Rental property income wrought with complexity

Q. My husband and I are considering purchasing a house near the campus of the university our son attends. We would rent the house to college students. We have never managed property as landlords before, and we live about four hours from the university. We are wondering what special issues we should consider in this type of investment and what types of improvements might be required, such as sprinkler systems or fire escapes. The properties we are considering have rental income that should more than cover the mortgage and taxes.
A. The installation of a sprinkler system would likely be cost-prohibitive. You must pay close attention to the legal maximum number of tenants allowed, all zoning, housing, and building codes.
If your son is going to manage the property, I suggest that all of you attend a short course in residential property management. Courses like this are available at community colleges and landlord associations. Topics like tenant rights, leases, property management practices, taxation, tenant screening and maintenance practices are critical to understand. Managing a property will take time and create a good deal of headaches for your son. Is he ready for this?
Acquiring residential rental housing is complex. Knowledge of local real estate markets, financing, evaluating the physical condition of the property, building and housing codes are just a few of the critical areas. I would take time to evaluate the market and rental trends prior to buying a property. While this may prove to be a good investment and augment your son's education, renting to college students has many challenges. Have your son live in a dorm or near campus first so that he obtains an understanding of the area.
Dr. Thomas Musil is the director of the Shenehon Center for Real Estate in the Opus College of Business at the University of St. Thomas in Minneapolis. He has more than 25 years of experience in real estate as a broker, analyst, consultant and expert witness in real estate litigation and arbitration disputes. E-mail questions to: tamusil@stthomas.edu. Please include your name, city and state.

Source