I am considering moving away from my hometown San Diego, CA, with the dream that I might be able to get on the ground somewhere to start buying cash flow properties and fully support myself through rental income. Naturally I am looking for high cash flow areas, so I figure I will land in the midwest or the south. However, the cities I have found with the most cash flow potential tend to have high crime rates and poor quality of life. Are there any exceptions to this rule?
Although I am looking for the best place to start my real estate investing career, I am also looking for a safe and stimulating place to live. Is this impossible? I would really prefer a college town (e.g. Ann Arbor MI, Madison WI, Bloomington IN, or Athens GA) but cash flow seems a little more limited in these types of areas. I welcome and appreciate any suggestions that might point me toward the kind of high cash flow that I seek in or around cities with a college town vibe.
My uncle owns 20+ rentals in Bloomington, Indiana. Home of the INDIANA HOOSIERS!!! #1 BABY!!!
Anyway, they are all cashflowing very well, and I never hear him really complain about to many people tearing up everything. Obviously, its college, so stuff is gonna happen, but I plan on investing in Bloomington.
I dont know for sure, but I think you might be really good off going to a richer-college place to attract kids that dont party and wont tear up your stuff. They will also probably be able to afford rent better. I dont know, just throwing that out there.
All my holdings are in student housing, and I plan to keep it that way, just growing to larger projects as I go. I fully support myself, my fiancee, and my 7mth old baby with my rental business. Also, my backyard is constantly one of the top party schools and has an extremely vibrant scene. So it most certainly can be done. I’m not going to tell you where I invest because I don’t want anymore competition than is already here but I will point you towards a book that you need to check out if you want to get involved in student housing. Good luck.
calgoldenbear, I called my uncle and talked to him about housing in college areas. He says Bloomington IS NOT the right place to invest. He bought all of his houses 30 years ago, and now the houses are so expensive its really hard to get them cash flowing.
I asked him “where would you suggest somebody would invest at if they wanted to house students at a college” and he said he would suggest investing near an Ivy League school since the kids tend to be less agressive on the houses(because they are more nerdy)
Ive never invested in anything, im just passing the word and trying to help…
[[[[…the cities I have found with the most cash flow potential tend to have high crime rates and poor quality of life…]]]]]
There are only a couple of reasons why real estate would be really cheap:
Nobody wants to live there, or there are no jobs. Usually, it is a combination of both.
North Dakota is really cheap. It’s a beautiful place to live with a low crime rate. There may be a job shortage, and some folks don’t like all that snow.
I happen to like San Diego as a location for real estate investing. Right now is a good time. Prices have taken a substantial drop recently. Buy low.
If you are within 10 miles of the ocean, San Diego county has the best weather in the entire United states. It is a tourist destination and a desirable retirement community.
Buy a good property in San Diego, and it is going to be an excellent long term investment.
I dont know for sure, but I think you might be really good off going to a richer-college place to attract kids that dont party and wont tear up your stuff. They will also probably be able to afford rent better.
A friend of mine has about 150 rentals in a college town here in Ohio. Many of the college kids have rich parents (one has a father who is a Billionaire). The kids are VERY destructive and don’t care about anything because they are spoiled rich kids. He makes the parents co-sign, but still has a hard time collecting because many of the parents live out of state and are quite busy. A personal secretary of the billionaire father takes care of all the affairs regarding the kids.
I have a few college rentals and my experience is that college kids are very hard on property. Girls seem to be just as bad as boys (probably because the girls attract boys).
from what I know if your going to invest in a college area, your better off in a large city where there are things to do so the students dont hang around the house. I have a couple friends that buy in the Boston Area and rent to the students, and like mentioned about, many times the parents have to co-sign and he requires an income of 3x the month rent with out the parent on the lease or 5x the monthly rent if there is a co-signer(parent). Like any rental make them quailify under some form of guidelines.
As for why income quailfy them. Look at this…If your in Boston and the rent is $800 a month, the student needs to make $2400 a month so most likely a full time college job is what they have and not partying all the time. These are the students going to school more for an education as they need to pay their own bills, not mommy and daddy and they want to graduate and go on to bigger things.
Also make sure your lease provides a clause where you can stop by and doing a monthly inspection of the premise with 24hr notice and if you suspect or see the house is damages you have the right to evict and tenat losses depoist…
Also make sure you get 3 months rent upfront F/L/S. Verify the job, references, etc. A good thing is to ask them for theire highschool and call the school and speak to the principal or past teacher to find out what kind of student they were… If they were a trouble maker you already know you may not want them,
renting to college kids is no bowl of cherries. I have a mixture of student and non-student rentals. While my student properties are more recent additions (last 3 yrs) I have observed that students are more picky about repairs being done 2 sec after something breaks, more like to not pay for damages (or rent for that matter) and/or send you threating letters (some by certified mail).
the good thing is student housing as a built in market that tends to keep pressure n the market place such that rents can be grown nicely and property values as well. However, a good, non-university town can have the same characteristics without the hassle dealing with some 21 yr old punks who have never earned a dollar in their lifes.
Thanks to all of you who posted your feedback. I really appreciate all the responses.
I do understand that students don’t always make the best tenants. And I should clarify that although I will allow for the possibility of renting to students, it is not my first choice. I would like to live in a college town, but I don’t plan to invest only in properties immediately adjacent to the university. I would certainly consider investing in towns/suburbs that lie on the outskirts of the university area.
Ideally I would like to buy a 4 bedroom house close to a university that I could live in along with three other roommates (potentially students) whose rents would pay my mortgage. Then, I would search for rental properties in neighboring towns that are within a 15-20 mile radius. So I guess I should clarify my question by asking anyone if they know of towns within a 15-20 mile proximity to a university, where real estate has the potential for high cash flow.
And are these towns safe? That remains a concern of mine because I expect to manage these properties myself, and I don’t want to feel like I am driving into a dangerous area every time I visit a property.
I’m surprised to hear you say that you’re interested in San Diego real estate. I’ve gone to quite a few REI meetings down here, and there’s somewhat of a unananimous prediction among the local investors that prices will continue to drop over the next two years. You might consider waiting to act on SD real estate until about 2010. It’s virtually impossible to cash flow positive down here even with 20% down. I’m no expert, but just relaying what I’ve heard.
It’s virtually impossible to cash flow positive down here even with 20% down.
calgoldenbear03,
I don’t mean to single you out but I’m just using your post to make a point…I think many a new RE investor gets confused with the money down and cashflow equation…Any money you put into a RE deal must be expected to make a very good return…If you put 20k or 200k down into a RE deal you have be making into the teens % ROI on that…People often think oh I’m putting down xxx amount now the property will cashflow,all the while overlooking the down money not making a dime…I find this unnerving…Why would anyone want to invest a single dollar and not get a ROI from it…
