Announcer: Please note disclaimers at end of show. Welcome to Creating Wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing, fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible.
Jason is a genuine self-made multimillionaire, who not only talks the talk, but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman, with the Complete Solution for Real Estate Investors™.
Jason Hartman: Welcome to Creating Wealth Show No. 128. I’m your host, Jason Hartman and I’m glad you joined me today. First of all, I want to start out by telling you I am a rich man, especially rich because our listener in Ireland, Damien – how are you doing, Damien? – sent me a great gift. Well, you can be the judge as to whether I’m a rich man or not, but I’ll tell you what he said. He sent me four pieces of paper that I have here in my hands. Thank you so much, Damien. This was just a tremendous gift. I’ve been meaning to get a hold of some of these myself. And some of you probably know what I’m going to say.
Here’s what Damien sent me. He sent me a 100 trillion dollar bill. He sent me a 10 trillion dollar bill, a 20 trillion dollar bill, and a 50 trillion dollar bill. So let me see; I have 180 trillion dollars here, but unfortunately, they’re Zimbabwe dollars from the Reserve Bank of Zimbabwe. And I’m going to guess because I’ve seen these things on eBay and I just haven’t bothered to purchase any, so Damien, thank you so much for sending me these things. They’re just awesome. We showed them at our team meeting with my sales staff here last week. I think these are about $4.00 a piece on eBay. I’m not sure, but last time I looked, I think that’s about where they were.
And folks, what Damien’s gift really shows us is a terrific example of how every paper currency ultimately reaches its intrinsic value. What is its intrinsic value, as I’m holding this paper here? You can hear it. It’s paper and ink. That’s about all it’s really worth. If you are following our strategy as investors, and you are piling up long-term, fixed-rate debt, you can become very, very wealthy.
As the world is buying up gold right now, remember, gold, and silver and the other metals are the same way, it’s okay, but that’s really a playing-not-to-lose strategy rather than a playing-to-win strategy. Packaged commodities, meaning houses on cheap land, apartment buildings on cheap land, where you’re buying the commodity value with long-term, fixed-rate debt, and historically low interest rates – that is the playing-to-win strategy. It’s not defensive. It’s offensive. Buying gold and silver is defensive. It’s okay. It’s money, I agree. It’s all right. It’s nothing big, though. It’s not going to make you win the game. It’s just going to help keep you from losing the game.
So if you are the kind of person going through life playing not to lose, buy gold. If you want to play to win, follow my plan because it is a far more multi-dimensional plan.
So again, Damien from Ireland, thank you so much for the gift. I really appreciate it. We want to have you on my Foundation Show, which is the Young Wealth Show. That is another show we’re launching, and that will be up soon. We’ve done some interviews for that and it’s all about achieving wealth at a young age. My first interview was the author of Rich before Thirty. She was a member of the Oprah Book Club and it was great to interview her. We’ve done a couple of shows. We’ll have them up soon. Look for them, especially if you, like Damien, are starting early. And I really congratulate you starting at such an early age.
In reference to Damien’s gift, I thought I would take a couple of questions from listeners, and by the way, we appreciate you getting these into us at HYPERLINK “http://jasonhartman.webimpakt-green.com”
www.JasonHartman.com. Click on the Ask Jason button.
This one comes from our listener, Rohm, in Australia, in Sydney, Australia. A beautiful place, by the way; I’ve been there myself. I was there on Christmas Day 1999 or 2000. I remember people on the beach on Christmas Day in Sydney, Australia. It was fantastic. Rohm says, “Jason, I’m a keen listener to your podcast and find your commentary insightful, even though I am far away in Sydney, Australia. You have many times talked about the devaluation of the US dollar. I note with interest the comments from a leading stockbroker.
‘The one thing for certain, at the moment, is that this is about all currencies. I can never remember a period in equities where currency has had a greater influence. It is an amazing time. For all the bottom-up stock market analysis you do at the moment, markets are simply about one top-down factor, the US dollar. Make no mistake. The US dollar is in the process of losing its reserve currency status. US dollars are being devalued and that is why gold continues to be accumulated by everyone from China through to individuals. Remember; you can’t print gold.’
“The Australian dollar is almost at parody with the US dollar. To our country, being one of the first out of the global financial crisis. Regards, Rohm.”
So that’s an interesting quote, and what it’s talking about is how you look at stock markets around the world, especially the US stock market. I made the prediction and I don’t know if you remember my New Year’s show that the Dow would 6,000. And we almost got there when we were at 6,400 several months ago. But guess what? I should have qualified that prediction a little bit better by saying that if they print so much currency, so many fake fiat dollars, that the true value of the stock market, the Dow, is at 10,000. But they’ve printed so much of this money that the real value is 6,000. Then in real terms, rather than nominal terms – remember nominal means “in name only” – it’s 6,000, folks.
So watch out for the game of historical revisionism and dollar valuation. What does every fiat currency ultimately become, like these Zimbabwe dollars that Damien sent over? It becomes worth its intrinsic value, paper and ink, and that’s what it’s all about when you follow my strategy of long-term, fixed-rate debt against packaged commodities that have universal need and they’re not tied to any one currency, vis-à-vis the dollar, for sure. That’s our strategy here.
