When I was a kid my Dad bought 2 investment properties in West Chester, PA just off of the college campus. At that time West Chester University didn't have nearly the enrollment that it has now but there was always a demand for off campus housing for students. The properties needed a bit of work so each week we would go out there and get them ready for the upcoming rental season. Long story short, 21 years later, he still has the properties and they have more than doubled in value and he still rents them out every year with no problem at all. In fact, with the increase in student enrollment at the school he can afford to be a lot more picky with who he rents to.
If you buy a property correctly in a college town it can be a cash register for you for a VERY VERY long time. Here are a couple things that you may want to consider while you're doing your research.
1. You make your money when you BUY the property.
The profit is in the numbers. If your looking to have cash flow each month than
you need to make sure that your PITI ( pricinple interest taxes insurance ) and
other operating expences are going to be covered by the monthly rent that you
receive from your tenants. Many people love the idea of being a landlord and
getting monthly checks in the mail, but they operate on idealistic numbers and
when they have trouble finding a tenant they're in big trouble. If you want to
more about the Math, email me and I will send you a very comprehensive
worksheet that will help you to calculate monthly costs vs profit. It's not
rocket science.
2. Research the area.
College towns are different than other areas because the activity is seasonal.
If the town that you live in is rural than it may be a safe bet that your
property won't be rented during the summer months. This needs to be taken into
consideration when you calculate your monthly rent. Many leases in college towns
run from August to June or from semester to semester. A quick stop into your the
local Housing Authority or the University's Housing Department and you can get
an idea of common student lease terms and renatal prices. You will also want
to see if there are any Real Estate Investors Groups in the area. Many of the
poeple in these groups are seasoned investors and can save you some time, money
and frustration if you simply ask for some guidance.
3. Property Maintenance
You DEFINITELY want to allow a larger than normal budget for this. Unless you
choose to use a property management company that will charge you a monthly fee.
In that case you'll still have to budget for it but it any upkeep won't
neccessarily be your headache. You can secure your investment by making VERY CLEAR
terms in your lease as to what the tenant will need to do in order to get their
security deposit back. It's pretty common practice to ask for 1st months rent and
a security deposit equal to the monthly rent up front. The more money that you get
upfront the better whe dealing with student rentals.
These are just a few things that you want to consider before you sign on the dotted line. But, if you're curious about buying an investment property in a college town or anywhere else gimme a call and I can help you break down some math.
Keep It Real Estate
Chris Edwards
Realtor
Cell: 484-947-6023
Email: chris.edwards@century21.com
Saturday, November 28, 2009
Thursday, November 5, 2009
Gettin' Goin'
If you have determined that this IS the time for you to make a move, here are a couple of things that you'll need to have squared away first.
1. Credit Check
If you haven't pulled your own credit that you should. Moving forward it's a good idea to check it about every 4 months or so. Mistakes are common and the could be effecting your scores. But you can get them rectified if your aware of them and you take action.
I reccommend using www.transunion.com . It costs a few dollars but you will get all 3of your scores from the bureaus (Equifax, Transunion, Experian ) and you'll see what the lenders see. If there are mistakes, you'll have the contact information of the creditor and you'll be able to dispute the discrepancy.
Many mortgage brokers/ lenders will tell you that the minimum score that you'll need for an FHA loan approval is a 620 average w/ some exceptions.
2. Cash Rules Everything Around ME
That's right, you're going to need some cash available. If your going for a FHA loan you can get away with as little 3% while the seller will assist you with the balance of costs. Conventional loans will require that you come up with a bit more.
Although cable news may have you believing that there are no other options than an FHA or conventional loan, that's just simply not true. There are other programs available, lenders aren't as liberal with the terms and conditions of these loans as they use to be because of new regulations, loss of revenue, and the overall collapse of our nations financial stucture as we know it. If you don't have any money but you have a family member that is still enabling you, ask them for a gift. Just make sure that the money is in your account prior to getting your pre-approval. Otherwise you'll have the lender asking questions as to where this additional 10k came from. It could ruin your settlement.
3. Pre-Approval
This is where the rubber meets the road. Go to your bank or Mortgage Broker/ Lender and tell them that you need to get a pre-approval.
This will tell you how much house you can buy and until you get a pre approval letter, your really just shooting from the hip. You don't want to go looking at houses and getting excited only to find out that your looking at things that your not qualified to buy. That can take the wind out of your sail. Instead, you want to get the pre-apporval so you'll know that ABC bank will give you mortgage for $ XXX,XXX dollars.
4. Call Me 484-947-6023
So, credit is good - check
Got cash - check
Pre-Approval Letter - check
Let's go look at some houses.
If your a little hesitant to do these things on your own, that's fine too. No agent is gonna tell you to go away until you have a pre-approval letter. If you need a little more attention than just call an agent and they can walk you through the process from beginning to end. You'll learn a lot as you walk through the process.
Keep It Real Estate
Chris Edwards
Realtor/Investor
chris.edwards@century21.com
484-947-6023
1. Credit Check
If you haven't pulled your own credit that you should. Moving forward it's a good idea to check it about every 4 months or so. Mistakes are common and the could be effecting your scores. But you can get them rectified if your aware of them and you take action.
I reccommend using www.transunion.com . It costs a few dollars but you will get all 3of your scores from the bureaus (Equifax, Transunion, Experian ) and you'll see what the lenders see. If there are mistakes, you'll have the contact information of the creditor and you'll be able to dispute the discrepancy.
Many mortgage brokers/ lenders will tell you that the minimum score that you'll need for an FHA loan approval is a 620 average w/ some exceptions.
2. Cash Rules Everything Around ME
That's right, you're going to need some cash available. If your going for a FHA loan you can get away with as little 3% while the seller will assist you with the balance of costs. Conventional loans will require that you come up with a bit more.
Although cable news may have you believing that there are no other options than an FHA or conventional loan, that's just simply not true. There are other programs available, lenders aren't as liberal with the terms and conditions of these loans as they use to be because of new regulations, loss of revenue, and the overall collapse of our nations financial stucture as we know it. If you don't have any money but you have a family member that is still enabling you, ask them for a gift. Just make sure that the money is in your account prior to getting your pre-approval. Otherwise you'll have the lender asking questions as to where this additional 10k came from. It could ruin your settlement.
3. Pre-Approval
This is where the rubber meets the road. Go to your bank or Mortgage Broker/ Lender and tell them that you need to get a pre-approval.
This will tell you how much house you can buy and until you get a pre approval letter, your really just shooting from the hip. You don't want to go looking at houses and getting excited only to find out that your looking at things that your not qualified to buy. That can take the wind out of your sail. Instead, you want to get the pre-apporval so you'll know that ABC bank will give you mortgage for $ XXX,XXX dollars.
4. Call Me 484-947-6023
So, credit is good - check
Got cash - check
Pre-Approval Letter - check
Let's go look at some houses.
If your a little hesitant to do these things on your own, that's fine too. No agent is gonna tell you to go away until you have a pre-approval letter. If you need a little more attention than just call an agent and they can walk you through the process from beginning to end. You'll learn a lot as you walk through the process.
Keep It Real Estate
Chris Edwards
Realtor/Investor
chris.edwards@century21.com
484-947-6023
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