Calling on the experienced...

mattrussell

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#1
Greetings,

I recognize that REIN members are amongst the most educated and savvy investors out there, thus I have a question. I`m 22 years old and will be attending a professional school in the states for the next 4 years. The location is one that does not necessarily meet the economic fundamentals of an opportune investment location, however, I recognize that student housing can have its advantages even in a location not prime for growth. My question is pretty simple, is this something worth looking into? I don`t want to get stuck paying $700+ in rent every month and I`m DYING to get my feet wet in this business. Had I been aware of student rentals and their potential, I would of have certainly pursued this in my undergrad, considering im in KWC!

I appreciate any insight and anyone willing to help me out.

Kind Regards,

Matt
 

invst4profit

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#2
There are some basic questions you need to ask yourself.

Do you know anyone that presently invests in student rentals?

Are you prepared for the responsibility of ownership while concentrating on your studies?
Do you have the time to properly seek out the "right" property. Do you know what the right property is? Do you understand how to evaluate a property and determine such things as expenses. Do you know what all the expenses are on a rental property
Done properly this could take months and is very difficult when done long distance.

There will always be issues when owning a rental property. Damage to the property by tenants, students quiting school and walking away leaving you high and dry with the rent, surprise expenses etc. Will you have a cash reserve?
Do you have the financial resources to replace major items like a furnace?
Are you good at managing stress?
Are you handy with tools?

What about your exit plan? Have you thought about your plans when you graduate. Do you plan on selling at that time or holding the property.
In the event you are planing to sell what will you do if the market is down and you will lose money if you sell. Or the market is slow and it takes a long time to sell.
Making plans to start investing early in your life is good but you must keep in mind that being a landlord is not always a smooth road and the financial responsibilities can be very stressful.

There is a steep learning curve involved with being a landlord. Start by accessing the landlord/tenant regulations in the area you plan on attending school. You need to educate yourself to be prepared to manage your business before you buy your first property in order to avoid many costly mistakes.
Learn how to screen tenants, when to get co-signers, lease agreements etc, etc.

There is plenty to learn before you consider buying a property.

Good Luck.
 

mflynn

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#3
Hi Matt, I know a young person that did this for her undergrad in Hamilton. I can see if she would be willing to have a chat with you (I don`t know her that well, she is a friend of one of my tenants). I was quite impressed with her when I met her and she struck me as the type to lend a helping hand.

However, she will not likely know anything about the city to which you`re moving. I would think a university town is always a good investment, but I would wonder about the legalities of owning an investment property in a different country????????

Good luck

MaryQUOTE (mattrussell @ Mar 30 2009, 04:14 PM) Greetings,

I recognize that REIN members are amongst the most educated and savvy investors out there, thus I have a question. I`m 22 years old and will be attending a professional school in the states for the next 4 years. The location is one that does not necessarily meet the economic fundamentals of an opportune investment location, however, I recognize that student housing can have its advantages even in a location not prime for growth. My question is pretty simple, is this something worth looking into? I don`t want to get stuck paying $700+ in rent every month and I`m DYING to get my feet wet in this business. Had I been aware of student rentals and their potential, I would of have certainly pursued this in my undergrad, considering im in KWC!

I appreciate any insight and anyone willing to help me out.

Kind Regards,

Matt
 

mattrussell

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May 23, 2008
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#4
Greg,

It is responses like this that make REIN such a wonderful organization, thank-you for your input. Those are many questions you`ve raised, and to be honest, it intimidates me. I basically don`t have answers to any of those questions, other than I`ll be in school full-time for four years and then move away after that time to start-up my own practice. I`m not particularly handy, nor will I have a reserve fund available in the case of an emergency. I could find a good property though, and I understand expenses, taxes, etc. As far as exit strategy, I have no clue what I would do if the economy was still in ruins (but the Obama years are comin`
). Can you help me work through the issues you`ve stated, what would you do in my situation? I was looking at buying a cheap property, living in it for four years, fixing it up as best I can, then selling it tax-free and skipping the whole landlord thing (this was suggested by a fellow REIN member in a separate post of mine). What do you think?

Matt
 

mattrussell

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#5
Hi, Mary,

I will certainly take you up on that offer, thank-you. Please forward my email to your friend, it is mrusse03@uoguelph.ca.

I appreciate you keeping me in mind,

Matt
 

invst4profit

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#6
The first thing you need to do is educate yourself on real estate investing. There are plenty of resources available.
The book "Real Estate Investing in Canada" available on this site is a good place to start.
Although specific to Canada it includes the basics of "understanding" the business in any country in my opinion.