Mike, I’m not sure where you’re from, but this is a 702 area code. I can’t remember that one off the top of my head. But Mike’s question is, “Can a person change a personal mortgage and put it under their LLC? Need help with mortgage questions.”
The answer, Mike, I don’t think so. When people put their properties into an LLC and they take them out of their personal name for various tax planning and asset protection reasons, you can do that, but remember it is always possible, although I think unlikely – and I have to make the disclaimer that I’m not a lawyer and I’m not a tax expert – that the lender can call the due-on-sale clause and ask you to repay that loan potentially right away. So be a little careful of that. I think it’s very unlikely, but it is a possibility. And no, you cannot. If you sign the loan in your personal name, you will always be personally obligated for that loan. It is a little bit difficult sometimes to refinance that loan when you have it in an entity or LLC.
We’ve had podcasts on that subject before. We’ll have them again. You can look back at any of our shows on that subject and consult the various asset protection experts.
We talk about this subject of the dollar and any fiat currency around the world, Zimbabwe dollar, US dollar, Australian dollar, any currency around the world. It doesn’t matter. As long as it’s not backed by gold and silver, it is a fiat currency and it is a fluctuating yardstick by which to measure value.
It reminds me of what is important about today. Today is the day, 20 years ago, that the Berlin Wall fell. And I have visited Berlin, Germany, twice, one time about 12 years ago, another time about two years ago. And listeners, I couldn’t believe it when I was there about two years ago. When our tour guide was showing us around the Berlin Wall and all of this incredible historical stuff there, and I remembered back to my visit 12 years earlier, when I spent about six hours at the Checkpoint Charlie Museum. And I just had goose bumps, going around there looking at all the contraptions that people made to try to leave East Berlin, to try to escape this terrible, oppressive, communist regime.
People risked their lives. Many died. They were shot. They were attacked by guard dogs when they were trying to dig under the wall, cross over the wall, run across, all of these things. It’s just unbelievable that if you have such a complete loser system that people will die to leave, to get away from it. It was amazing how the tour guide just simply revised history on that tour. He was talking about John F. Kennedy’s famous speech when he said, “I, too, am a Berliner.” I think that was the translation. “Ich bin ein Berliner.” And he didn’t even mention Ronald Reagan, when Ronald Reagan made the speech that made the difference, that said, “Mr. Gorbachev, open this gate. Mr. Gorbachev, tear down this wall.” And that was really the symbol of the end of the Cold War. Peace through strength, rather than the policy that’s being pursued today, which is peace through apology. We’ll see how that works.
But look at how governments, look at how history is revised. Look at how the value of fiat currencies around the world is just revised. It is fake, folks. Look for things that are real. And when we look at the 20th anniversary of the Berlin Wall, it is just another example of this type of manipulation. I just had to mention that because today is the anniversary. Twenty years ago today, millions and millions of people were freed, freed from oppressive regime, and able to pursue their own economic liberty.
Brad from Santa Barbara writes, “Thank you so much for your thoughtful show. I appreciate the depth and breadth of what you include in the show. I love the economic commentary and I am always pleased with the level of guests you attract. Question: I own five properties, one in your recommended markets and one in California, which loses more money per month than the cash flow of the other five properties combined.”
Yeah, I’m sorry to hear that. California is just not a good place to be investing.
“I need a strategy for building cash to spend now. I’m a huge fan of long-term wealth building, but I need cash to spend now. Any thoughts? Wholesaling, other; need diaper money. Thanks for your input, Brad.”
Well, Brad, yeah, there are some things you can do faster and that’s why we’ve taken a bit of a new direction on the show, talking about these various internet marketing and home-based business opportunities. And so, hopefully, you’ve been listening to the more recent shows and there’s a lot more to come. In fact, the next show is on that very subject of how you can make money.
Unfortunately, real estate is not the ideal vehicle for quick money. There are some quick money methods. Yes, you can wholesale, you can rehab; you can do that kind of stuff, and we’re going to cover more and more of that in our future shows. But really, the way you usually make that kind of money is you do it through a business and you do it through a home-based business ideally. A four-hour work week type of business. Stay tuned. We have more on that and I think you’ll really like it. Keep tuned in on all of that stuff, and again, we’ve recorded some of these shows already. We just haven’t released them yet. They’re coming real quick. The next show is on that very topic.
So thanks for listening, and if you can, modify your loans on your properties, especially the California property. We have a Do-It-Yourself Loan Modification kit you can buy for $47.00 at HYPERLINK
“http://jasonhartman.webimpakt-green.com” www.JasonHartman.com, and I would recommend that, and that you would pursue loan modifications because they are like free money that can instantly improve your situation.
Last question comes from Alyssa. She says, “Hi, Jason.” Alyssa is in New York. She says, “Hi, Jason. My question is regarding savings. I would like to know is ING Direct Savings a good savings account. If not, what is a bank to go with when opening a savings account?”
Well, Alyssa, I’m sorry, but I really don’t specialize in that kind of thing. I think a savings account is pretty much a terrible investment most of the time, but I personally have had an account at ING and they have that Orange Account, and I guess it’s a pretty good deal for a money market account. But you can do a little better in longer term CDs. The problem is I think inflation is on the way and you may lose money in those longer term CDs. Again, we have bank failures all over the place. For small amounts of money, reserve money, yes, a savings account is okay. But it is certainly not an investment, does not qualify as an investment.
