Now that the election is over, and Obama's lease on the White House has been renewed for 4 more years, it's time for residential real estate investors to consider ways that they can benefit from the impact of Obamacare and other government policies.
We've already had 4 years to get a feel for Obama's impact on housing. It shouldn't be too difficult to make some educated guesses about the best real estate investment strategies, based on what we've already seen.
We already know that student loan funding is a priority for the Obama administration. As long as student loans are readily available, rental properties well located in cities with major colleges and universities should see strong demand, low vacancy rates, and the ability to rent for above-market rates, since a 3 bedroom house may be rented to three separate students.
Consider this article from Market Watch, listing the top ten towns for rentals to college students. Most folks probably didn't know that there are over 40 major educational institutions in the Boston - Cambridge market where Harvard and MIT are located. 3 bedroom homes in the college market are renting for an average total of $3900 a month, when rented to 3 students. Compare that to a typical mortgage payment there of $1370 per month, and you can see how this might be an interesting investing angle.
Atlanta is also on the top ten list, with a 3 bedroom / 3 student rent rate of $1485 compared to average mortgage payment of $650. Atlanta is also a hotbed for foreclosures, many of which are located near various educational facilities within the downtown area. Combine a good buy on a foreclosed home with a student rental in a market like Georgia State, Georgia Tech, Emory University or Spellman College, for a winning combination of low buy price and high market rental income.
Also included on the top ten list were Nashville, TN, South Bend, Indiana, St. Louis, Syracuse, NY, Houston, TX, Washington DC and Chigago, Il. Notably these towns are more likely to see growth in the construction sector as a direct result of expansion of academic facilities. One of the few commercial sectors that has been doing steady business is additions or improvement projects for colleges and universities. I've personally seen several colleges in my local area building new facilities or expanding existing facilities since Obama took office in 2009.
Another "holy grail" of the Obama administration will be the full implementation of Obamacare. Many college towns are also home to one or more major hospital or medical facilities that may also be tied to a local university. Demand for workers of all types in the medical profession will be growing in the years ahead, no matter who is president, as a result of the aging of the baby boomer generation.
Rome, Georgia, a small town located in the northwestern mountains did not make the top ten list, but Rome is one of those towns that exemplifies the educational - medical relationship. The population of Rome is only about 37,000 officially, but Rome has several universities and colleges, as well as two major hospitals and lots of other clinical facilities. As such, the employment rate and rental market in this town has not suffered nearly as much as it has in other nearby cities that do not have colleges or major hospitals.
Another related segment that is seeing increasing demand is in the unique niche of providing access to short term housing or apartment rentals for family members of those who are in town to receive medical treatments. When a patient has to undergo several days or weeks of chemotherapy for example, family members would prefer accommodations in the immediate area that, unlike hotels, will allow them more space and the ability to eat "at home" to avoid extra costs. Veterans hospitals have many out of town families with a need to stay close by for extended periods of time.
The rental property market does best where job growth is strongest. The Educational and Medical sectors are primed for major growth over the next four years and probably well beyond that time frame. Incidentally, the advances in medical technology and educational technology have not yet resulted in a reduction of their labor force. Instead labor needs have increased along with the availability of new equipment and applications. This is unique when you consider that technology is also the reason why many industries such as manufacturing, no longer need a large labor force.
In today's challenging economic climate, it makes sense to think creatively about the economic and legislative fundamentals that lie before us, and develop real estate investment strategies that are most likely to be supported by those fundamentals.
Donna S. Robinson is a real estate investor, author and residential market analyst located in Atlanta, GA. Follow her on twitter at donnaconsults. Her latest book, Basics Of Real Estate Investing is now available on Amazon.
As a student struggling to pay bills and worried about paying back college loans....F*CK YOU for charging ABOVE market rates to us as "an investment." Lots of students have to live off campus whether tbey want to or not and are at the mercy of greedy money sucking pigs like you. I bet you vote Republican too....all money money money, me me me. Try building some affordable housing for us....oh, excuse me, that might make you too human.
Hi Mack, I understand your feelings, but the point here is not that anyone is overcharging for student housing. The point is that when you have three different tenants renting individual bedrooms and accomodations it tends to add up to more income for the investor, but it not because student housing is being sold at some artificially high price just because you are a student. Off campus housing may rent for less than on campus dorm space costs. It depends on the area. As it happens, all multifamily housing generates more per square foot than does single family housing rented to a single tenant. Just the way it works. No one is encouraging people to rip off students. The parents of many students also benefit by purchasing an off campus property and generating rental income while providing a place for their kid to live while attending school. Demand from students is the real driver of rental rates. If students feel that rent is too high in one place they are free to seek other accommodations.