When it comes to investing in real estate, college towns hold a lot of financial promise. Real estate in college towns can offer investors some unique opportunities.
One of the many ways real estate investors can tap into this potential is through house flipping. House flipping, in case you didn’t know, is when a real estate investor buys houses, fixes them and then sells them for a profit. A house must be purchased with the intention of quickly reselling it in order to be considered a flip. The time between purchase and sale can range from a few months to a year.
House flipping has grown in popularity over the last few years. Flips accounted for only 5.7% of all home sales in 2017. By the first quarter of 2022, that proportion had risen to 9.6%. In 2021, flipping activity was on the rise across the country. In 2021, 323,465 homes were flipped, the most in a single year since 2006 and a 26% increase over 2020.
Due to protracted lockdowns and a switch to online learning, the CoVID-19 pandemic may have put a halt on the possibility of house flipping in college towns, but the reopening of schools welcomed back the staff and students who are likely to buy or rent a property close to their universities.
College towns are considered to be less volatile than other markets due to the presence of universities and colleges making them a large potential tenant market due to the large number of people employed and the constant presence of college students. This makes them insulated from volatility compared to other markets. Investors can either flip to sell or rent out a purchased property and are guaranteed to make a return. However, while the advantages are obvious, you should also take a look at the drawbacks to make your house flipping investments in college town a success.
The Pros
Quick income. Sellers can expect people who buy property in college towns to have it ready to lease to multiple tenants in the coming school years. It is not uncommon to see six to eight tenants living in a single home near the college. Some have already agreed to multi-year leases. This can ensure immediate income for real estate investors who do house flipping.
Sustained property appreciation. Properties in college towns tend to appreciate steadily and significantly. When it comes to real estate, appreciation is always a good thing. If you are able to purchase property near the college, you have most likely purchased a gold mine. The closer the property is to the college, the better, though any property in a college town can accommodate students, professors, and local professionals who aren’t quite ready to buy. That means the property’s value will continue to rise.
Steady Rental Income. In college towns, rental properties are always in high demand. The better maintained your property, the higher the demand. Furthermore, the consistent high demand for rentals in these areas can keep rental prices in the area high even when other parts of the housing market fail.
Rare and short-termed vacancies. A college town’s high demand for rentals may also result in fewer vacancies. There’s always the next student or college employee looking for a place to live, a place to rent or lease in college towns. Because of the constant demand for rentals, demand for flipped houses should be high as well.
Easy to sell. College towns are usually good at selling themselves. Attractive amenities entice people to visit college towns. There is usually a plethora of activities available in the arts, sports, and entertainment. Guest speakers and musical acts are both common and popular events. College towns are known for having a plethora of restaurants and shops, many of which are within walking distance. College towns are also popular since they frequently welcome pedestrians and have excellent public transportation. Public buses, numerous taxis, university shuttles, and occasionally even railroad systems are all readily available.
The Cons
High Tenant Turnover. Any area has drawbacks to investing in real estate, and college towns are no exception. You’ll have access to a sizable rental market, but because these tenants are sometimes transient, there may be vacancies. During their time in school or while working at the university, tenants may choose to remain in the area, but they eventually leave. Even students who plan to study at a university for four years frequently divide that time between living on and off campus, and they typically switch housing every year.
Off Season. Summertime is one of the most difficult aspects of owning rental property in college towns. Even with year-long leases, mass exoduses occur at the end of the school year as many students return home for the summer. Hence, it is advised to make your house flips available to buyers who are not looking to invest in rental properties.
Destructive college life. College students can be very destructive in their living environments. A lack of worry about their residences may be from excessive drinking, immaturity, or knowing that their parents are paying the rent.
Maintenance requirements. Given that college students living in a single residence could necessitate ongoing repair costs, buyers might be discouraged from making real estate investments. However, there are still buyers looking for passive income investments, so you might think about making investments in areas that don’t appeal to university students.
Investing in Houston
If you want to invest in house flipping in college towns, you should think about these pros and cons. Despite the fact that Texas has a lower return on house flipping investments of less than 15% in 2022, there are still places where you can get a better return on your investment.
Houston is one of the most populous college towns in the United States, with dozens of universities and colleges, including Texas A&M University-College Station, the University of Houston multiple campuses, Texas Souther, Rice University, Sam Houston State University, and the Lone Star College System. Research also shows that home prices in the city continues to rise at double digit rates. With this, more people are turning to home rentals instead of buying one. Should you invest in house flipping you can consider taking advantage of this opportunity.
To get a head start on your house flipping investment, GL&L Holdings will be here to help you with a hard money loan. The requirements are direct, and we will be happy to provide the details to get you started.
If you are looking to apply for a hard money loan for a house flipping project, please give GL&L Holdings a call at (832) 770-9415 or use our online contact form. We look forward to hearing from you.