Join us on the 14th for our Creating Wealth Bootcamp here in Costa Mesa. Make sure, remember, year-end is coming up quick. You have to make decisions fast if you want to cut your tax bill and take advantage of tax benefits, whether they be in the Go Zone or otherwise. You have to buy properties and close them before the end of the year, so be sure you take advantage of that. And make sure you take a look at our apartments. We’ve done some shows on our Columbus, Ohio, apartment opportunities that are working out tremendously well for small investors, who want a turnkey, brand new, 100 percent pre-leased property. You can do 14 – 24 units here, and these properties work from Day 1. We’ve had a few clients buy them. We’ve interviewed them on the show. You’ve heard about those. Those are phenomenal. Visit HYPERLINK “http://jasonhartman.webimpakt-green.com” www.JasonHartman.com. Contact one of our investment counselors for more information on that.
And if you like turnkey, that’s what this show is about today. It is about turnkey properties. We’re going to talk a little bit about student rentals today. So the first part of the show is we have a professionally narrated voice-over, where we’re talking about the Columbia, South Carolina, market, not to be confused with Columbus, Ohio, which is one of the few exceptions in the Rust Belt that we like quite well. And Columbia, South Carolina, again, fantastic student rental opportunities there, so listen to this short description of the area. It’s only about eight or nine minutes long.
And then we’ll go to the interview, where I interview the author of University Wealth, talking about how you can make great money with student housing. Again, I like this demographic very much for the next decade, and it is pretty cool. So let’s listen in – two parts coming up right now.
Part 1 – Columbia, South Carolina Student Housing Investment
Announcer 1: People who follow Jason Hartman’s Creating Wealth Show know how much he likes student housing investment opportunities. Communities with a large transient population, such as college towns, are frequently a boon for investors, since the relatively low percentage of people buying houses keeps prices stable, and the movement of people in and out of the town frequently makes it easy to maintain high occupancy levels and often generates healthy rents that generate attractive cash flows.
Columbia is the state capital and the largest city in the US state of South Carolina. The population was 116,278 according to the 2000 Census; 2008 population estimates put this city at 127,029.
The city’s name comes from a poetic synonym for America, derived from the name of Christopher Columbus.
Announcer 2: Located just 13 miles northwest of South Carolina’s geographic center, Columbia is the primary city of the Midlands region of South Carolina, which comprises several counties in the central portion of the state. As such, it is centrally located to the rest of the state.
Founded in 1786 as the site of South Carolina’s new capital city, it was one of the first planned cities in the United States. The area is often cited for its high quality of life offerings, with its many cultural amenities, parks, and recreational features. At the confluence of two major rivers, Columbia is one of the best destinations in the country for kayak and canoe enthusiasts. It is also known for its large number of independent theater groups.
Announcer 1: Columbia was recently one of 30 communities named “America’s Most Livable Communities.” The award was given by the Washington-based non-profit Partners for Livable Communities, and honors communities that are developing themselves in the creative economy. Columbia has also been named a top midsized market for relocating families in the nation.
Increasingly, Columbia is becoming recognized as an ideal city for retirees. “Where to Retire” magazine listed Columbia as one of its 25 best choices for retirement as a budget town in its January-February 2007 edition. A “RetireHomesSmart.com” survey of retirement cities lists Columbia as America’s second best retirement city.
The 1990s and early 2000s also saw revitalization in the downtown area. The Congaree Vista district along Gervais Street, once known as a warehouse district, became a thriving district of art galleries, shops, and restaurants. The Colonial Life Arena, formerly known as the Carolina Center, opened in 2002, and brought several big-named concerts and shows to Columbia. The Columbia Metropolitan Convention Center opened in 2004, and a new Convention Center Hotel opened in September 2007. Several residential developments are also in the works for the Vista.
Announcer 2: In addition to being the capital city of South Carolina, Columbia is the home to Fort Jackson, the largest military training facility in the United States. There is a large multiplier effect to the economy from this facility since there are many support services that are necessary for a military facility the size of Fort Jackson.
In addition to this, there’s a large population of people in Columbia who rent their housing due to the high student population and the large turnaround of people contracting for the government and military. This has contributed to a very steady housing market. Columbia did not experience the same rapid price spikes as other markets, and it is also not experiencing a large decline. This makes Columbia an attractive place for investors that are looking for cash flow and stability.
Announcer 1: Analysis of home sales in Columbia shows a slowdown in the beginning of 2009, but remarkable price stability. With prices staying stable through both up and down markets, it demonstrates the stability of Columbia, making it an excellent opportunity for investors. For more information, contact an investment counselor at HYPERLINK “http://jasonhartman.webimpakt-green.com” www.JasonHartman.com.
Announcer 2: In addition to the fact that 54 percent of Columbia’s residents rent their homes, the age distribution is very heavily skewed toward younger people. This is reflective of a large student population, which tends to be very transient in nature. This provides further evidence of Columbia’s strength as an investment market, since student housing frequently provides attractive cash flow for the owner of the property.
Announcer 1: Columbia is home to the main campus of the University of South Carolina, which was chartered in 1801 as South Carolina College and in 1906 as the University of South Carolina. The university has 350 degree programs and enrolls more than 27,500 students throughout 15 degree-granting colleges and schools. It is an urban university, located in downtown Columbia.
