does very well, he ended up buying a property adjacent to one of his homes, demolished it and now he is building a new student building right across from the University of Minnesota.
I have done a lot of research for the last year, travelled to a few different states to research local markets and I think I can make it work, as with any investment, I was wondering what some of the potential risks may be.
Severe and substantial damage above & beyond normal wear and tear would be one ...
I'm a landlord many times over, live in a college town and won't touch properties in that area with a ten foot pole no matter how good the deal.
That's not to say that there aren't investors who make money hand over fist in that area - I'm sure they do ... but the properties aren't well kept (to put it mildly) and my business model doesn't include me being a slum lord.
But what you're friend is doing is much different that most private student housing ... that's kind of comparing apples & oranges. We have huge multi-use student apartments that have just been built across from the college - apartments up with retail on the bottom. They're gorgeous, expensive, exclusive - and fully rented.
The trashing it factor would be huge. But if you can put relatively bomb-proof materials into the interior for a reasonable price, then it might be worth it.
Where I live "student housing" = "overpriced slums"...
From a strictly financial standpoint, you can make a killing. You can rent out barely inhabitable units for a premium.
I may be a bit jaded, though. I'm an undergraduate student looking for housing who has discovered that housing w/in a mile of campus is up to 50% higher than other areas, despite being complete slums for the most part. Even higher than some of the "ritziest" areas...
As has been mentioned, one risk is that you do have to deal with property damage. The friend I am crashing with now (sleeping in a spare room) has this unit in shambles. Mind you, he pays $1800/month for it (see...told you it was over-priced). This unit has sustained quite a bit of damage. Broken windows, broken doors, just general dirtiness (I'm ashamed to say he's my friend..lol).
On the other hand, as per the lease, he will have to pay for all of this damage, so in that way, that risk is covered as well.
There are 2 approaches to student rentals. The one most landlords take is "hey, they're students, they don't care what the place looks like and will probably be trashing it, so we shouldn't invest any money into it. These places are dumps and the landlords are making a very good profit, because they're not spending much money on repairs and when they do repair something, it's usually the cheapest way possible. The other approach, which most landlords don't follow, is to make them nice, keep them well maintained, and make sure the students know upfront.... no parties or your evicted. Usually the partiers will rent the trashed places and you'll get better tenants... but they're still students, so there's always a chance they try to sneak in a party or can't figure out what a vacuum is used for. You'll make less money than the trashed rentals because you're spending money maintaining the properties, but you can still make more money over a regular rental plus there are several advantages over a regular rental property... for example, everyone moves in and out at the same time, you're showing everyone the properties at a specific time each year, instead of showing properties and having people move in and out every single month. But again... the risk is they're students......
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