Student housing is a great way to make steady profits off of real estate as long as you invest carefully. If you decide you want to invest in student housing but don’t have enough in savings you could use a self-directed IRA to make use of your retirement funds for the investment.
Student housing is often a great investment because once students begin renting from you they very rarely leave before the end of the lease period. Many students will want to pay for their lease up front and some colleges even enforce rent payments to stay in the schools.
If you have money tied up in an IRA account that you would like to access to try and get into real estate, you can roll it over into a more flexible self-directed IRA instead. Getting started with a SDIRA is simple after you find the right bank or custodian to handle your account for you. You may have to wait a few weeks for your funds to transfer from one IRA account into your self-directed account, so make sure you account for that wait period in your planning.
Always do your homework when you are considering purchasing real estate for student housing. Make sure that you are getting a good property and verify that you will have students to rent to as well. Talk with the local schools and find out what their housing policy is. Most schools allow their students to live nearby, and some even put together a waitlist of students trying to find housing that you could use as a resource to get tenants. Just make sure you have a market of students to rent to in the area that you pick out the property.
After you find the ideal property you need to make sure you have a rock-solid contract to give to each of your tenants to protect yourself. Always document the condition of your building before renting it out so that you will have proof when anything has been damaged. Also require a deposit from each student that you rent to and try to force parents to cosign as well to improve the chance that you will get all your money. Getting help from a lawyer to draw up a contract is an important step, and something that every investor should do.
As you begin making money from your student tenants you can increase the amount that you have in your retirement account. Many investors pick up a few different properties that they want to rent out to students and their retirement accounts slowly swell with steady profits coming in each year. Just remember that you can’t use the money from your IRA until after you reach 59 ½ years of age without incurring a ten percent penalty on any money that you withdraw.
Your Self-Directed IRA and Student Housing
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