The Carnegie Foundation for the Advancement of Teaching has designated the university a research institution of “very high research activity.” The school also has a world-renowned international business program, ranking No. 1 in the nation for its undergraduate international business program and No. 2 for its graduate international business program, in the 2006 US News and World Report college and graduate school guides. University of South Carolina’s University 101 program is also frequently cited by U.S. News and World Report as one of the top program of its kind in the nation. The university is also home to the nation’s first National Science Foundation Industry/University Cooperative Research Center for Fuel Cells.
In addition to the University of South Carolina, there are many other colleges and universities, such as Columbia College, Allen University, Midlands Technical, Columbia International Bible College, and Benedict College. The vast diversity of education opportunities in Columbia makes it a very strong college town with tremendous opportunities for investors.
Announcer 2: Columbia enjoys a diversified economy, with the major employers in the area being South Carolina state government, the Palmetto Health hospital system, Blue Cross/Blue Shield of South Carolina, Palmetto GBA, and the University of South Carolina.
Columbia is also home to the headquarters of SCANA, a Fortune 500 company, which supplies energy to parts of the Carolinas and Georgia. Other major employers in the Columbia area include Fort Jackson, Richland School District One, Humana/TriCare, and United Parcel Service, which operates its Southeastern Regional Hub at the Columbia Metropolitan Airport.
Major manufacturers, such as Square D, CMC Steel, Spirax Sarco, Michelin, International Paper, Pirelli Cables, Honeywell, and Westinghouse Electric. There are over 70 foreign affiliated companies and 14 Fortune 500 companies in the region.
Announcer 1: There are many characteristics about Columbia that make it an attractive nexus for real estate investment. In addition to being the state capital, Columbia is also home to Fort Jackson and a sizeable college population that creates a steady housing market. Columbia has been evaluated as America’s most livable city and the top midsized for relocating families.
The Gross Domestic Product (GDP) of the Columbia metropolitan statistical area as of 2005 was $26.3 billion, the highest in the state. For more information, contact an investment counselor at HYPERLINK “http://jasonhartman.webimpakt-green.com” www.JasonHartman.com.
Announcer 2: In addition to the 50,000 recruits that are annually trained at Fort Jackson, there is a vast network of facilities and personnel that support the training operations. Fort Jackson plays host to 3,900 active duty and 5,200 civilian employees. There are also 36,000 retirees that are serviced by Fort Jackson, along with multiple other support services.
Announcer 1: One of the unique aspects of student housing is that it frequently produces higher rents than traditional rental housing because it can be rented by the room instead of renting out an entire house. The total rent collected for all of the rooms in a house frequently exceeds the price that the house would be rented out for all at once. This provides excellent opportunities for investors to capture exceptional cash flows on their investment.
Announcer 2: If you are interested in the investment opportunities available with the Columbia market, contact your investment counselor for a one-on-one consultation.
In addition to the investment properties, ask you counselor about our Coaching Programs, where they will work alongside you to develop a holistic strategy that merges attractive investments, solid financial planning, exceptional education, and a strong focus on personal values to help you achieve your goals now and into the future. We are ready to help you realize the success that you have dreamed of. Are you ready to take the next step?
Announcer 1: In addition to the opportunities available within the Columbia market, there are many other local real estate markets that have been identified by Platinum Properties Investor Network as attractive options for investors. Your investment counselor will be able to help you find the ideal opportunity for your specific situation, and is available for strategic coaching. By merging exceptional investments with intelligent advice and a superior strategy, there is no limit to what you can accomplish.
Part 2 – Interview with Marleen Geyen
Jason Hartman: It’s my pleasure to welcome Marleen Geyen to the show. She is the author of University Wealth: 21 Secrets to Buy and Manage Student Rental Property. Marleen, welcome to the show.
Marleen Geyen: Thanks, Jason.
Jason Hartman: Well, it’s great to have you today from Tampa, Florida. Now, you are a resident of Minneapolis, though?
Marleen Geyen: Yes, I am. I live permanently in Minneapolis, but I do spend some time in Florida.
Jason Hartman: Fantastic. You’re what they call a “snow bird,” although it’s not snowing yet.
Marleen Geyen: It’s not snowing yet, but it will.
Jason Hartman: Well, tell us a little bit about the opportunities in the student housing market. We have long been saying that the next decade or so, with the Gen Y’ers going through college, is really looking pretty good for student housing. The demographics are pretty bullish in our opinion. What are you seeing out there?
Marleen Geyen: I definitely agree. I think the possibilities are really unlimited. First of all, think about where this housing is. It’s right next to a university, where student enrollment is increasing every year. And I think what some people don’t realize is just ability to rent to students, and not only that, if for some reason, you don’t rent your house to students, you have families, you have young adults that are working. The possibilities are great with that, and it’s such a low, low vacancy rate in these types of units. The convenience of being in a metro area next to a university, usually that also brings next to a business district and it is unlimited in the possibilities.
Jason Hartman: What do people need to know to recognize opportunities in the student-housing world? How do you differentiate a good from a bad property when you want to pick the right one?
Marleen Geyen: I think, just like in anything in real estate, what do they say? Location, location, location. And for us, it certainly has been true at the university. Our rentals are within walking distance and that’s really imperative that these students can walk. Parking is such an issue there that within walking distance is probably a prime resource that you’re looking for when you’re looking for property. So I would say location is a big deal.