The big question is are buying this strictly as a personal residence or are you renting to other students as well to cover your ongoing expenses.
If you intend to rent to others you are a landlord with all the responsibilities and headaches associated with the business.
If you are simply buying a personal residence then you are not purely dealing with investment real estate.
Depending on the specific State laws renting to other students may negate your personal residence status but in all honesty I know nothing about the American system.
 

housingrental

Frequent Forum Member
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Oct 10, 2007
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Waterloo
#7
Hi Matt
I rent out hundreds of student bedrooms around WLU and UW
My thoughts -
a) Only purchase real estate if you`re willing to own it long term - 5-10+ years minimum - transaction costs are high - values do go up but they can also fall
b) Only purchase if you can come up with additional cash for operations if needed - you will not be able to predict when you need that 10k for the furnace and appliances dying, or your tenant bailing
c) Don`t invest in a property if your going to live in it and rent out rooms - being a landlord is no fun - and when your the one trying to chase your friends for rent, or prevent someone from smashing a wall for fun you wish you were renting
d) I funds allow, invest in Waterloo...
e) Email me if you have any questions
 

mattrussell

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#8
Greg,

Ideally I bypass the landlord thing and just live in the house solo. And during my time off, I`ll make some smart investments into the property. I`ll be able to get approved for a mortgage, and my parents are financially secure and a little savvy, so they could help me out too I recken. I`ve read all of Don`s books twice actually
and always manage to learn more each time. The area where I`m looking obviously needes to be rigorously researched but from what I`ve seen, there`s potential.

What would you do in this situation?


Matt
 

invst4profit

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#9
I would not buy a home for personal use only.
Doing so will likely cost more than you will save and you risk losing money on the sale in 4 years.

You can live cheaper in a rental with a lot less hassle for that period of time.
Also I have never known a student that has not graduated with some level of debt so I doubt
you can truly afford the additional load of home ownership.

I would invest in something with less work and concentrate on my studies.

I would hold off on real estate investing until I had a good solid working income to support it.
 

bizaro86

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Jan 29, 2008
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Calgary, AB
#11
Hello,

I was in a similar situation as you ~3 years ago. I was half way through my degree when I realize that the rent on a 2 bedroom apartment was more than the PITI of a 2 bedroom house in Edmonton where I was going to school. So I borrowed the downpayment for the house from my parents, and bought it. I sold it a year ago when I finished my degree before I moved to Calgary for my job.

The biggest thing I would ask yourself is what is your alternative? Compare the costs and hassle of renting versus the cost and hassle of buying in the area you intend to live in. Is one of these considerably cheaper every month? If so, that`s probably the option I`d pick.

Buying that house worked out very, very well for me, and when I sold I had enough for a downpayment on a much nicer house in Calgary to live in, as well as a grubstake for future real estate investment. (We had an offer accepted on our first investment condo last night!!!)

The one other thing you absolutely should do is complete the goldmine scorecard out of Don`s book for your area. Edmonton was a great opportunity 3 years ago, and maybe your area is now, but maybe its not. You need to find out the answer to that question. Realistically, nobody is going to do that work for you, but the instructions in Don`s book are quite explicit and easy to follow. Even if you don`t buy anything, it`d be good practice to do it so you learn how.

Michael
 

mattrussell

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#12
Michael,

Thanks for responding and congratulations on your first condo (one of many I`m guessing!). Basically what you did during your degree, is what I want to. The only unfortunate thing on my part is I won`t be in an `Edmonton three years ago` location. So I could be at a pretty bad disadvantage there!!

One thing I wanted to ask you however, is how you had the `guts` to go ahead with the venture. Did you have any previous experience? If you read up a bit in previous posts from fellow REIN members, the general consensus is that it can be done, but it is difficult (very difficult!) and takes a lot of preserverance.

I`d really like to pick your brain a bit, if you ever had the time. Feel free to let me know via email; mrusse03@uoguelph.ca

Kind Regards,


Matt
 

manojsingh

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#13
Hi Matt,
Its not difficult. This is the best time for you. Simply do this but do not skip due deligence process.You are way ahead with respect to lot of people who at your age waste their time . Best time is always now. Thanks
 

bizaro86

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#14
QUOTE (mattrussell @ Apr 1 2009, 01:42 PM) Michael,

Thanks for responding and congratulations on your first condo (one of many I`m guessing!).
I hope so!

