Nearly ten years ago, Baylor University launched, with gusto, its “Vision 2012” initiative — an ambitious attempt to push the university to new heights in just about every aspect of university work and life.

So far, the plan has featured several successful initiatives, each of which can have a profound impact on Baylor real estate:

• New buildings like the Athletics and Academic Center, the Baylor Sciences Building, a new basketball practice facility, Floyd Casey Stadium improvements, and the new Brooks Residential College.
• Extensive, multi-pronged academic campaigns to join the top tier of the nation’s universities.
• A new emphasis on international education.
• Extensive new green spaces and walking trails.
• The building of an endowment with a corpus of $2 billion, which will both make these sorts of ongoing commitments to success easier to execute throughout the future, and secure the university against unexpected financial challenges (like the recent recession).

New infrastructure and construction projects will boost employment in the area, and spur further private development in surrounding neighborhoods. New green spaces will improve life in local neighborhoods, making housing there much more attractive. New emphases on global education will increase movement in the local market, as students are less likely to stay in one place for three or four years (plus it will attract increased numbers of international students and boost prestige). New academic and athletic successes will make the university a more attractive place for both students and faculty. New museums, cultural attractions, and athletic facilities will draw regular influxes of visitors, boosting the surrounding ancillary economy and improving local neighborhoods.

Larger influxes of residents each year will increase demand on the housing marketing both immediately around Baylor University, as well as across the broader Waco area.

In other words, campus-area real estate is always one of the most secure, rewarding real estate investments you can make. Real estate around an up-and-up university like Baylor is even more exciting. Give one of our Waco real estate specialists a call for more information. 

In the Long-Run, Renting Doesn’t Pay

Money spent on monthly rent payments should be looked at like money poured down the drain. You’re just not going to get it back.

If you own a campus-area property, you’ll still be paying mortgage payments each month. But at the end of it all, you’ll own an enormously valuable asset. It’s the same as when you’re trying to decide whether to rent or own for your primary residence, except with a campus rental, you’ll get your money back (and then some… a lot of some, in fact) in two ways:

1. Like any home you own, you’ll always have the option to sell it down the road for more than you paid initially… and actually keep the money.

In other words, when folks sell their primary residence, the money they get from it almost goes directly into their next home. So their housing investment is never truly liquid. But with a secondary income property, you can take that money and do pretty much whatever you want with it, since you won’t need to move as soon as you sell it. The investment is liquid.

Furthermore, since you probably won’t need the house for living in (after your kids graduate), you can hold onto it until market conditions are most favorable for a sale.

2. You’ll be getting rent the whole time. While you pay the mortgage, your tenants are paying you. And after the mortgage is paid off, the rent payments can provide a sizable, steady stream of extra income.

Stable Housing Markets

University-area housing markets are among the most reliable in the world. Take Waco, for example. Unless Baylor shuts down or relocates (which, as one of the oldest universities in the South, seems pretty unlikely), there’s going to be a steady presence of students and faculty and staff needing housing year after year after year. And since universities are enormous economic boons to their communities, the areas around college campuses are less likely to be hard hit by an economic downturn.

Furthermore, campuses are normally areas of high housing movement. Students usually only stay in the same place for a year or two, and usually leave town after four or five. Thousands of new students arrive each year. The constant movement makes it easy for homeowners to find tenants and keeps rents at a profitable level.

In a Down Market, Deals Abound

Still, despite the Baylor housing market’s relative good health, a real estate collapse like the one America just experienced touches every local market, including those in college towns like Waco. Home values around Baylor are about as low as they’re ever going to be, and federal interest rates are still rock bottom.

Furthermore, the housing crash hurt folks the most when it made it impossible to sell a home they needed to sell (say, for example, to relocate for employment purposes). But if you’re looking for Baylor real estate as an investment property, this won’t. In other words, if you don’t have to sell a home in order to buy one, the slumping housing market is actually working in your favor.

So there’s never going to be a better time to consider an investment in college real estate — especially if you have a son or daughter coming to study at Baylor, and are planning on sinking thousands and thousands of dollars into their housing costs anyway.

Give one of our Waco real estate specialists a call for more information.

The financial crisis slammed just about every community across America in 2008, and the Waco housing market—even robust Waco real estate—was not immune.

Overall, home prices dropped by an average of $10,000 in 2008, according to the Real Estate Center at Texas A&M. Nearly 500 fewer homes were sold in 2009 than in 2006. And 2009 saw 1.2 percent negative growth in employment.

So where are we today?