And also the size of the house. I own mostly one-story houses or two-story houses, but they’re like single-family homes or duplexes, and I would say the size is a big thing. Probably the best would be 3 – 5 bedrooms. That’s what we have found is the most lucrative for us is to do 3 – 5 bedrooms.
Jason Hartman: Now, there are many different permutations of student housing, so what you are doing on the personal side with your own investments is you are looking at single-family, detached homes that are 3 – 5 bedrooms, is that correct?
Marleen Geyen: Yes.
Jason Hartman: And some people look at apartment buildings. Some people look at lots of different things, duplexes, whatever. They’re in condos that are sort of dominated by students, although they’re not even defined as student housing. It’s different in different parts of the country. But you like the single-family detached homes. Now, if these are near universities, I would assume they have to be much older if they’re close. Is that true most of the time?
Marleen Geyen: Yes. That’s a good question. Yes, they are. They’re older. And you will find students – at least I found that students enjoy having their own home and they like these older homes. But yes, they are older and they are within walking distance. Many of them do not have off-street parking, so it’s on-street parking. Many of the students don’t have cars anyway, or they take a bus, ride their bike, rollerblade to school. So parking has never really been an issue. The homes are older. But they are older, so that’s another thing you look at when you look at housing. You look at the upkeep because of an older house.
Jason Hartman: Yeah, maintenance costs, definitely. So what I meant by that, listeners, is obviously development always starts in the center of a city generally or by a coastline, or if there’s a university, it starts right around the university, so there’s usually not land where you can just build a bunch of new single-family homes right near a university. That’s very rare.
And we actually found an opportunity like that in South Carolina that is sort of pretty interesting to us, but it is pretty rare that you get that next to a university. So what are the ages of the homes that you’re typically investing in?
Marleen Geyen: I would say ’50s, ’60s, 1950 or 1960 is probably the homes that we own.
Jason Hartman: Okay. Marleen, what do people need to do to understand students? There are so many opinions when it comes to student rentals and I find that a lot of them are really overblown and somewhat unwarranted. There’s, of course, the image that students are partying all the time and they’ll destroy your house and this kind of stuff, and they might be a little harder on the house. But the cash flow is so much better. Then there’s the other opinion about do you get a year-around lease, do the parents co-sign the lease, or is it just the student? And if they default, do you have anything to go back on? I know that’s a big, long question.
Marleen Geyen: Well, let me start with the students. That’s probably my No. 1 question that people ask me. First of all, I like the age, so I come at it in a different way than a lot of people. I love that age. I think these kids – they’re just from high school. They’re going into college. They’re at a great part in their life. The future is so bright for them, so I like the age. So I really like that age and so I enjoy students.
But as far as the partying and destroying houses, I can honestly say that in all the years I’ve done it, I’ve probably had one or two houses that really had a major remodel. But students on the whole do not do that. Certainly, they have their parties and certainly, they have their friends over, but once you get a good group of students in and they refer other students, then you’re kind of on a real track record of good kids.
I have to say, though, if your houses are respectable, well-maintained homes, you will get a different type of student renting than if your home is more run down and beaten up. That draws a different style of student. So that’s a big issue right there.
As far as the leasing goes, here’s how I do it. I lease for 12 months. So students sign for 12 months. On the main campus in Minneapolis, the leasing cycle starts September 1 through the following August, so all of my students will move in on September 1. And then they all move out August 31, which is a really crazy time because you just get one day of turnaround. But on the other campus that I have, they rent from June 1 through the following May, and they also sign a year lease. Now, all students do not live there in the summer, but they do pay rent as if they did. That’s very typical.
So what I would suggest is you need to talk to the university that someone is interested in and to see what is their lease cycle because it does differ depending on the university. And another thing I do is if I have a three-bedroom, four-bedroom, five-bedroom house, all students sign on the lease, and what it also means is if one student doesn’t pay, the other ones are responsible. That really brings down to a low, low rate of nonpayment because the pressure of one student not paying with the other students, they kind of take care of it themselves, and so I don’t have hardly any issues with rent payment just because of that one factor.
Jason Hartman: So that, for the listeners’ sake, is called “joint and several liability.” Because this is important, Marleen, I just want to dig a little deeper into this. You have one lease that all of the students sign? They do not sign separate leases for each bedroom?
Marleen Geyen: That’s right, one lease and they all sign.
Jason Hartman: Okay, are these students coming to you as one group altogether at the same time or are they all friends? Do they all know each other when they’re leasing the property? Or are you finding them individually and then sort of putting them together?
Marleen Geyen: No, they’re all friends. They all know each other. And we do that just because of the companionability of them, that they’re compatible with each other. So they come together. So when I rent a house, when I put the ad in the student newspaper or the website, I say five bedrooms or three bedrooms, whatever, and then you’ll have five kids come together to look at the house. They all come together as one for one lease.
Jason Hartman: Okay. Talk to us a little bit, if you would, about acquiring that type of tenant that all comes together as one lease. Does the sign in the front yard and the ad in the paper on Craig’s List or whatever, does it say, “Student House for Lease; five people can live here?” Or how does that work?
