Tucson, AZ real estate strategy - article 2
In Tucson as with many other cities, houses will cost more near the University. That of course does not always mean that you should steer clear of college driven areas when looking for a rental property. The benefits and disadvantages of having a rental property not near a University are numerous. But what if you had to *gasp* make a decision on what and where to buy? These trivialities start to require a much more in-depth analysis.
Here are some benefits of buying/owning a rental near a college campus:
- Higher monthly rent per sqft than other areas due to demand! Woo-hoo
- Locations which cost more initially can sometimes give a better return on investment (ROI) in the long run. After all, the more you invest, the more you gain if the market moves as a percentage. I Should point out that this could be a benefit for "homes not near colleges" as well if you spend the same amount for more house.
- College students are probably less likely on the whole to have pets. Pets can cause damage to property and increase liability for the property owner if they are mishandled or treated poorly.
- Areas with steady housing demand are much less likely to lose value in a market downturn. As long as the college is open, the rooms will rent.
- Less square feet usually means less maintenance and less cost on repairs and maintenance. I'm not sure if the college kids will offset this entirely. A good example would be a roof replacement would always cost less for less sqft and the tenants would be unlikely to damage the roof.
And here are some disadvantages:
- High turnover rate. Nobody goes to college forever! and most people will move out of an expensive near-campus flat after they graduate.
- Possible vacancy due to high turnover rate. 1 month of vacancy = (100/12) = 8.3% yearly income loss. Not a trivial amount for anybody who cares about financial independence.
- Possible vacancy/price drop due to summer and winter vacations. I know people who move home for summer and rent a new place every year.
- Possible partying damage / additional liability due to partying. This can be minimized by requiring rental insurance but kids will always be kids.
- Less square foot per dollar spent. Does this really matter since you won't be living there?
Almost every major city has a college campus inside. As a future rental owner you need to make a cognizant decision on where to purchase your property and recognize that some will command a premium for perceived extra dollars in income. Whether you decide to buy near a campus or far away from it, just making the decision will shave quite a few houses off of your viewing list.