We live in a University town. The housing prices are dropping which are mainly affected by the economy of the whole state. The university itself is good. I want to get a rental property on campus. It could be a small SFH or a duplex. But one of my friends warned me not to do so because there won't be any potential appreciation of the house itself, and I will definitely lose money. She heard it from her friends, and wasn't able to tell me why.
I am very new to the real estate/rental thing. I googled but didn't see any topic linking rental property and appreciation together. Can anyone explain a little bit about this? Thanks. Edit by Moderator: Thank you for your participation. Please note that there is also discussion about this topic Here.
If you don't find what you are looking for in that thread, then I would suggest that you post your question there just to keep the information on rental properties in the same area.
BTW, my purpose is to get positive cash flow. I don't really care about the appreciation much.
oceanexprt
Senior Member
posted: Jul. 3, 2007 @ 7:03p
jolapo said: BTW, my purpose is to get positive cash flow. I don't really care about the appreciation much.
ummmmm...what's to stop other people from buying their own house instead of renting from you so you can make positive cash flow from their rent? if the rent they are paying you is higher than the mortgage payment, why rent? i wouldnt. i'd buy it myself. i hope you know that most landlords have negative cash flow and make money from the appreciation later on.
illtaketwo
Member
posted: Jul. 3, 2007 @ 8:30p
oceanexprt said: jolapo said: BTW, my purpose is to get positive cash flow. I don't really care about the appreciation much.
ummmmm...what's to stop other people from buying their own house instead of renting from you so you can make positive cash flow from their rent? if the rent they are paying you is higher than the mortgage payment, why rent? i wouldnt. i'd buy it myself. i hope you know that most landlords have negative cash flow and make money from the appreciation later on.
Because he is trying to rent to students I am assuming since it would be a house on campus. Students don't buy houses (well I did, but I'm not in the norm).
Around here you can buy a 4-5 BR rental property for $80k on campus and rent it out for $250 to 300 a month per BR. That's a nice positive cash flow.
ls7corvete
Member
posted: Jul. 3, 2007 @ 9:10p
Ditto, doesnt have to be students, anyone who will not be in the same area for 3-5 years is generally better off renting, never mind discussing if people renting is a valid idea, the market is unquestionably there to rent to, the question is: is renting still going to be profitable if prices continue to drop?
If you're really buying for income and don't care about appreciation, then your decision if fairly easy. If you can find a property that generates sufficient income, and you have no reason to suspect that rents will decline (university towns are good for this), and you can control your maintenance costs (be careful about this in university towns. You'll be suprised how badly male students will trash a place), then buy the property.
The problem is, you're one of the very few people who isn't buying for appreciation, and it has skewed the market so bad that you're probably not going find a property with a decent cap rate. Because of the potential for spiked maintenance costs associated with student rentals, I'd be looking for caps around 10 - 12%. But since everybody is still convinced that they can appreciate themselves out of a negative cash flow situation, there are NO freakin' properties with cap rates over 6% around the universities where I live.
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