Marleen Geyen: Yes, that’s what it says. Like in Craig’s List, which is a great resource, and our university has their own website, so I go on there and I put my ads on there also. But that’s what I do. I put, “Five-bedroom or three-bedroom house for lease, student rental,” and then I just put the amount, the monthly amount, and then I’ll put, “Students pay the utilities.” So let’s say it’s a four-bedroom house near the university and it will be $2,000 a month to rent, plus utilities. And students will know from reading that that they will have to pay their own utilities and their monthly rent will be $2,000.
Now, there’s an issue right here. In Minnesota, anyway, we cannot say in an ad it’s student housing, so the ad has to be open.
Jason Hartman: Right, because you have a discrimination or fair-housing problem.
Marleen Geyen: That’s right. So for us, I never say student housing. I always say housing near the university or I give the address and people in the area know it is university housing just from that.
Jason Hartman: And so if there was another house right in the same neighborhood, because you’re renting to students, are you renting for a lot more money?
Marleen Geyen: You mean if there was a single-family home rented to a family?
Jason Hartman: Yeah. You set your rent at a certain price, and I find in many different parts of the country it’s pretty much set by bedroom count or sometimes sort of bathroom count. How are you doing it and what’s a competitive rent for someone who really isn’t interested in renting to students in the same neighborhood?
Marleen Geyen: Well, you’ll find most people, unfortunately or maybe fortunately, do not want to rent where there are student rentals, most families. And it is set by the rent, so if a house that maybe we’ll rent to students at $2,000 a month, will probably rent to a family at about $1,200 or $1,000. So just by doing that, you’re going to separate student housing from a family renting, just by that rent factor alone.
Jason Hartman: When you say the rent factor, you mean by location?
Marleen Geyen: No, by the amount of money you’re asking.
Jason Hartman: So tell us how much you’re asking. What does one of these three-bedroom houses go for now? Of course, we’re talking about different locations, everybody, but student housing doesn’t really vary that much because it’s sort of rented by the bedroom, right?
Marleen Geyen: It is rented by the bedroom, but I’ll just tell you, for example, the two locations that we’re at in Minnesota. In Minneapolis, our student housing is renting for probably about $550 – $600 a bedroom. So that’s a five bedroom or whatever.
Jason Hartman: Wow! So investors, I have to just mention this. That’s fantastic!
Marleen Geyen: Yeah, it’s a great price.
Jason Hartman: It really is a great price because think about it. If you have a three-bedroom or four-bedroom house, you’re renting for a four-bedroom for $2,200 a month, whereas, that same four-bedroom in a non-student scenario might rent for $1,200 a month. That’s a very legitimate comparison that I just gave the listeners and I’ve seen it. I’ve seen it happen in different parts of the country.
Marleen Geyen: But then the real estate value, remember, is up there, too. It’s not like a little small town where the houses are $120,000. But the rent is a big difference. That’s one reason I really do like student housing. It is your rent that is required because of that that’s phenomenal. It is your cash on cash return that’s absolutely terrific.
Jason Hartman: Yeah, it sure is. So that house that rents for $550 per bedroom, for example, how much is that house worth?
Marleen Geyen: In today’s market, let me think. I would say in today’s market, maybe $250,000 – $275,000, depending. I would have to go back – it’s been so long since I’ve looked at that, probably about four years, but I would say – I don’t know — $250,000 – $275,000.
Jason Hartman: Okay, sounds good. So at $275,000, yeah, that’s not bad at all. And how old is that house?
Marleen Geyen: The one I’m thinking of specifically was built in the early ’70s.
Jason Hartman: Okay, 1970s. Good. Is there a certain target for university size or type of university that investors should be looking at?
Marleen Geyen: I always say, when I get asked this question by private investors when they call me, I always say look for a four-year university, and some universities now will require their students to live on campus, so certainly that would be a deterrent. That isn’t what you want. I like a public university, four years, at least a four-year, some that maybe even offer a Masters program and doctorates, too.
Jason Hartman: So the students stick around a while.
Marleen Geyen: That’s right because with my students, I like to rent to them in their second year of school. So they come in as a second-year student. I never rent to a first-year student. I really think the dorm life is part of their acclimation to student life, so I rent to second-year and above. So I like a second-year student because then usually I’ll have that student three to four years, depending on how long their education is, but I like that year of student. So I would say a four-year college for sure and just drive around and see the type of housing next to the university.
Jason Hartman: And some of the colleges actually require – and I know this one in South Carolina that we’re dealing with does – that they live in the dorms for the first year, and after that, they’re free to do what they wish.
Okay, so you’re managing your own properties probably, right?
Marleen Geyen: Yes.
Jason Hartman: What advice, if any, do you have for someone, who is not managing their own properties, in working with a property manager on a student housing scenario because some managers love it because of course, it increases their income since they’re paid on a percentage, but other managers are very stubborn in their thinking and they don’t like it. What advice do you have in managers?
Marleen Geyen: Well, I’ve interviewed management companies actually, and I worked with one for about a year. I would definitely say that they need to have experience in student housing because it is a different type of ballgame. And they need to understand students, they need to understand the way students lease; they need to understand what students value. I mean students, they don’t care if the kitchen is small, but they want a big space to sit around. So the living room or the dining area, they need one room where they can put a few of their sofas and their big screen TV and where they can congregate. That’s a big factor for them. And not all management companies understand what they think and what’s important. So to me, the No. 1 criterion is that they’ve had experience in student rental.
