What about University RENTALS?

The rental market has been a tough one in the University of Arizona’s  targeted area. Several large high rise towers have been built over the last 5 years and MANY Mom and Pops have gone in purchasing a couple units, especially since interest has been so low. Now we are going through absorption and rents have dropped, this in turn LOWERS resale value too. If cap rate is affected the sales price is affected too- beware- selling isn’t always a good idea when units are hard to rent. Many people both in 2005-2006 and now can barely cash flow, between insurance, taxes, water, maintenance, security, and several other costs it has been growing harder and harder. Properties begin to look poorly maintained, , neighborhoods go downhill, crime increases-

I decided to drive around the U of A area to see really what was going on- on every block there is at least 2-3 rental signs- not good! Now the prices are by the bedroom, when did that start? With the towers $600- $800 a bedroom, sounds like California pricing to me.

When did college kids get so rich?  We have managed units for 30 years,  and it has become BIG business, it is tough if you have 2 or 3 units and hope to compete. Vacancy rates are high, college kids are hard on the property , turnover rates are high too, on top of that utility rates keep going up- sewer, water, electric. Good luck for the next couple of year while absorption happens.

Buy in  a GROWING part of the city, watch the price factor, cash flow, and location. Northwest might be a good place. Remember single family homes for middle class people is a good category. ONE refrigerator, stove, oven, AC unit, is cheaper to repair. Make a lease that protects you , check out your prospective tenants very thoroughly. You don’t always make monthly money owning a rental, however, for now, you get a tax right off. You may not make appreciation owning rentals a long time either, costs are high and so is management. Sometimes I think equities are better, ha, ha, ha, at least over 25 years they tend to average 6%.

Just remember it has turned into a BIG business in University areas! Be prepared to wait it out and lower your rents, fix up properties that are empty, or sell at a loss. Be prepared to compete with commercial management teams and  facilities that offer swimming pools, bus pick up, game rooms, happy hours/bars, weight rooms and A LOT more.