Today's question comes from Dale and Dale says, hi, Marco. I stumbled into you and your tutelage. Very recently. I currently have no investment properties, but looking into a duplex in my old college town where our kids might presumably attend in six years, the student population is approximately 50,000. My plan is to buy now cash flow and build equity for six years, then own a residence we can occupy while kids are in school while still renting out the other unit. My question with the revolt and revolution currently going on with the higher education system, as they deal with COVID hotspots, reduced admissions, remote learning, and the ridiculous increases in tuition. Do you think this scenario is a good investment now, later, never?

Thanks for your help in making me feel a little wiser after every episode - Dale





Well, Dale, thank you very much for the question and for your kind words. So your basic question is, should I buy a rental property in my college town? Obviously, you have some connection there and your kids will probably go to school there, I would assume in six years. So here's how I would look at this. This actually is kind of a difficult question. Believe it or not, because there's so many, it depends, but regarding, you know, does it make sense now? Does the scenario make sense today? Well, first of all, you have to do the same kind of market analysis. If you will, that you do with any other investment property. Look at the market, look at the area and the neighborhood, and then the property. So let's just assume that the neighborhood and the market all check the boxes. Okay. So it makes sense that pretty much every level fundamentally, and you're happy with the area and the location, et cetera, et cetera, you know, it's obviously a school district.

So the next step is to run the numbers. You want to make sure that the numbers make sense today from an investment perspective. So if you're buying a duplex, you have two tenants, you look at the gross rents, subtract your vacancy, allowance, your expenses. You end up with your net operating income and then figure out what your mortgage payment's going to deduct that, and what's left over is your net cash flow. So do the numbers make sense today. And then you start to make some assumptions and predictions about the next six years and see if the numbers continue to make sense. And this is where it starts to get more and more nebulous. So as far as this year goes, you've got this covert thing going on and we all know that things are not going to be the same. This fall 2020. The attendance is probably going to be lower.

A lot of students are going to class virtually they're going to be at home. So they're not necessarily traveling to school or living by the schools. And that's a big problem. Especially if you have a rental property that you are depending on students to come and occupy your property. The flip side of that is if you're looking to buy in these areas, and there are people who are selling, it might be a little bit more of a soft market or a buyer's market where you may be able to pick up properties at a better price, because the demand isn't going to be as strong people may be avoiding investing in those areas. And the people who are trying to sell are just going to give in and say, okay, well, I'm not going to get full price. I'm not going to make $300,000 on my property. I'm going to sell it for 280 or 270 or whatever you can negotiate. So I guess it works both ways as a buyer investor. It might be to your advantage as a landlord owner, it might be a problem because you're going to have higher vacancies. So having said that we are seeing studies come out where the effects of this pandemic in the student housing market is certainly having an impact. And we're all expecting fall 2020 to be softer. So property vacancies in student housing last year in 2019 in the fall, the vacancy rate was 5.2%. And this is coming from a study by Ries,