I like this article because it represents my investment philosophy. Even though it talks about fraternity and its context is US based, the principles still apply when thinking about property investments close to a University or College…
In a recent conversation with an asset manager, the topic of foreclosures came up and various stories about what you find when you first acquire that property.
He told me about a recent default on a fraternity house. Yes, you heard me correctly, the bank had to foreclose on a fraternity house. He asked me, “Tina, what do we do with a 15 bedroom + 1 huge party room house that reeks of beer?”
Good question! To add a bit more detail: each bedroom had deadbolt locks, there were some creative “paintings” on the walls, the kitchen was pretty non-existent, and the house was located next to a landfill.
As we pondered the future of this piece of real estate, the asset manager got a message from a commercial real estate agent. He has clients who invest in fraternity and sorority houses and want to see the property.
After this, I just HAD to find out….WHO invests in Greek housing? Thinking back to my college days of the scent of fraternity houses and the unpleasant condition of many structures, what type of person really WANTS to take on this type of real estate investment?
I was pleasantly surprised finding out. A young, down-to-earth couple. They owned quite a few fraternity houses and touted the benefits of their investments:
• the long-term leases state that the tenants are responsible for all maintenance and repairs
• the parents usually guarantee the rent payments and pay electronically
• the national chapters keep an eye on the local chapters and make sure they remain financially sound
• if the chapter needs money for upgrades and/or repairs that aren’t budgeted, the alumni generally kick in to help
• most chapters have a house committee consisting of collegiates, alumni and faculty sponsors