College Town Apartments
Many investors ask us our opinion of the market, when do we feel we will be out of the recession, and what is the right kind of property to buy right now.
First off, if we could predict when we will be out of this recession then we would be sitting on a beach on our own island having waiters bring us fruity drinks with pink umbrellas. No one can really predict when the recession will end because it is job and employment driven. Until people go back to work our financial woes nationally will continue.
With that being said, there are some ways to look at real estate to determine what will be the least likely real estate asset to be hurt in this recession. Here is the Nelsonian Theory:
- Class B and C Apartments in college towns
- Modest priced rental houses in strong neighborhoods
- Small medical office buildings with well established doctors
- Key: Retain some LIQUIDITY!!!
Retaining liquidity is critical in a tough market like this. If you have a leaking roof or the HVAC of the property fails having the cash to fix it quickly can make the difference of keeping your tenants happy or having them move out.
Liquidity is also important when you have a vacancy. It is always painful when you have to dip into your own pocket to cover a mortgage payment if your space is vacant and there is no rent coming in. Set a goal today of accumulating 1-2 months of operating expenses in a reserve account.
Class B and C Apartments are becoming very attractive to investors. The tenant mix in these types of properties are hard working blue collar individuals who usually become long time renters. They work hard and pay their rent on time. They are looking for a clean, safe place to live and don’t expect granite, stainless steel appliances, etc. They are also not the type of tenant who is renting your place just long enough so they can save up a down payment and then vacate to go and buy a house which is a trend in Class A apartments.
The most popular Class B and C Apartment complexes can usually be found in college towns. Right now with unemployment high the local universities and colleges are busting at the seams with people wanting to get an education. College towns are great for apartments because there is a healthy mix of the working sector in addition to the student sector for possible tenants.
Read our next blog about things you can do right now to get yourself in a better financial position to weather the storm.
Recent Comments