Home Buying in 48104>Question Details

Peter, Home Buyer in Ann Arbor, MI

We are from out of state and considering purchasing a rental by campus. Any thoughts of what to watch out for?

Asked by Peter, Ann Arbor, MI Mon Sep 8, 2008

Purchase price approximately $600,000. Rental income approx. $5000/month.

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Hello, I assume you have a student that you want to have live here, this makes a lot of sense and can be a great investment. My advice is to by as close to campus as possible. Also, be sure to have a thorough home inspection done to be sure you are not going to be facing big repair bills such as bad foundations etc. Make sure you understand the City of Ann Arbor leasing requirements and city requirements for rental housing. I there are rooms in the basement, make sure they are up to city code too.
0 votes Thank Flag Link Tue Sep 16, 2008
Greetings Peter. Thank you for your interest in our campus area.

There are several residential multifmaily units for sale at this time. Campus rentals should be looked at as a long term investment. The agent you hire should have Multi Family housing experience, they should be able to provide you with the current cap rate of the building as well as a history of profit and loss, as well as disclosure of actual expenses, and net operating income figures. This way you are best informed about the performance of each investment.

Remember... the MLS is a marketing tool, and often times is providing only half of the picture. Sometimes it is the picture that we most want to see. Be sure that you are working with an agent who is also familiar with Tenant/ Lanlord law. I can easily provide you with the Michigan Landlords Tenant handbook that I have in JPG format. I would also be interested in providing you with a complimentary 2/3/unit home tour. Once you get into 5 unit bldgs, financing, insurance, and the tax advantages may change. Also, I would not discount Eastern Michigan Universities Campus area where prices have dropped enough that in several of those bldgs you have the potential of generating a positive cash flow. Feel free to contact me anytime, I am easy to reach and available to answer questions. Take a moment to register on the Prudential Search Platform, and I will have the access to see your saved buildings, and provide further information. This site has all of the tools you will need to search effectively, and have a professional in the background when you are ready to begin your search. Otherwise, I hope that the journey to buying a building your investment portfolio an enjoyable experience. Caitlin A. Phillips Caitlin@CaitlinAmanda.com
0 votes Thank Flag Link Tue Sep 9, 2008
Peter I disagree totally with Jackie, anytime you can find a rental near U of M. is a great time to buy. They are NOT sitting empty, so you take over the leases of the students living there. The leases can not be broken until the end, then you can fix them up, up the rent or whatever they want to do.
When most investors are selling property near campus they are getting out for retirement or cash out reasons, NOT because they can't find tenants.
Actually there are several that are available now that might fit your needs.
0 votes Thank Flag Link Tue Sep 9, 2008
Jackie is so right about waiting till spring. We learned that the hard way! Check out what the rents go for in the area, before buying.............your budget may be to high for a rental............but I am in Grand Rapids........If you ever decide to buy some near Grandvalley my neighbor/realtor has some great duplexs for sale........listed at a very good price!
0 votes Thank Flag Link Tue Sep 9, 2008
Hi Peter,

You should really on consider buying rental property in the spring. It may be difficult to rent it out during the school year. I would also make sure that you are aware of the property taxes on a home that is not your primary residence. The taxes alone on this property are $1500 a month. if you put down 20% you are not going to cash flow at all. If you pay any utilities, you will be losing money each month. You either need to have more of a down payment or be able to get more in rents. I would suggest investing the 120k down payment somewhere else as you could make more money in another type of market or other housing choices. I have never thought owning rental property in AA makes sense unless you buy really low or of course a long time ago. Feel free to contact me to discuss this further @ jackie@bouma.com
Web Reference: http://www.bouma.com
0 votes Thank Flag Link Mon Sep 8, 2008
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