Thankfully, the Waco housing market has two major advantage perpetually working in its favor:

Prime location:

Midway between Austin/San Antonio and Dallas/Ft. Worth, Waco benefits from the constant flow of traffic moving between these larger urban hubs along the I-35 corridor, which makes for a bottomless well of capital getting poured perpetually into the city. Even though few of these folks are stopping to, say, buy a home, healthy, recession-proof aspects of the economy like this attract permanent businesses and homeowners.

Furthermore, it’s the largest city in a nearly 300 square mile region (further, if you project out into West Texas), which makes it a destination for a broad array of goods and services. The city’s largest employer—Providence Health Center—reflects this.

College town:

Waco is a classic example of a strong college-based economy. It benefits not only from Baylor—the oldest continually operating university in Texas—but also  McLennan Community College and Texas State Technical College.

This matters to the economy for two reasons:

1. Colleges and universities are largely recession-proof—especially prestigious ones like Baylor, where enrollment doesn’t drop during economic slumps. They create large, affluent communities of faculty with money to spend. Their support needs provide constant sources of lower-skilled employment. And the large student bodies support robust restaurant, shopping, and entertainment sectors. Baylor University will anchor the Waco economy year in, year out without fail for the foreseeable future.
2. College towns are bursting with real estate opportunities—both directly around campus, and in outlying neighborhoods. Every year, thousands and thousands of new residents arrive, and thousands and thousands of residents leave. This permanently in-flux atmosphere means that homes will always be in demand, and home values will remain strong.

The numbers reflect this:

As rough as 2008 was for the area, the housing market has seen growth over the previous year in every month since October of 2009. And even in 2009, when unemployment ballooned to 6.7 percent, it was still in much better shape than most of the nation (at the same time, Texas was hit with a nearly 3 percent drop in employment). According to Trulia, more than 600 homes are currently for sale, for an average of $158,000 each.

Investing here in college real estate—whether you’re a parent of a student, a college professor, or just a Waco resident looking for a smart real estate opportunity—is a great idea.

Contact our Baylor real estate experts for more information.

Let’s say you actually bought the textbook for, say, a post-grad course with that attractive exchange student on the agricultural affects of the Soviet collapse in Belarus. And let’s say the book is one of those big, fat, expensive ones (150 pages about corn alone!) that gives you back problems for years and years to come after lugging it around the Baylor campus.

And let’s say when you head over to the book store to sell it back, you learn about a new edition of the book due to come out, or about how the course was dropped from future schedules for lack of interest (kids these days just don’t care about Belarus). So now your stuck with a big, fat, expensive, back-breaking book that, since you never, ever plan to vacation on a farm in Belarus, will be best used as a new ottoman.

There’s an easy way to avoid this (surprisingly common) scenario: textbook rentals.

Simple. Money-saving. Stress-free. Textbook rental opportunities are popping up all over college towns like Austin and Waco, and for good reasons.

Textbook costs are simply staggering these days. It’s not uncommon to start off a semester at Baylor University or the University of Texas with nearly $1,000 of book costs added on to the already steep tuition. While spending money on a top-notch education is just about the smartest investment a person can make, there’s no reason to sink a ton of money into the physical equipment that comes with it.

In other words, you’ll own your education forever. You won’t, however, need to own the books that helped you get it.

A smart alternative is rentals. Here’s why:

• No need to worry about buying an edition of a textbook that can’t be sold back.
• No need to pay for the premium of ownership.
• The ability to easily update from an obsolete edition to the current textbook needed.
• No need to spend hours at a bookstore, trying to figure out what you need.
• Access to smart, intuitive customer service.
• Access to a comprehensive inventory of the latest editions of most textbooks.
• No need to try and sell back books at the end of the semester.
• Discounted prices, compared to book store listings.

So let’s take a look at two companies who are helping students save in Waco, Austin, and beyond. Campusbookrentals.com and collegebookrenter.com both make it easy to rent textbooks with a suite of benefits and features, including:

• Free shipping, both when you receive the textbook, and when it’s time to return it. This saves you time spent wandering the bookstore, money spent on buying a book from a site like Amazon or Barnes & Noble, and back-end costs that you might forget about on the return. You’d even save on gas money spent getting to a library.
• Risk-free refunds, if you drop the class, or it turns out you either got the wrong book, or you got a book listed in the syllabus that you don’t really need.
• Flexibility to extend rental periods, which gives you peace of mind should your needs for the book change over time. And if you decide you just want to keep it forever, both companies make it easy to simply pay the difference.
• Permission to still highlight important information in books (both companies ask renters to do so carefully, and only for important information).
• No monthly membership fees.

There’s just no reason to lose money on worthless textbooks anymore.

