Now seems to be the best time to invest in properties in college towns where housing demand is high due to a soaring rental market according to the New rules of real estate by Business 2.0 Magazine. With home prices still out of home buyer’s range, and homeowners selling their homes due to rising interest rates, rents are expected to increase nationwide. This makes buying investment property in rental markets such as college towns an attractive option, one that is already being pursued by investors. Rents are expected to rise by 5 % by the end of this year according to the National Association of Realtors (NAR), and investors are looking at college towns with increased interest.
There are two major reasons why it is prudent to buy investment property in college towns now. When compared with other rental markets, the rentals in apartment buildings in college towns are much stronger and hence more profitable. This has been augmented by the fact that apartment buildings in college towns are fewer in number. This demand for apartment buildings has also increased due to the rising admissions in colleges mostly from the Gen Y or the echo boomers, which has further increased the asking rates in the college town rental markets. These properties have a low vacancy rate, especially in buildings located near the campuses. Investors in commercial apartment buildings also get to increase their rent with the mounting demand making such investment a highly profitable venture.
So if you are a prospective landlord who has decided to encash this favorable situation, then you can start with choosing the college town that has the lowest ratio of university-owned beds to the student population. As Michael Zaransky, co-founder of Prime Property Investors in Chicago says, prospective investors would do well to pick the college towns that have the ratio of university-owned beds to students at 30 % or lower. One should also look into colleges that propose to expand their student ranks by 2 or 3 % every year.
Investors should also need to take into consideration the disadvantages involved in owning commercial apartment buildings in college towns. The business could be trying sometimes, and involves risks with college policies liable to changes and the difficulty involved in predicting volatile student demand. However, considering the high rate of returns that the investment has to offer, the pros seem to far outnumber the cons making buying investment property in college towns a smart option.
Real Estate Advisor
http://www.articlesbase.com/real-estate-articles/why-should-you-buy-investment-real-estate-in-college-towns-129016.html
#1 by TheCynicalWon on July 6th, 2009
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Advice on real estate investment?
I live in a major college town in which real estate within walking distance of campus is very valuble. The housing slump does not have seem to hit this area very hard considering enrollment in school has not dropped. I have an opportunity to purchase a condo for 175K close to campus that will sell after construction for 200K (in a perfect world) and prop value (according to agent) is increasing 5% year. The problem I see is is that my mortgage with all included is about 1400/month and if I decided to move out I dont think I could ever get a tenant to pay 1400/month-perhaps 1000 at best in the near future. Is this still a good investment given the prop value increase or should I go for something further from campus at a lower price that I know would be able to rent for close to the mortgage should I decide to get something better in a few years for myself to move into?
#2 by stringmerchant on July 6th, 2009
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Having managed rental property for thirty years, I have yet to see any condo situation that lends itself to being a rental. All of the properties that we managed that were condos were a pain in the pocket book and elsewhere, either due to the community environment, or the HO association, or the lack of tenants who were motivated to part with enough money.
The contributing aspect of the college town is not to my mind a plus. We are talking about a seasonal tenant base, that will surprise you most when it hurts you the most.
If you are driven to own a rental property in this environment, seek out a multiple unit property, live in one, and share the potential risk of a vacancy with the other one or two units that hopefully will not be vacant the month you decide to leave town. Also no HO association, and you get to have control over the costs and maintenance issues. If you leave, hand the keys to a management firm and list it for sale if you need to, on your way out of town. If you go this route, get a landlord mentor from the get-go; don’t wing it on your own.
If you need a place of your own, alone, then seek out a cute, modest, highly marketable single family house in the area, close enough to bike or walk, or bus, and enjoy the experience mowing the lawn and raking the leaves. You will still be ahead.
Best wishes.
Rogers Smith
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