Student Housing thread (last one!!!)

Submitted by Blue in Paradise on

Apologies for those not interested in this topic but I promise this is last posting.  I am ready to put in an offer with my investors on our first place (not the Granger house).

The house is not yet leased due to a death within the ownership group and a decision by their group to sell. 

Questions for the Board:

- Are we late in the game in terms of leasing this year?  Or are there still students looking? 

What about grad students that are just starting in September?  Would most of them still be looking?

Most of the students are home for the summer and I don't want to get stuck owning something for 4 months without any rent (or worse - the entire year).

worstever

May 26th, 2017 at 6:19 PM ^

As a fellow slumlord, I will tell you that real estate pricing is at 10 year high and many folks (like me) are selling.

Finding a tenant is the least of your worries as demand in the area is and always will be there.

Be careful on the downstroke and understand that you are buying at the top of the market. If it's my money I wait 2-3 years for the recession and then dig in on prime areas...that said...good luck.

Blue in Paradise

May 26th, 2017 at 7:04 PM ^

Thanks for the reply.  I don't really care that much if prices go up or down in the next five or ten years.   In fact, I want them to go down. 

I am in the early stages of setting up a private equity fund that will invest in student housing rentals at premier universities around the country.  I am buying this one with my partners to "go through the process".

That being said, I don't think a recession will hurt housing near colleges, in fact it could even boost prices (unless we are talking a full blown meltdown).  In the last two recessions, a lot of people who lost their jobs went to grad school to "wait out the job cycle".  Also, the Fed probably drops rates back to zero and long term rates will drop as well.

So you think we are still ok for September leasing?  Also, we should talk about the properties you are selling.  Let me know if you want my e-mail.

 

ribs1

May 26th, 2017 at 8:40 PM ^

"That being said, I don't think a recession will hurt housing near colleges, in fact it could even boost prices"

The last recession in 2008 hurt housing prices, rental rates and everything else near colleges.

"In the last two recessions, a lot of people who lost their jobs went to grad school to "wait out the job cycle"."

This absolutely will not happen next time.  No adults over 22 years old will be moving back to college to attend school in person.  Every major university has online versions of their MBA programs including Michigan.

 

ska4punkkid

May 26th, 2017 at 6:27 PM ^

OP meant...

Question for the highly qualified and reliably business/real estate savvy MGoBlog board: How should I run my business that I've thrown tens of thousands of dollars into?

Blue in Paradise

May 26th, 2017 at 6:28 PM ^

But I don't really care that much if prices go up or down in the next five or ten years.   In fact, I want them to go down. 

I am in the early stages of setting up a private equity fund that will invest in student housing rentals at premier universities around the country.  I am buying this one with my partners to "go through the process".

That being said, I don't think a recession will hurt housing near colleges, in fact it could even boost prices (unless we are talking a full blown meltdown).  In the last two recessions, a lot of people who lost their jobs went to grad school to "wait out the job cycle".  Also, the Fed probably drops rates back to zero and long term rates will drop as well.

So you think we are still ok for September leasing?  Also, we should talk about the properties you are selling.  Let me know if you want my e-mail.

 

HarbaughsLeftElbow

May 26th, 2017 at 6:36 PM ^

Where is the place at? I would say you are definitely way too late for undergrads (if it is a two bedroom you may find some stragglers) but could potentially be okay for grad students and are probably good timing for first-job young professional types moving to ann arbor (probably more than these you would think with Google and a few other companies). 

evenyoubrutus

May 26th, 2017 at 7:47 PM ^

It's complicated, but otoh the guy I bought the properties from owns tons of student housing properties (as well as several properties downtown, half of Kerry Town, and tons more) and he told me that the student housing is incredibly reliable income-wise. It just seems to me that if you are investing in income property, it either needs to be your full time job (I.E. a full time landlord) or the work that goes into it just isn't worth the money. Not to mention the risk and liability. Maybe That's just me though.

Blue in Paradise

May 26th, 2017 at 7:57 PM ^

And, of course, scale helps too!  I have clients looking for steady, if not spectacular returns (or at least the risk that comes along with that), so student housing is niche that fits the bill.

I also have a theory about longer term economic trends and how tech centers / univerisities will benefit from the (just starting) technological revolution.  But that conversation is for a different time and preferable over lots of drinks.

 

Farnn

May 26th, 2017 at 8:33 PM ^

Owning property for income is a full time job, unless you hire a management company.  And then you spend all the profit on the management company, and only see money when you sell it from appreciation.  You aren't the only person looking to buy the house for a profit and unless you have the scale to have your own management team, you can't compete with what those guys will pay and expect to see a profit.

