Student Housing: And Adding Condominiums to Your Portfolio.
I found out early on that most real estate investors just aren’t interested in those types of properties. The main reasons are the HOA (Homeowner Association) fees. All of these communities have monthly fees that the homeowner pays in addition to the regular mortgage. HOA fees might include the water, garbage pickup, the master insurance policy on the main structure, or may include other things on occasion such as your heat. The fees will also include exterior maintenance, including lawn care, and snow removal in most cases. As you know, the typical mortgage payment will include property taxes and insurance. When a retail buyer is purchasing a condo, they will add those association fees to your mortgage payment when they are qualifying you for a loan.If you are a landlord that is renting a condo to a tenant, it can be much more difficult for the property to cash flow with these additional fees.
That raises the question of whether or not these properties are ever a wise investment over the long term.Why You Might Want to Add Condominiums to Your PortfolioI have recently changed my thinking where condos are concerned. If you live in a city that has a major university, you are probably aware that student housing has become a big issue in these areas. Older students and graduate students in particular, are looking for other living arrangements outside of the dormitories and student apartments on the university campus. I personally know several real estate investors that now specialize in this type of housing.I recently heard about a condominium that is part of an estate in a nice area near the University of Louisville. I believe that after some cosmetic updates you would have a total investment of $45,000-$55,000 for a typical unit. They have two bedrooms and one bath with a total square footage of about 950-1030 sf. Not bad compared to dorm living.At first glance the HOA fees seemed really high at about $265.00. After doing some checking I found out that these fees included everything except the electricity. The building has steam heat and that is included along with the water. Students would know what their expenses would be every month.As a landlord, you would never have to think about replacing a roof, the heating system, or other major items in this property. How Much Would It Cost Me for A Typical Condo In This Building?If you were to get a $55,000 loan at an investor rate of 6%, for example, the monthly payment would be about $330.