Jason Hartman: Okay. And just going back to the book here a little bit, kind of thumbing through the table of contents, year-round rentals, don’t the students object to that? Don’t they say, well, hey, I’m going back home for the summer, why should I sign a one-year lease?
Marleen Geyen: Some of them do, yes, but it’s part of, again, when you’re doing student rentals, it depends on the college or university you’re at. It has become the norm now at the university that they rent through the summer, even if they’re not there, so other landlords are doing the same thing. It’s not like I’m the only landlord near the university that’s requiring that. The landlords have kind of really hung together with that and are requiring it, so it really isn’t a point of contention anymore. It had been when I first started because it hadn’t been the norm, but now, landlords have really grouped together and said, hey, we’re doing this because our expenses are there, so we’re going to charge the rent.
Jason Hartman: You know what? I have totally found that to be true, by the way, for the listeners because that is one of the other big objections I’ll get on the student housing angle is investors will say, well, aren’t I going to be stuck with three months of vacancy every summer? And the reality is no. It just doesn’t work that way. It is not the standard practice. The standard practice is they sign a one-year lease, even if they leave in the summer. They’re still paying for a full year. What about a parent co-signing on the lease? Are you just getting students hooked on the lease? Are they the only ones making the commitment or are the parents co-signing that lease, too?
Marleen Geyen: No, just the students, and I found – we were working with the parents. Well, we actually tried it at the beginning, but it began to be such a hassle because a lot of these students are out of state, so to go back and forth with the lease and all that, to us, it finally worked out better if all the students signed and they were all responsible, instead of co-signing with parents. But I will tell you that probably half of my students that I rent to, about 100 students, I would say half my students’ parents send the money. They send the rent money. Either they’ll send six months in advance, they’ll just pay for six months, or they’ll every month send the rent money. It comes from the parents.
Jason Hartman: So you’re receiving the check from the parents, even though the parents didn’t sign the lease. Now, people would say, well, gee, these students, do they even have a credit report? Do they even care? Do they just skip out on the lease sometimes? And what if there’s damage? Do you take them to small claims court? How do you collect? I think people just have this vision of irresponsible students, and some students, especially Gen Y, I have to really compliment Gen Y. In many ways, it’s a very conscientious generation. I’ve had a lot of Gen Y employees that I’ve been extremely pleased with, and that’s not the image, oddly enough, that the 60-Minutes interview – I don’t know if you happened to catch that about two years ago – portrayed really. What do you say to that?
Marleen Geyen: I definitely agree with you. I have not had all those issues that people say that there are. I really think if you treat a student with the respect that they really want, you’ll get the respect in return and the commitment. Certainly, there have been students who have had to leave school because of issues, but because of the lease, the way its written, the other students will come together and either find another person to that spot, which I will totally agree with if that’s what they want to do, or they’ll just make up for the rent money. So I’ve not found that irresponsibility, Jason. I’ve really not found it.
Jason Hartman: Do you have a bad experience you’d like to tell the listeners about? Every business, it all sounds too good to be true, but there are always pitfalls in every business. Nothing is perfect. Is there a horror story, maybe one in two dozen that you’ve had?
Marleen Geyen: Oh, I have a few stories. I’ve written some of them in my book. One comes to mind. I think the biggest issue that I’ve had with students is they collect stuff. They just do. They collect stuff. They collect sofas. They collect pets, so you’re always having to watch that. They do, they collect stuff. One day, I was calling. I needed to go down to one of our units and I can’t remember what I stopped by for, but I just called because I always call 24 hours before to give them notice that I need to do a walk-through. And this time, when I called, the person who answer, whose name was Peter, said, “Yes, when you come, though, will you please come through the front door?” I said sure, and so when I was driving down, it was about 35 minutes from where we live, I thought, well, that’s odd. I always go through the front door.
So I came up to the unit and I knocked on the door and Peter let me in, and then I walked into the living room and I proceeded to walk from the living room into the kitchen to the back door to open the door, and look in the back yard. And as I was doing that, Peter was saying something and I can’t quite remember what, but asking me to wait. But I walked and I opened the back door, and in the backyard was the largest hot tub I had ever seen. It was truly terrific.
Now, hot tubs are not allowed. So I looked at Peter and the first thing I asked – it was a fenced-in backyard, which was a plus, but the first thing I asked him was who did the electrical hookup? And because we have to remember when you do things, you have all these contractors – I always make sure people are licensed. And he had this smile and he said it is a contractor and he was licensed.
Anyway, the unit had six bedrooms and all the guys went in and shared, and they got this big hot tub. And you can imagine. Anyway, I did let them keep it. Because we had a fenced-in backyard, I let it go, but I did make them sign some things on liability. But that was a huge surprise and it did turn out good at the end. They took it. When they moved out, they dismantled it and it all turned out. But those types of surprises you get every once in a while.
Jason Hartman: Okay, so this may seem like an obvious answer, but I just want to ask you. Why are hot tubs not allowed?
Marleen Geyen: Well, liability issues are a big deal for people. If anything, it’s a liability issue.
Jason Hartman: But no story of the students just destroying your houses or anything like that?
