Looking at my first ever deal. Here’s what I have staring at me:
Student housing at in a university area
100K asking price
$40,000 in annual income – net closer to 20s/yr
Rented for decades
Students pay water/sewer – LL pays rest
Gas - 4800; Electric - 1800 ; Insurance - 2200
Taxes are a killer - 8K
Assessed value 125K
Rents $420/month per room – right now there is 8 rooms @ 420/month
Rents in area are in range of 325-700
Newer roof and boilers – seems to be well maintained
Has in the past had 12-15 people in the rooms (soccer team, sorority,group of friends, etc)
Max is 16 rooms – has averaged 12 rooms rented/year
B/c of taxes, my need for property management and a ~65K mortgage @ 300/month, I am looking at pre-tax net of somewhere around 15K if I only get the 8 rooms rented/year. Does this seem like a sensible deal?
First off, that seems backwards to me. Water/sewer tend to lien issues and tend to be handled by the ll. Gas electric tend to be handled by the tenants. But there is absolutely no reason why you can pass the cost to the tenants on the next round of leases which would push you another 6600/yr.
In regards to the taxes with prices falling so hard it has become easier to challenge the tax assessment. Lower that a bit and increase your spread.
You best bet would be to get a 5 year triple net lease with one of the student groups so that they can use it as an off campus house. Discount the monthly rent to 4000 and let them pay for everything. Then you don’t have to pay for anything other than taxes and mortgage. At 50k/yr you’d cash flow an amazing amount at the price of that property.