It wasn’t exactly a local, well-guarded secret, but it seems like it took a severe nationwide recession to get people to notice the fact: Austin is a great place to be (and one of the best places to invest in campus-area real estate).

Regardless, people are catching on. Newsweek recently named Austin as its top city poised for recovery from the recession. Forbes Magazine confirmed it. And the Brookings Institution. And… ok you get the picture.

So let’s take a look at just a few facts, figures, and unlikely indicators that affect the local Austin housing market to see why:

1. More than 50,000 students attend the University of Texas at Austin (not including faculty, support staff, and those employed by nearby businesses serving the university community). Not only does this provide a dependable population mass living around campus, but it provides a dynamic population as well—the constant change of the local community creates multiple new University of Texas real estate opportunities each year.
2. Similarly, a steady presence of government-related jobs (Austin is, of course, the Texas state capital—and the capitol building is less than a mile from campus) also stabilizes the local housing situation.
3. With 58 such businesses calling the Lone Star State home, Texas boasts more Fortune 500 companies than any other state. The business-friendly climate has helped the state become the nation’s no. 1 destination for job-seekers. In Austin, a strong creative and entrepreneurial vibe has sparked one of the strongest tech-economies in the nation.
4. Altogether, Texas is welcoming more than 1,000 new residents each week.
5. Despite these strong foundations, unemployment in Austin is still hovering around seven percent. There are still approximately 10,000 fewer jobs in the city than there were pre-recession. Still, 17,000 new jobs have been added in the past year (a 2.2 percent annual growth rate). Its unemployment rate is better than both Houston and Dallas.
6. Currently, Austin rental occupancy rates are hovering around 93 percent, and are expected to rise thanks to significant numbers of new-arrivals (who are likely to rent for a while before deciding to buy).

In other words, Austin took a hit like everyone else when the economy tanked back in 2008. But thanks to strong fundamentals and a permanent university and government presence, the city was quickly in position to start seeing housing market growth again—and that’s where we see ourselves today.

Home prices are still much lower than they were pre-crash, but they’re rising, and most indicators predict further significant growth. And around the UT campus, housing demand will always remain high and renter-friendly. University of Texas real estate is a solid bet.

In other words, the market is ripe if you’re ready to buy. Contact one of our University of Texas real estate experts for more information.

At around $400 per year, it’s difficult to dispute the value of having an annual pest control contract. Bug problems are one of the leading causes of complaints I receive from tenants. We have streamlined this process for our tenants in order to offer them better service while at the same time reducing the number of calls or complaints that we receive. We have posted the contact information at our properties for our pest control company as well as the action steps required in order to initiate a service call. That’s just one less thing to occupy valuable time during the week!

From a great distance off, the Kiddie Condo program that FHA has offered for quite some time looks great.  Parents can purchase a condo close to the university of their children’s choice and reap the rewards as values appreciate and equity gets paid down during the students collegiate experience.  It’s particularly appealing because it’s basically the only low money down option for parents who don’t have a lot of cash that they can tie up in a property investment.  So what’s the problem?
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The problem isn’t simply finding borrowers who qualify, the problem is finding properties that qualify!  In order for the FHA to loan money on any condo, it has to be “warrantable”.  You can read the previous blog posting to understand more fully what a warrantable condo is.  In most university areas you have a high percentage of investor owned properties.  Campus area condos have long been a safe place for property investors to piece together portfolios due to consistent renter pools and high rental income.  The closer to campus the more appealing the property is to a student, thus to an investor who is concerned with demand for his property.  If any single property has more than 50% of the units recorded as investor owned, the property doesn’t qualify.  So in a 10 unit condo complex, if 6 of them are listed as investor owned, it doesn’t qualify.  The second nail in the coffin is percentage owned by a single investor which can’t exceed 10%.  So, in this same 10 unit complex, if a single person owns 2 units, it doesn’t qualify.  In a 5 unit complex, a single investor-owned unit would make up a 20% thus eliminating eligibility.
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Of the hundreds of potential condo projects that surround the University of Texas in Austin, there is seldom more than a couple that manage to qualify.  To make matters worse, these ratios are constantly changing as investors flip properties in and out of their portfolios and students graduate resulting in their parents selling the condo.  There is no way to know which properties qualify at any given time without a great deal of investigation into each property’s home owners association who tracks which units are owner occupied Vs. investor.

In the end, the program gets an E for “effort” but fails in functionality and its ability to adapt to the true university market.  There is an opportunity here for private money to step up and fill in the gaps.