Marleen Geyen: I can’t think of any. Jason, offhand, I can’t think of one story. Certainly, we’ve had to deal with more damage than what we thought and we kept the security deposits. Certainly have gone through that. But no big – I had the police called one night because one of my students was a major football player, the big star, and he had a party and it turned out to be a lot larger than it was supposed to be, and the police were called. So then they called me. But no, I don’t have any where a place got so totally destroyed that we had to totally gut it and start again. I don’t have one.
Jason Hartman: Okay, good. What do people need to consider in terms of financing and money resources when doing student rentals?
Marleen Geyen: First of all, I think find your mortgage broker and find a great broker that deals in student rental. I work through a real estate agent that is just terrific and he understands student housing. And I would say that’s key because that person can also recommend other resources, the inspector, and maybe he has a lender that he likes. And find out what you need for down payments. I don’t know where the market is right now. On some of ours, I did 10 percent down. On one or two, I did 20 percent. On one, I did a contract for deed. I bought ten units on a contract for deed, which was terrific.
Jason Hartman: By the way, just to explain to our listeners – a contract for deed, is that the same as a land contract?
Marleen Geyen: Yes. The owner holds the paper.
Jason Hartman: You bought it that way, you’re saying.
Marleen Geyen: Yes, I bought ten houses that way. And so I would say, first of all, find the real estate agent that you want to work with, start there. And then drive around and see what you like. Work with that person, and then from there, go to the lender, see what you need. I don’t know what’s going on now, what you would totally need for the mortgage, but you need to find all that out. Certainly less is better. I never wanted to pay much cash out of my pocket.
The other thing to be very cautious about is how much repairs need to be done to the house. If it’s already a student rental, it probably has the correct licensing and that’s all done for you. If it’s a single-family home and you want to change into a student rental, you may need to get a certain type of licensing, and that the agent will know. That person will know exactly what you need.
Jason Hartman: Depends on the city, right?
Marleen Geyen: Yes, it depends on the city.
Jason Hartman: I want to just comment about that and mention this as something to be careful of, investors. I own a property in Athens, Georgia. That’s a big college town. And there they have some fairly strict rules about how many people can occupy a property, and the reason they’ve done that is because they would find students doubling and tripling up in bedrooms, putting a whole bunch of people in there. You see these kinds of rules in some of these sorts of immigrant-impacted areas, too, where they’re really limiting the number of occupants. And what it does is it really creates a parking problem in a lot of areas.
Marleen Geyen: Yeah, occupancy is the very, very No. 1 rule that I look for when I look at housing, when I’m buying, so that’s crucial. You need to know what the occupancy rules are in the area you’re looking.
Jason Hartman: I think one of the big important things is really the lease agreement. Are you using just your state’s standard forms to do your lease and just having everybody sign the lease, or do you have a lot of special addenda for students and things like that?
Marleen Geyen: Well, I’ve gone over – probably I’ve revolved from about three leases. I started with just the general lease and then I had an attorney, who works in student housing, write up a lease. And then I’ve kind of gone back to more a general lease only because a lot of the addendums – and that, again, will depend on your state and city – but a lot of the addendums they said really wouldn’t hold up that well anyway. So mine is pretty basic. My lease is quite basic, just a matter of the “no pets” is on there, no smoking, parties. That’s also an issue and so we take care of that. But it’s a couple of pages and it’s pretty generic.
I think when you write special – this is what I found out talking to an attorney – when you write special leases for students versus other people, like other homeowners and things, it can be a problem. So I try to keep it as bland and as plain as possible, and cover all your bases. Certainly, your security deposit, your pet rules; cover your bases with the most generic lease as possible.
Jason Hartman: So you find that sometimes you get into trouble when you try to customize it too much.
Marleen Geyen: Yes.
Jason Hartman: And I think that if you ever do have a problem, if you go into court and your lease is highly customized, the judge sometimes looks at it with some suspicion, I think. Well, in closing, is there anything you’d like people to know about this student property business? I know there’s great opportunity. I think that it just requires your mind being wrapped around a different type of tenant, but I think big opportunity here. What else do you want to tell people?
Marleen Geyen: I think when I started, or right before I started, I really set out my goals of what I wanted to accomplish and achieve, and for me, they were more long term. I wanted to buy and hold, and so that, for me, just fit. And also, my husband and I have four kids. They were all students at one time, at the same time, at a university. So for us, it works for us really well. But we wanted to pass that knowledge onto them. We wanted them to understand the value of student housing and what it can do to your balance sheet, and it’s truly, truly a great asset class. Some people talk about stocks and bonds and IRAs and all that, which are good, but I think this gets overlooked as part of your future. I would just love to have people even look at it, just consider it, consider that type of an asset class to add what they’re already doing.
Jason Hartman: Yeah, fantastic. Well, the book is University Wealth: 21 Secrets to Buy and Manage Student Rental Property. And by the way, for our listeners, we have a good opportunity for student rental property in Columbia, South Carolina, right now, and keep that in mind. Marleen, thank you so much. The book is on Amazon. Do you want to give out any other websites or anything?
Marleen Geyen: No, that’s it. It’s on Amazon and they can buy it there, University Wealth, and I hope they do. I think they’ll enjoy it.
Jason Hartman: Good. Thank you so much for joining us today.
Marleen Geyen: Thanks, Jason.
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Duration: 53 minutes