Questioning my investment.

[soccs]

Hi, my name is Joe. I recently bought a condo in Miami as a rental investment. It was not hard since I already knew my tenants and where I needed to buy. You see, my son attends college in Miami; he was going to rent an apartment with his friends because they hated the dorms. I am already paying rent for another son that goes to college in NYC, so I thought, instead of paying another rent for my son in Miami, why not buy a place that he and his friends could live in and pay me rent. Well, it is working out quite well. The rent that I collect pays the mortgage; so it is not costing me anything to own this place and I am gaining equity. Now I don't know if I should buy another place and rent it out to more college students. I paid cash for this condo by taking out a home equity loan on my primary residence. I could take out an equity loan on the condo in Miami since I own it without a mortgage tied directly to it and buy another rental property. Does this make sense or am I missing something? I feel that there is a good market for buying in college towns as long as you get the right students to rent the place. Is what I am doing a very risky way to invest? Please let me know what you think. Has anyone else done this with good or bad results? Thanks.

[coastal]

My only issue with college students is the quick turn-around. If you can find students who will stay in the same place together for years without tearing the place up it would be great but in reality students tend to move every year, get in fights with room-mates and move out, sublease when you are not looking, gook up your carpet, put holes in your walls and move out late at night never to be seen again etc....

If you don't mind the management issues it can be financially rewarding. I've got two rentals that have made a good deal of money over the last ten years but I have also had to take care of a number of late night calls to start up oil burning heaters, fix leaks in the roof, repair broken plumbing and take care of a number of personal issues.

[Ryan Ward]

Also remember that you are not paying cash for anything if your take out a mortgage somewhere else. There is nothing wrong with it and it is done quite frequently. At some point you will presumably reach a point where your debt/income ratios will not allow you to continue this route. When this happens you will be able to continue with what are called stated income loans for the properties. You will pay a slightly higher interest rate, but if you can still generate positive cash flow with a 30 yr rate, you should be fine in the long run. I would not recommend EVER using an ARM for an investment property due to the higher level of risk.

[Boston Condo Guy]

If you don't mind the management issues it can be financially rewarding.

Perhaps your son can be your manager? I would imagine that your son is not paying any rent to you, and this could be one of his duties - he would be well suited to gauge potential tenants and give you a "real world" view of them to you before they signed a lease. Depending on the situation and the ambition of your son, he could be your forerunner into a Miami real estate empire.

[avonreal]

its not a bad idea but have you got the time to manage the properties? remember whenever something breaks down they'd call on you to come and fix it, they're not like normal tenants (i should know, am one of them).
Plus, once your son graduates, who will you have to check up on the properties?

[escapeso]

It sounds like the first property you bought was for your son. Since that is taken care of I would suggest for your second rental having it closer to home. Its alot easier to check on your properties are in town vs being in another state. Another benefit is that you know the area better so its easier to know what parts of town are more likely to appreciate.

[Dan Connolly]

There has been some discussion here on the market in Miami taking a hit, so appreciation may not continue there. It's just hearsay for me so if I were you I would do some research on that before I invested further.

I know people who have done that and have then faced some challanges when their kids graduate and leave the area.