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Government Sanctioned Realty Investments: Part 1

Aug 31, 2008
There is a new loan incentive being launched by Freddie Mac called "The Student Housing Mortgage". While it is only applicable to very large student housing premises, it underlines the fact that the government realizes there is a need for this type of accommodation.

Investing in student rentals in towns and cities with large colleges or Universities has been one viable hedge against the down turn in the market. Some of the properties may have lost some value, but the consistent demand balances the losses to some extent. Also, on a long term basis, the properties are always bringing in income as students always need homes to live in.

This means that buying or owning a property near to a University or large college is still a good investment. If you are thinking of investing in the real estate market while the prices are so competitive, consider buying a student rental. How would you go about this?

Well, as all financial situations are different, I will assume that you have the wherewithal to fund this investment - or at least to get it off the ground. If you are a home owner then an equity take out may be the way for you. At any rate, you will need enough to buy the home, if not to make the mortgage payments (these will be covered by the students).

It is not so common to see a home for sale that is already converted to a student rental. Most owners hang onto these pots of gold! Therefore, most likely you will start by looking for a family home that lends itself well to a student rental.

In looking for an investment rental property, the search will entail looking for different characteristics than you would normally be checking for if you were looking for a personal home. Certain features will need to be different to maximize investment income.

An experienced real estate agent will be your best bet, as agents are informed of available property before the public. Once an agent knows your preferences, he or she will scour the new listings each morning with your specifications in mind.

An ideal time to consider buying a rental investment property in a University town is when your own child has to enter University. Instead of paying out for his rental accommodation, you can put him 'in charge' of the rental home. This saves you paying his rent, relieves you from the hassle of finding renters and gives him some manageable responsibility.

Depending on your location, house rentals can return approximately 3% minimum of the total value of a home. However, renting out rooms to a student will often give double that amount. This is because rental accommodation that is close to the University is at a premium and although the rent charged is small, students are only renting one room, so your smaller rental room charge will be tripled or quadrupled

The rental income may only be forthcoming for 10 or 11 months of the year. Be prepared! You can get a student to sign a lease from August 1st, or September 1st until the end of June, but you will be on your own for July and maybe August.

Government Sanctioned Realty Investments: Part 2 deals with the practicalities of choosing the right type of property.
About the Author
Philadelphia Real Estate Guide: Find Society Hill homes for sale in Center City Philadelphia. Easy-to-use search and neighborhood info from Todd Levinson, Philly Buyer's Agent.
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