StreetEasy: Talk - Investing in "college" towns

I always thought the investing in RE in college towns made sense until I had a good friend try it. He bought two 5 bedroom homes (3 bedrooms upstairs; two in the basement). He would rent to 5 kids. All was good until the old-time non college neighbors decided the college kids were too rowdy. They got the city to start enforcing an old law (that was designed to stop brothels 75+ years ago) that said no more than 3 unrelated people can live in a house.

I've also heard of cities taking action b/c the bedrooms in the basement are not "legal" bedrooms and therefore can't be used as such.

The point I am making is to find out if the there are any movements going on in the town to try to crack down on the college students. My friend ending up loosing a good amount of money on the two houses b/c once the city started enforcing the old laws, he could only rent to 3 students and not 5 but three students wouldn't pay the same rent that 5 had paid before. The value of his houses decreased by a good amount.

On other point if you go forward - get a good management agency. It will be well worth it. They will find and screen your tenants, go after the tenants if the rent is not paid, etc. Also, you don't want to get a call at 2am that the toilet is clogged. And if you did want to deal with it, it might cost you $250 just to have a plumber show up; a management company will have one on staff and might only bill you $75. I recall that my friend told me the management company took about 10% of the rent. It took away a good amount of the profit he was making (when he actually made a profit in the good years) but he said it was well worth it.

Just a few thoughts to consider.

Source: http://streeteasy.com/nyc/talk/discussion/29918-investing-in-college-towns

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