Who watched their net worth erode over the past few years as the economy took a sudden nose dive?  Well, that’s most of us.  Our retirement savings and financial investments lost between 30 – 40% of their value!  Unless of course Madoff was your financial planner, then you got to lose it all!

Some people however did manage to make some money on their investments.  I recently sold a two bedroom condo for a client of mine located in West Campus at the University of Texas.  The purchase price was $210,000.  We purchased this condo just over three years ago for $164,000. After closing costs were paid, my seller cleared approx. $30,000.  That is 18.3% more than what was invested.  Or approx 6% per year!  Not bad during a time when most people’s portfolios lost twice that in a couple of months.

Not only was there a profit of $30,000, my client was able to lease the 2^nd bedroom to a friend of his daughter’s at a market rate of $600.  Over three years, that’s an additional $21,600!  The income produced by the extra bedroom and the appreciation realized over three years was more than enough to cover the cost of the daughter’s education.  Nothing like a free ride!  There must be something to this college real estate!

Benjamin Franklin

Hot off the press!  Be on the look-out for increased sightings of the wildly popular and historically famous Benjamin Franklin. The man may have passed away a long time ago, but his portrait is showing up in ever increasing frequency!  But how? Where?  Look in your wallet!  Well, maybe not YOUR wallet, but certainly the recipients of all the Stimulus money going around.  Now I’m all about using cash injections to get this economy rolling again, but that debt will have to get paid back.  One advantage that the United States has in issuing debt is that it’s denominated in dollars.  That’s right, we borrow dollars from other countries to finance our debt.  Well, the unfair advantage that the US has over any country dealing in dollars is that we get to control the presses (money supply)!  That’s right, depending on our fiscal policy we can increase or decrease the flow of Ben Franklins coming off the press to achieve a wide range of objectives.

The Fed is quite intelligent I believe and would never risk their reputation as fiscal conservatives with a tight grip on our monetary policy.  After all, who would continue to finance our debt spending if we didn’t protect our reputation and demonstrate self-control?  Ok, the fact of the matter is that the Fed will slowly increase the money supply in order to pay off their debt, which will slowly erode the value of the dollar (inflation) which means that the dollar you are holding in your hand today will be worth less than a dollar in your hand a year or two from now.  Your bank account will generally offer a level of interest that is just above the rate of inflation so that while your money is in their care, it’s value is maintained.  What happens when inflation grows at a rate higher than what your savings account will pay you for interest?  And what the heck does this have to do with College Real Estate?

Here is where I’ll tie it all together.  Historically, during inflationary times, people turn to hard assets to protect their wealth (houses, land, or equipment).  The idea is to purchase an asset that will adjust for inflation.  Why does buying a house/condo make the most sense today?  As inflation takes off, the Fed will raise interest rates in order to slow the flow of money.  As rates increase, fewer people will look to purchase homes due to the increased cost of servicing the debt.  Those people will rent.  As the rental market grows, so will the rental rates.  As inflation erodes the value of the dollar, rental rates will adjust to reflect the real market value.  And to top it all off, the money you borrow today will be worth a fraction of that by the time you have paid it off in 30 years!  The reason being, your loan does not adjust for inflation.  So if you borrow $100,000, in 30 years that same amount of cash might be the equivalent of your monthly grocery bill!

Are two better than one?

As with most answers to these types of questions, it’s a big Maybe.  It all depends on the context of the person and the place.  Let’s say that you have approx. $300,000 in financing available.  You or your parent have met with their bank or mortgage consultant and have been pre-qualified based on credit and income.  The conventional next step would be to begin searching for your home or condo that can be acquired for what you have been approved for, right?  However, that’s only one possibility.  Another option might be to instead look for two possibilities that would get you to the same value.

For example, instead of purchasing one home at $300,000 let’s say you bought two condos at $150,000 each.  You might not end up with a home that is as big and nice as you were hoping for, but what do you end up with?

The pros are as follows

First of all, you have spread out your risk base.  Some neighborhoods do better than others and particularly in campus area real estate, some properties pass from being the cool place to live into being yesterday’s news.  Secondly, if you end up renting the property out as an investor, you have also reduced your exposure from a single tenant to multiple tenants.  It will be easier to keep two smaller units occupied than it might be to keep one larger.  Also, if you are unable to find a tenant for one of the two units, you will at least be at 50% occupancy.  With one unit, it’s all or nothing!

There are the cons as well

It will most certainly mean more work as you have doubled your management obligations from one to two properties.  It could double your maintenance calls, with two properties comes two kitchens, two HVAC systems and generally two sets of tenants to keep happy.

If you’re in the market for a campus area property, run the numbers.  You might find that in the end, two ARE better than one!