Bando Calrissian

May 26th, 2017 at 10:39 PM ^

It also sustains one of the worst parts of the Ann Arbor rental market: People who want to make money off the backs of students through owning and renting properties from afar. The best landlords I had in Ann Arbor were the landlords who owned a small number of properties, lived locally, knew their renters, and cared about both their properties and us. Heck, one of my landlords dropped off a loaf of Christmas bread. 

On the other end of the spectrum were the people who didn't maintain their property, charged us a fortune, and gladly collected the check we'd have to drop off at their perfectly-maintained mansion-esque house outside of town.

Now that I live in a big city and have had a number of different kinds of rental situations, I know now that the Ann Arbor system is mostly slumlords who don't give a shit, and that's not normal--or OK. I don't have a lot of sympathy for people who are proud of trying to extract every penny out of kids who have very few options but to rent their garbage units at absurd prices. 

Enjoy your investment opportunity, but I hope you actually care more than just collecting the revenue.

Michigan Philosophy

May 26th, 2017 at 9:21 PM ^

Tenants are easy to find. Good tenants are hard to find. If you are looking for a revenue source with consistent returns there are so many variables to consider. It is easier once you scale up but then it becomes a full time job if you want to do it right. As a landlord myself I wish you good luck.

CriticalFan

May 26th, 2017 at 10:18 PM ^

We felt like we had to start looking for the next house to rent in November, two months after moving in. So yes June is late. But anyone still looking in June will really be happy to find your place.

bronxblue

May 26th, 2017 at 11:09 PM ^

I don't know the context of this thread or what you are planning on doing beyond (what sounds like) creating a small shop owning rental properties for grad students, but for the love of gawd don't run it like a slumlord.  Give a shit about the places you own, the people who rent, and who you are serving.  NYC is Ann Arbor on steroids, and I've lived in a couple of other big cities along the way, but a major component that can hollow out the soul of a city is how people treat others who live there.  

dearbornpeds

May 26th, 2017 at 11:44 PM ^

My wife and I explored being landlords in A2 (we live reasonably close). Was scared off by the high cost and age of the buildings. Ended up buying student homes in a PAC 12 college town where we had a good contact. It's been a very good experience for us. Housing stock is newer and the demand has been high. Heard much negativity re: long distance ownership but we've done well.

samdrussBLUE

May 27th, 2017 at 1:16 AM ^

Can you make 25%+ a year? If not, become a trader and then do something with your profits.

bluebyyou

May 27th, 2017 at 6:21 AM ^

If the OP's intent is to do something long term., I would ask two questions.

1.  With the cost of education continuing to go up, at what point do applicants start avoiding attending universities, particularly when in many areas the ROI is nil due to low wages?

2.  With technology/advanced manufacturing/AI/robotics starting to eat up jobs, both blue collar and white collar, do you feel secure that college over the next few decades is going to be an option that makes sense?

In the short term, with the right asset purchases, you are probably fine.  In the long term, I think the investment could have some serious issues, although with the shortage of rental housing nationwide, you do have a buffer.  I hate to buy anything when markets are at or near peaks.

Blue in Paradise

May 28th, 2017 at 12:00 AM ^

Will always be in demand. In fact, Ann Arbor should benefit from the very trends you mention above. Michigan is one of the "it" school amongst wealthy families around the world (I live outside the the U.S. and even here a lot of the wealthy kids are applying to Michigan. I am also looking at UF, UG, Texas, Norte Dame, UCLA and a few others.

Bando Calrissian

May 28th, 2017 at 2:35 PM ^

If you're looking at schools across the country, you are, in fact, trying to be an absentee slumlord. Nothing local about being a landlord in California, Indiana, Texas, Michigan, and Florida all at once.

Much sympathy for the poor grad students who will be renting from an unaccountable, anonymous landlord in a different timezone.

Blue in Paradise

May 28th, 2017 at 7:17 PM ^

Many college rentals are WAY nicer today than anything that was available 20 years ago. These places now have gyms, pools, media rooms, private libraries. Hell, one project that I worked on for a USC development had a frickin 7 day a week spa. If those are slums, then sign me up. Renting an apartment or house does not not mean you are living in a slum. I don't personally need to be physically present at every location as I can pay people do manage the property. So get off whatever high horse you are on, I get the feeling you are trying to somehow turn this into politics, so that is the end of the conversation.