Investing in college towns - what real estate investors need to know blog by Larry ArthAs any entrepreneur knows, the key to success is to find a need and then fulfill the need. When you do, profits will soar. This is exactly what a friend of mine did when his son went off to college.

The need in college towns

At the start of any school year, hundreds of college students and even the faculty roar into town and need a place to Is a college town investment right for you?live. When my friend and his son went to check out his chosen school, they rapidly realized that housing options were extremely scarce.

They spent the entire weekend looking for suitable housing for him.

It became obvious after the second week of looking that the school had more housing needs than it had housing.

They also discovered by talking with the college and the nearby university that college towns tend to have less fluctuation in housing demand.

They learned that between the staff, students and professors there was always a steady stream of tenants looking for housing.

The solution created a double win

With nowhere else to live, it became apparent that they could solve the problem and create a double win along the way. My friend knew that the best lessons any college age student can learn are responsibility and money management and he also needed a place to live, so the solution was obvious: They needed to buy a house.

  • They bought a five-bedroom home where he could occupy one bedroom, and this of course left four bedrooms to help solve the problem of housing shortage for four other students. Instead of having an expense for housing, my friend now owned an investment property that was an appreciating asset. The expense of running the the house was a business expense, which created tax write-offs. My friend’s son ultimately lived there for free, as the rent for the other four bedrooms covered all the expenses with just shy of $100 per month of extra income.
  • This $100 became income to his son as he gave anything over the cost to operate the house to his son as compensation for great management. This of course was a great real estate learning lesson for this college student. He learned all about managing people and managing property and the finances around it. His son made a few bucks so he had pocket money and this $100 became another tax-deductible expense as well for dear old dad.

They saw a need and fulfilled the need. They created housing for his son and four other families’ sons. They turned the problem into a business that comes with many tax advantages, cash flow for the son and appreciating home values for Dad, not to mention the savings of actually having to pay rent for his son’s room.

Many, who have not even considered buying investment property before, learn that buying homes in college towns to get their child off and running is a viable way to teach their child the valuable lessons of responsibility and money management while assisting with equity growth for their retirement.

Is a college town investment right for you?

  • Is your child suited to do such a task (and if not, you will need property management)?
  • Do you have the funds, perhaps self-directed IRAs or access to down payment money and ability to get financing?
  • What will these tax benefits do to help offset your income tax?

Things to look into and discover. Talk with the school administration on these topics:

  • Housing needs for your college town.
  • Are there new campuses or universities being built or considered or perhaps new academics being considered? (This may increase the need.)
  • Current and projected enrollment.
  • School spending on housing for students.
  • Ratios of students to on-campus housing units (both current and projected).
  • How much university-owned off-campus property does the school have, if any?
  • How much does the school spend on housing for students?

The housing fundamentals themselves:

  • Is the city housing considered affordable (median income times three should equal median home price, or less)?
  • Is city population growing?
  • Is unemployment below the national average?
  • What is the house cost to rent ratio? It should match closely to the 1% rule.

As with any great investment, doing a little upfront diligence will ensure you acquire great investments worth owning. Sustainable returns are the target, and many have found them by investing in college towns.

Visit Larry’s site here.




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  • Larry Arth

    Larry Arth is the founder and CEO of Equity Builders Group, a Florida-based real estate investment group. A 36-year veteran of real estate investing, Arth also is an international consultant and speaker who each year assists hundreds of investors, both foreign and domestic, in realizing their investment potential. He analyzes locations for economic strength and for the largest and most sustainable returns and, most importantly, sustainable turnkey investment. His focus is offering turnkey investments to the passive investor. Visit his website at www.howtobuyusarealestate.com.

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