Investing in college housing has become an even hotter trend lately but what are the real pros and cons?

Investing in college towns has long been a profitable niche for real estate investors across the nation. Typically, good schools enjoying booming local businesses and growing communities making for good fundamentals for real estate investing. Now major players including private equity and big home builders are getting in on the action with deluxe dorms.

So what are the real advantages and disadvantages and is investing in college housing for you?

The Pros of Real Estate Investing in College Housing:

• Can be seen as a form of social good, helping to fuel education
• Good schools can be surrounded by grounds which are ripe for growth
• Multiple tenant housing and rooming can result in much higher rents per unit
• You might get your kids’ college housing for free or at least save on the expense
• You could get bought out by the college as it desires to expand and soak up more land
  Most students aren’t very demanding tenants
• Individual vacancies make little impact on overall returns and cash flow

The Cons of Real Estate Investing in College Housing:

• Student loans are defaulting at an unsustainable rate which may be a concern
• Students are exiting higher education unable to get jobs with their degrees while dropouts launch multibillion dollar businesses, creating a shift in trends and future demand
• Property maintenance can be a nightmare; your tenants are students after all
• Students can be extremely unreliable tenants
• You may have to deal with parents too
• Colleges (for example in Ottawa U) can push local government to seize property by eminent domain for expansion
• Challenges of handling property management from a distance

Many are drawn to real estate investing and flipping houses for fast money, great returns and big paychecks, but there is a huge difference between making a great income and building real wealth and having wealth that can last for generations.

Some people dream all their lives of winning $1 million dollars. They envision that will set them up for the rest of their lives and they’ll never have to work again. For a few it might.

Most will need millions just to be able to retire reasonably comfortably at 65 or 70. Those in real estate investing soon realize that $1 million is pocket change for the truly wealthy. Then consider what a lavish lifestyle really costs; between having to drop at least $20 million for a respectable home, a few more for a private jet, over $1 million for a highly envied sports car and well over $2 billion (yes with a B) to boast having the biggest private yacht among your new friends.

Of course there is little need for this extravagance but it does highlight the difference between making good money and being truly wealthy.

Real estate investing is obviously one of the strongholds of the world’s richest individuals and if not their primary way to get there, at least one of their best performing and favorite wealth management tools.

Carlos Slim is in, Warren Buffett is in, Bill Gates certainly owns his share of real estate as do most of the others on the Forbes 400.

So what can we learn from them about creating the type of wealth that can last generations? How can you create so much money through real estate investing that you’ll never be able to spend it all in your lifetime, it will last your family for generations and you can still afford to give billions through philanthropic efforts?

Robert Kuok, the world’s 32nd richest person according to Bloomberg and a real estate titan in the hotel industry recently gave his first interview with Western media in 16 years. He says his wealth can last for generations. So what tips and real estate education lessons in building lasting wealth can be picked up from him?

Firstly he has a strong personal brand, and at 89 he’s still in charge. He also weathered the recent downturn just fine. So be in a position where you can ride fluctuations out for bigger gains. When you have that kind of money you can live through an $8 billion drop in the value of your real estate holdings without having to sell and wait for it to bounce back higher.

Kuok has also diversified into many other channels, including launching some of the world’s top hotels around the globe.

Family is important to him, and instead of focusing on materialism he alludes to the fact that with the right entrepreneurial spirit and character it doesn’t matter what you start with, while all the wealth in the world can be quickly wasted by those that don’t appreciate it or manage it well.

So invest in real estate, diversify, build your personal brand, recognize that you don’t have to start with a lot to make it big, and while enjoying your wealth is great there are more important things in life too.

Cash flow is the most important consideration when buying a rental property. Appreciation is nice but far from a guarantee. A rental property with strong monthly cash flow will positively impact your overall real estate portfolio. It is important to stay on top of your rental market, expenses and any changes in rent at all times. Overlooking or ignoring just a few items can turn positive cash flow into one that is treading water. Fortunately there are some things you can do that will give your monthly cash flow a boost.

In the simplest terms cash flow is money that is left over after all expenses are paid. The most common expenses are for the mortgage, insurance, taxes, utilities, property management, maintenance, vacancy and more. The only source of income you have on the property is the rents received. It is important to assign a monthly figure on all expenses even if you do not pay them every month. You probably don’t need to do repairs on the property every month but you will at some point. If the funds are not available when you need them you end up taking money from an alternate source. Cash flow is not static month in and month out. If your expenses increase your cash flow will decline. Here are five things you can do to increase your monthly cash flow.

