College Investment Property

[JeffBox]

I'm planning on buying some sort of property in Gainesville, FL when I move up there (hopefully this summer) for school. I want to see if the numbers work for a rental even buying at FMV (fair market value). There are a couple of similar condos at this price and location with the following numbers:

Asking price $82,500
3/1.5 1200sq ft.
1.5 miles to campus on bus route
$395 mortgage at 6.5% interest ($20,000 down)
No HOA fees! (confirmed by listing Realtor since it's a townhouse)
sewer/utilities estimate $200
Taxes and insurance $200
Internet $50
Am I forgetting anything?

Rents in this area are usually $400-$475 inc. utilities but not inc. internet/cable. Most places have 1 year leases and others have 9 month (summers seperate) so it shouldn't be too hard to fill two rooms at low rates. I will probably rent for $400 x 3 =
$1,200/month
- expenses ($845)
= $355/month cashflow

yearly roi = $4,260, or around 20% BEFORE appreciation!

Notes:
I will probably have to do some repairs so actual ROI might be a bit smaller. This does not figure in appreciation which was 7% last year (according to one of my Realtor market reports). I may have a vacancies during the summer and in between school years I will have at least one good tenant (myself) no matter what. Closing costs on the way in will be pretty much wiped out by my commission and reduced when I decide to sell since I'll list it with my broker.

EDIT: oh I forgot to add, since now we're talking about renting rooms, I guess the only way to go is to form an LLC?

[spncr2]

It looks like i'm moving to Gainsville! haha. You say you will rent to 2 others?

[JeffBox]

yes, my parents would shell out one of the $400/month for me since it's cheaper than what they pay in Miami, FL for my dorm and that is a fair price for housing there. I have a friend who said he'd gladly room with me if I tranferred up there so there's really only one space to fill.

[spncr2]

I see. Hopefully everything will go as planned for ya Jeff. Keep us updated man.

[JeffBox]

Just wanted to bump and let you guys know I found out there was no HOA fees so I reworked my numbers adding insurance and 0 for hoa and got an even better return. Hmmm...

[Stocktrading101]

Jeff I apoligize for Brandon not checking your numbers out! I will have to lay into him while we eat our turkey feast this week!

I wanted to comment though on the overall concept which is great. One of the hardest parts is getting good renters, and having your friends living with you makes it that much easier. I really wish you the best of fortunes with that man. You gotta make sure and let us know how everything ends up turning out .

Have a great holiday,

[JeffBox]

thanks, didn't you say you were living in a place your parents bought and are renting rooms? How's it going? My friend up there is already doing the same, but I found a place with better numbers : )

[MDZ]

Hey Jeff,
I just read this one, sorry man lol. I noticed on your first post, you talked about LLC's. I know that we are both pretty new to this, but everyone I have talked to or been involved with strongly recommends it. Reasons being liability (duh) and no attachment to the property. Something I was just talking about with a friend of mine was selling properties though LLC's. What they told me was if you hold the property in the LLC and nothing else, you can sell the LLC rather than the property. The advantages they gave were that the seller avoided some tax ( title tax???) not sure on that, and the buyer is taxed on the old appraised rate for the house.

For anyone following me on that last part, when you buy a house, you get taxed on the current market value, over time, appreciation tends to take over, and you end up paying tax on a lesser amount than the house is worth. When you buy the property, this value is updated. This is what the buyer is avoiding with the LLC sale. Its just a way to transfer a property without actually selling it.

I got off on a tangent there, but if you were looking for opinions on that LLC issue Jeff, everyone that I have talked to has said Yes.

Have a awesome holiday man!