Basically what you did during your degree, is what I want to. The only unfortunate thing on my part is I won`t be in an `Edmonton three years ago` location. So I could be at a pretty bad disadvantage there!!

This is an important part of the process. If you`re not in a location where you think it makes sense to invest in RE, it might make sense to concentrate on finishing your degree, and saving/not borrowing as much as possible, and learning and preparing to invest when you graduate. Then, if/when you move to where you`re planning to live permanently, you can start buying RE. Having full-time employment makes the process of buying RE much, much easier, even if you`re planning to live in it yourself.

One thing I wanted to ask you however, is how you had the `guts` to go ahead with the venture. Did you have any previous experience?

I was confident that I was making the right decision, right to my very core. But my hands were still shaking when I signed the documents! I figured that with what I`d be saving on rent even with negative appreciation I`d come out ahead. That helped a lot, because I figured the worst case scenario would be to sell for what I bought it for. You need to run the numbers and compare the rent vs buy choice for yourself. As for previous experience, I didn`t have any, except for reading books about RE.

If you read up a bit in previous posts from fellow REIN members, the general consensus is that it can be done, but it is difficult (very difficult!) and takes a lot of preserverance.

I think its probably something that can only be done with help. If my parents hadn`t been willing/able to lend me the downpayment, there is no way I could have swung that house.


I`d really like to pick your brain a bit, if you ever had the time. Feel free to let me know via email; mrusse03@uoguelph.ca

You have email.


Kind Regards,


Matt

My replies are in blue above.

Michael
 

REINteam

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#15
Hi Matt,

I`ll add some comments as I have done this in the US for my bachelors and thought about it for my masters (but I`m from the US).

I have never ever liked the idea of paying rent, it has never made sense to me, hence I`m in the this business. However, the one thing I didn`t realize during my undergraduate years was - THIS IS A BUSINESS. I bought a great little 4 bedroom place minutes away from the University of Kentucky (very large school, lots of students to rent). I bought during my junior year, moved in with 3 friends to cover my costs and it worked out very well. However, I was in friend mode so I charge cheap rent, didn`t truly cover all my costs and had no exit plan. So...when the time came around for me to head to grad school I had no plan and got stuck with a place that didn`t move nearly as fast as I needed it to. Any money I made I lost by having to hold the property and in the end I broke even (still didn`t pay rent so maybe a little ahead). Had I bought during my first year I would have made ok money b/c I had plenty of friends that were paying decent rent and I knew their families so them running away and not paying wasn`t an issue.

In hindsight I would do it again, but with a firm exit plan in place. I had no management lined up so renting didn`t fly, couldn`t sell...and this made it impossible for me to buy a place for grad school (I couldn`t afford LA anyways).





For you:




1. It would make more sense to move one or two friends in to help cover costs. Grad students are typically more responsible and I imagine you can get a list of incoming students to your program, most of whom will need housing. Screen these very well - think business. If you`re planning to buy just for yourself the numbers may not make sense - expensive rent and you pay all repairs. I am handy, if you`re not this can add up.





***Determine your personality for this kind of venture. Turns out I don`t like living with people in a place that I own...most won`t treat it the way you do...and this irritated me. I had great roommates, but it still bugged me.





2. Treat it like a business. Run all your numbers and figure out what you`d save by buying verse renting. You`ll be there for four years which is a decent hold, not great, but that is four years of potentially collecting rent and paying the mortgage down. Figure out the numbers and plan your exit strategy now.





3. Get in touch with a broker and an accountant down in the US to see what you can do as a Canadian citizen. My wife also lived down south for 5 years and she bought a house - I believe at a decent rate. Figure out the taxes you`ll pay in the US and Canada.




4. Dig into the fundamentals of the city you`re moving to - what is going on there. How big is the school, what else drives the local economy, etc. What city are you moving to if you don`t mind saying?





5. During a recession people go back to school...




In the end, make sure the numbers and the locale make sense. Hope this helps.




Regards,




Ray Reuter

Real Estate Investment Network
 

mattrussell

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#16
Ray,

Thankyou for your in-depth response, I certainly will be referring to your post as time goes on! Time for me to get to work!

Kind Regards,

Matt



P.S. The city is Seneca Falls, NY.
 

Mike56

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#17
Matt,

I have two main thoughts that I would like to point out as a young non-citizen purchasing realestate in the US. The property taxes charged to foreign owners are higher than that of a permanent resident, and if you make a profit on the property it is taxable. The bigest item is you had better have a lot of cash or a very strong credit history in the US. Your record in Canada is not worth anything. Your opportunities in Canada would be more favorable.



Mike