1. Check All Expenses. Most property owners can quickly rattle off what they pay every month for the large expenses. The mortgage, insurance and even property tax payments are almost engrained in your head. It is the seemingly minor expenses that quickly add up that can become a problem with rental property cash flow. It is important that you take a day every month or so to do a full review of all your expenses. Make a spreadsheet that lists every single expense you make on the property. Be sure to include hidden items such as snow removal, lawn maintenance and quarterly water bills. Dive into each account to see if there are ways you can reduce your payment. This can mean switching companies or finding ways to improve efficiency. A $100 savings on a $1,200 monthly rental is a savings of roughly 8%. You can probably find $100 a month of savings without digging too deep.
2. Improvements. Making the right improvements to your rental serves a number of positive purposes. It adds appeal which increases demand which improves your bottom line. The right improvements allow you to maximize your rental price. Regardless of the market if you can supply a superior product tenants will pay a premium for it. This doesn’t mean you can name your rent but you can charge more than other properties in your area. The key is doing work that combines quality and affordability. The work needs to be practical for the area and provide something that tenants really want. If you make the right improvements you will see the impact in your monthly cash flow.
3. Refinance. The largest monthly rental expense you have is with your mortgage payment. Depending on when you took your loan out there may be a benefit in refinancing. Interest rates are still hovering near all-time lows. To take advantage of these you need to look at what your current rate is, your principal balance and an estimation on the current value. If your loan balance is near 70% of the value you may be in business. Actual monthly savings is based on the size of the loan and the change in interest rate. Lowering your rate by one full point on a $100,000 loan does not have the same impact as lowering it a half a point on a $400,000 loan. In some cases a refinance can save you a few hundred dollars or more depending on your current situation.
4. Deferred Maintenance. All properties will need maintenance at some point. You may think you are saving money by avoiding annual checkups but all you are really doing is making the problem worse. Avoiding these smaller bills will lead to bigger ones down the road. These have a huge impact on your monthly cash flow. Never avoid seasonal checkups on the furnace, oil tank, fireplace and water heater. Every owner wants to squeeze every day they can out of these items but most go about it the wrong way. Don’t let them run until they stop working. Protect your investment, and improve your cash flow, but taking care of these items every year.
5. Increase Rent. It stands to reason that one of the ways to increase cash flow is by increasing the rent. The timing of your increase is critical. You can’t just decide you want to increase the rent without some justification. There needs to be a positive shift in the market, improvements to the property or some other factor that makes your property appealing. How you increase is also important. Typically you need to make any increases incremental. Take a look at what is in your market and how your property stacks up. If you increase too much it may have a negative impact. Instead of getting more rent you may end up with a vacancy. Before you decide to change your rent you need to do your homework.

Rental property cash flow can be a moving target at times. There are ways you can improve your cash flow but you need to stay on top of it with every expense every month.

You never know when you may want, or need, to rent a property. There are many investors who got their start in the business by renting out their primary residence after the mortgage collapse. There is also a large segment of investors who decide to rent after putting their rehab on the market. A solid rental property can be a great addition to any portfolio. That being said there is a lot that goes into it. You can’t simply put a “for rent” sign on the lawn and wait for checks to roll in. Like anything else in the real estate world there is a certain process that needs to be followed to ensure results. Here are eight steps you need to take to get your property rented.

1. Research Local Rental Rules And Guidelines. The first step you should take if you are considering renting is to research the local rental rules and guidelines. There are often specific rules based on the town the property is located in. You don’t want to spend time and money in finding a tenant only to discover that your property is not eligible for rental. There are many quirky rental laws out there for student housing, zoning and the maximum number of tenants that may be allowed in the property. Before you get too far in the process you need to know what you can and cannot do.
2. Look At Market Rents. The rental market is very much contingent on local rental prices. The next step is to look at every rental property on the market within a five mile radius of your property. The closer the property is to yours the more reliable of a comparable it is. Look at important items such as size, room count, square footage, parking and other amenities. It is important to fight the urge in placing a higher rental value on your property based on some upgrades you made. Let the numbers guide you as to what kind of rent you can generate.
3. Understanding Expenses. There are a few hidden expenses that can quickly eat away at potential cash flow. All property owners are aware of the monthly principal, interest, tax and insurance payments. However there are many rental property expenses that can take you by surprise. Water bills, lawn maintenance, snow removal and sewer bills are just a few of them. You also need to figure out how you plan on managing the property. A good property manager will make your life easier but they will also take roughly 10% of the monthly rent received. It can be very disheartening finding out that your rental property is breaking even when you thought you were positive $300 a month. Avoid this mistake by understanding all rental property expenses.
4. Get The Word Out. After you run the numbers and make the commitment to rent you need to spread the word. Gone are the days when a classified ad in the newspaper was your best bet. Today there are many more rental listing sites than ever before. Between social media alone you can quickly reach hundreds of people. You can also utilize Craigslist, Kijiji, and any other rental site you can find. Finding a good rental is often a numbers game. The more people that know about your property the better chance you can quickly find a tenant.
5. Schedule Showings. Just because a prospective renter is interested doesn’t mean they are going to take the property. With every showing you need to always showcase the property in the best possible light. Make sure the property is clean, odor free and ready to rent. You may have to show the property half a dozen times before you find a tenant that ready to act. This is all part of the process. Good tenants rarely just fall on your lap.
6. Tenant Screening. One of the most common mistakes that inexperienced landlords make is renting to the first person that shows interest. Your goal isn’t to find a tenant but find the right tenant. You need to spend some time screening each interested tenant. Give them an application, ask for a credit check and follow up with the references listed. Your tenant is going to live in your house for at least nine months. As easy as a good tenant is a bad one is a nightmare to deal with. Take your time and screen every interested applicant.
7. Lease Review. You can probably find a generic lease online in a matter of minutes. This may be easy and inexpensive but will it protect you if an unexpected issue comes up? You are better off spending some money having an attorney draft your lease. Once you are comfortable with your lease you can present it to your tenant. Sit down at the property and review any items of particular importance to you. If you are adamant about pets or smoking rules now is the time to make it clear.
   Final Walk-through. After you and your new tenant have signed the lease and collected the security deposit there is just one more step to go. You should meet your tenant at the property on move in day for the walk-through. You should be ready to hand over the keys and provide specific information about the property. You should also document the condition with pictures or videos. Doing this now will make things easier for you when the lease is over.

Things will rarely go smoothly over the course of the lease. Take things as they come and be ready for anything. Use these eight steps as a guide the next time you have a property you want to rent.