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Student Housing: Ryan Chaw's Approach to Co-Living and Renting by the Bedroom [Ep192] cover

February 20, 2024

Student Housing: Ryan Chaw’s Approach to Co-Living and Renting by the Bedroom [Ep192]

In this episode, we speak with Ryan Chaw, an expert in real estate investing and mentorship. Ryan shares valuable insights into his 6-month mentorship program. He discusses his strategy of co-living in one unit and renting out the others for real estate investment. He emphasizes the benefits of leveraging, tax advantages, and the impact of interest rates on buying and refinancing. Ryan also delves into his successful "rent by the room" strategy. Targeting graduate-level college students and maximizing rental income through shared living spaces. He shares his experiences managing student housing, overcoming challenges, and scaling up his real estate portfolio. This episode is packed with valuable tips for both new and experienced real estate investors.

Episode Timestamps

  • 00:00 Rent by room method increases rental income.
  • 04:48 Investing near top college towns mitigates concerns.
  • 07:42 Address issue directly, support independence, seek help if necessary.
  • 11:40 Manage personal finances to qualify for low debt.
  • 14:00 Costly sewage mishap led to valuable lesson.
  • 17:15 Leverage increases real estate investment returns.
  • 21:35 Invest in real estate regularly for long-term returns.
  • 23:06 Rule: Square footage divided by 300 equals bedrooms.
  • 27:52 Students and medical residents/fellows stay year-round. Prioritize 1-year leases due to high demand.
  • 30:22 6-month mentorship program for real estate investors.
  • 32:25 Mentorship crucial for success in real estate.

Episode Table of Contents

  • Co-Living Trends in Real Estate
  • Real Estate Investment Strategies
  • Maximizing Rental Income through Co-Living
  • Managing Tenant Conflicts and Property Management

Co-Living Trends in Real Estate

Co-Living Trends in Real Estate
Photographer: Austin Distel | Source: Unsplash
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Ryan's Approach to Co-Living

Ryan Chaw emphasizes the burgeoning trend of co-living, particularly in his practice of renting out individual rooms to college students. This method has proven effective under the current pressure of high real estate prices. This has been a key factor in the success of his investment strategy. By renting by the bedroom, Ryan is able to capitalize on properties by generating more income. Presenting an innovative solution to the affordability crisis that plagues many cities. The idea of co-living isn't solely limited to student housing. It represents a broader movement towards shared living spaces driven by economic necessity. And a shift in generational expectations around home ownership and personal space.

Challenges with Co-Living: A lot of people are worried about that it’s going to be a party house or a frat house. I think that’s the biggest worry about it. There’s a couple of ways you can prevent that from happening. And a lot of it is just investing in the right college. — Ryan Chaw

The Impact of Co-Living on Investment Strategies

Darin concurs with the co-living concept as a significant trend in real estate investment. He recognizes its potential for those who may be discouraged by the current market's high property costs and lower cash flow opportunities. By leaning into the co-living market, investors like Ryan have found a niche that allows them to not only survive but thrive amidst high interest rates. Plus real estate prices that might not immediately align with traditional investment models. This strategy serves as a testament to the agile mindset required in adapting to real estate markets that consistently evolve with economic fluctuations and societal changes.

Real Estate Investment Strategies

Real Estate Investment Strategies
Photographer: Tyler Schaefer | Source: Unsplash

Renting by the Bedroom

Ryan Chaw's real estate strategy centers around maximizing rental income by renting out individual bedrooms, particularly to college students. This creative approach allows for a higher yield than traditional renting methods. Particularly adept for markets with high real estate prices. For instance, Ryan's properties cater to the needs of students by offering affordable yet private accommodations compared to expensive campus housing options. By doing so, he has managed to substantially maximize the cash flow from his investments. Circumventing the usual financial hurdles of high interest rates and elevated property prices.

Meeting the 2% Rule

The strategy Ryan Chaw employs easily meets and often exceeds the commonly cited '2% rule' in real estate investing. This rule suggests that a monthly rental income should be at least 2% of the property's purchase price. Ryan achieves this through his innovative renting approach. Offering a higher-than-average number of bedrooms within a single property and renting them individually. These properties, typically around the $200,000 range, generate enough rental income to comfortably apply the 2% rule, ensuring a sound cash flow. Ryan's method is highly effective and applicable across various states. Providing a replicable model for investors seeking opportunities in different markets, including those with upscale colleges and universities.

