Real Estate Investing, College Housing Properties

Are you completely new to or just getting your feet wet with real estate investing? I’m a Realtor, my friends and I watch HGTV. Let me tell you, there are so many ways to invest in real estate. I think many would-be real estate investors watch shows on house flipping and mistakenly gauge the process. It’s more work than most investors are up for. Doing your own repairs might save money, but many investors aren’t general contractors.

In conversation, friends and clients interested in real estate investing often ask me where to begin. I ask them if they’ve thought about college housing for rental income.

Some that would don’t have the funds needed for renovations. That can be an issue, but it’s not one that the average person can’t overcome. FHA loans have guidelines and restrictions on lending to investors. You can have two non-investor residential loans in Ohio. The properties must be at least 50 miles apart. There are FHA loans for investors, and a slightly higher interest rate. FHA 203k loans are for distressed properties and include up to $35,000 for repairs.

The great thing about FHA loans, they only require a 3.5% down payment. You should know, loans with less than 20% down payment require PMI, or Private Mortgage Insurance. This is a premium lenders charge and a Federal regulation that protects lenders in the case of borrower default.

Investors need to understand, when you are financing you aren’t allowed to make the repairs yourself. It’s prohibited and Federal Law. This protects markets from decline as many buyers don’t complete needed repairs, dragging down property values. It’s also protects the lenders. If a borrower defaults, the lender would rather have a finished, updated property than a distressed eye-sore on their books.

Now you understand more about financing college housing property investments. Now let me tell you why college housing is hot for real estate investors. Rent is always going to go up. Getting a college education is expensive, not all students want to live in a frat house. Keeping up with current rent rates, but renting rooms for at or a little less than the going rate, will ensure good occupancy.

In Cincinnati, there are numerous universities and college campuses. An investor would have no problem finding potential Cincinnati properties for college housing.

Many students work their way through college, taking jobs near their education center. Some students really want to save on gas and auto insurance. It’s very attractive to them to find affordable housing near both school and work. Even better if they can walk, bike or bus to their destinations.

Advertising your college housing is easy and even free. Just post your rental properties at the schools. Talk to key figures like head of the debate team, the quarterback or university newsletter or blog.

I like to help new real estate investors, I have no problem will small private investors acquiring properties to utilize as college housing for rental income. What I don’t like are large real estate investing companies flush with capital that swoop in, purchase all the properties they can at discount and charge a premium to students.

Apartment Complex Real Estate Investing With Demographic Analysis

Demographics change and population trends influence almost every decision in modern life from city planning to healthcare provisions, from education needs to life style living these and other demographic factors determine the shape of our society and the growth of urban living or suburban living. Consider a real estate investor whose livelihood depends on people changing homes or jobs. Economic mobility is a key determinant in the future of this business, as is the economic health of the region, jobs and the amenities of the area for singles or families. Recent weather stories that have impacted the US will also be a change in short term and long term demographics or urban area.

Development planning relies even more on demographic data to determine priorities. The average age of the population is a major factor in the type of housing that will be required over the next couple decades. As well as the influx of immigrants or evacuation victims form hurricanes (Harvey, Erma, Maria) to large urban areas that have job opportunities and supportive families. This can be a temporary need or if families resettle in the area, a permanent change of address and an opportunity to raise the rents due to high demand. Inventory and demand in these areas could be an untapped opportunity.

For investors, the stakes are just as high. Investing in commercial real estate requires the ability to forecast where there will be a growing population and where the population’s average income will be increasing for a squeeze on housing. Investors are best prepared to watch the news, see changes dues to weather or unpredictable changes in the environment as well as business that expands across the USA.

In fact, commercial property investment requires a deeper understanding of demographic data; it is not just the population trends that need to be considered, but the demographics of the competition, business climate and weather changes. Road traffic patterns can also make or break an investment, especially near busy intersections in competitive markets.

The demographics of traffic can add to the complexity of making a commercial real estate investment. Given the high stakes of real estate investment, whether in residential, commercial rental properties, demographic data reports and market segmentation data are even more important. Can you begin buying land or buildings now at a reasonable market price as you await for the demand to build? I believe yes you can. A matter of fact, there are good properties on the market today that deliver good returns (ROI) in current conditions. The demand for displaced workers and residents may only be six months away from today. Take advantage of this opportunity and diversify your portfolio by working with a good real estate broker.

Real Estate Valuation Analysis – How to Assess Investment Properties Within Minutes

From a quantitative viewpoint, investing in real estate is to some degree like investing in stocks. To benefit in real estate speculations, investors must decide the estimation of the properties they purchase and make instructed surmises about how much profit these ventures will create, whether through property appreciation, rental pay or a mix of both.

This is what real estate valuation analysis deals with. You have a property in which you want to invest, you need to calculate how profitable this property is and use this to formulate a strategy. That is basic and very important. Many investors think they have all this done and dusted, but still make uneducated guesses and fall into the trap of bad investments.

In Andrew Baum and Neil Cosby’s book “property investment appraisal”, they think property valuations are critical. According to them “Valuations are important: they are used as a surrogate for transactions in the construction of investment performance and they influence investors and other market operators when transacting property. ”

Hold on! So, how do you calculate this value? There are two ways to go about this. You can either hire a valuer or take a hands-on approach to valuing your real estate investment. If you choose to take the second option, then check out these two approaches from Investopedia.

HOW TO DETERMINE MARKET VALUE OF YOUR INVESTMENT PROPERTY YOURSELF

1. NET OPERATING INCOME APPROACH.

Net Operating Income reflects the gain that a property will generate after taking into account operating expenses, but before deducting taxes and interest payments. Before deducting expenses, the total income obtained from the investment must be determined. This can be done by looking at rental income from comparable properties in the area. Therefore, considerable marketing research is needed at this stage.

Anticipated increments in rents are represented in the growth rate which we will incorporate in our calculation. Working costs including those that are directly brought about by day to day operations, for example, property insurance, management expenses, maintenance fees and utility expenses will also be added. So according to the net operating income approach, the value of your real estate is calculated by:

Market value = NOI/r-g = NOI/R

Where:

NOI = Net operating income

r= Required rate of return on real estate assets

g= Growth rate of NOI

R= Capitalization (Cap) rate (r-g)

2. THE GROSS INCOME MULTIPLIER APPROACH

The gross income multiplier method assumes that the price of property in an area is proportional to the gross income it helps to generate. To calculate the market value using this approach, we have to take into account an element that is called a gross income multiplier. The gross income multiplier takes into account historical data and sales in an area.

The selling price of comparable properties divided by the annual gross income they generate will produce the average gross income multiplier for a region. In essence, we are saying:

Market value = gross income * gross income multiplier

You have to realize that there will be unavoidable assumptions in these calculations. You can’t always be perfectly right. But you can look at the signs and make well-informed guesses to determine profitability of your investment.