1% Rule: The reason I use the rent by the room method is it basically doubles or triples your typical rental income. — Ryan Chaw

Maximizing Rental Income through Co-Living

Maximizing Rental Income through Co-Living
Photographer: Nastuh Abootalebi | Source: Unsplash

Boosting Profits with Co-Living

Ryan has fine-tuned a method to significantly boost rental income by utilizing the concept of shared living spaces. He targets properties with a substantial square footage. Such properties can host a larger number of bedrooms, each of which can be rented out individually, usually to college students. By dividing the total square footage of a property by 300, Ryan determines how many bedrooms can fit inside the space. This formula helps him ensure that he can accommodate enough tenants to maximize rental income. The allure of his method lies in its ability to double or even triple the rental income which would traditionally be expected from single family home rentals.

Saving Money on College Housing: "So a lot of these students, they wanna save money, and instead of paying $1200 for on campus housing, they could pay 600 to $700 off campus housing, so it's half the price." — Ryan Chaw

Tenant Base and Advertising

Primarily serving students, Ryan places his properties on platforms that are frequented by his target demographic. He taps into a mix of mainstream and niche channels, including but not limited to Zillow, Avail, Uloop, and various Facebook groups catering to university housing needs. By leveraging sites like Avail, he broadens his exposure to a slew of other real estate websites, which funnels a diverse range of prospects. For university-specific advertising, Ryan opts for Uloop, despite its associated costs, as it directly reaches the student population. His strategy illustrates an understanding of how pivotal efficient advertising is in attracting the right tenant base. This largely contributes to the success of his rental income strategy.

Navigating Legal Agreements and Tenant Turnover in Co-Living Investments

In the early stages of his investment journey, Ryan employed basic lease agreements obtained from resources like Amazon. A pragmatic move for any start-up venture, especially considering the relatively lesser associated risks with student tenants. However, understanding the importance of having sound legal documents in place, he later had customized lease agreements drafted by a lawyer. This transition catered to the specificity of each city's legal requirements. As for managing tenant turnover, which can be notably high in student accommodations, Ryan encourages tenants to sign a one-year lease to mitigate this. Additionally, he supportively suggests subletting options during short-term vacancies such as summer breaks. His effective lease strategies not only streamline the process but also provide continuity and stability to his rental income.

Managing Tenant Conflicts and Property Management

Managing Tenant Conflicts and Property Management
Photographer: Obie Fernandez | Source: Unsplash

Co-living Conflict Resolution

Ryan emphasizes the importance of proactive communication and conflict resolution when dealing with tenant disputes. Especially in a rent-by-the-room business model. He advises that tenants engage in direct discussions to express grievances and create actionable plans to resolve issues. This approach empowers tenants to take responsibility and find common ground. Ryan acknowledges that disagreements are inevitable. However, with the right strategies, such as choosing the right college environment and tenant demographic, the risk of serious conflicts can be minimized.

Handling Tenant Conflicts: You got to have a face-to-face conversation with them. Tell them why you’re upset. Ask them to come up with a plan together. Then implement then plan for the next one to two weeks. — Ryan Chaw

Co-Living Property Management

In his real estate endeavors, Ryan first managed his properties independently. He utilized tools like Excel spreadsheets to keep track of numerous tenants. As his portfolio expanded, he moved towards hiring virtual assistants to handle tasks such as bookkeeping and tenant coordination. This transition enabled him to manage properties more efficiently and remotely. While also allowing him to focus on scaling his business. By creating a system that integrates virtual assistants and head tenants, Ryan has been able to manage his 70 tenants effectively without the need for a traditional property management company.

Financing Options and Managing Personal Finances

Ryan provides insight into different financing strategies for acquiring rental properties, drawing from his personal experiences. He mentions the conventional investment loans offered by Fannie Mae and Freddie Mac, which evaluate an investor's debt-to-income ratio. Ryan also discusses the DSCR (Debt Service Coverage Ratio) loans, which focus on the property's cash flow rather than personal income. Furthermore, he highlights the significance of personal financial management and living within one's means to qualify for loans. Particularly for new investors who may not have a proven revenue history.

Overcoming Initial Fears in Real Estate

Tackling the psychological hurdles of entering real estate is a challenge Ryan understands well. He candidly shares how incidents like unexpected major repairs served as learning experiences that fortified his resolve and expertise in the industry. By sharing these experiences, Ryan encourages potential real estate investors to embrace challenges. Learn from them, and consider mentorship as a valuable resource for navigating the complexities of property investing and management.

Where To Find Ryan Chaw

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Darin Batchelder

Wealth creation through real estate provided me with a new passion to get the word out and let others know that they have an alternative to investing in the stock market.

If I can inspire and educate just one person to take action that results in life changing wealth creation then the work to launch and grow this podcast is well worth the effort.

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