Every real estate investor is constantly on the search for a new profitable location for his/her next investment property. Places around New York State might be the next hot spots for real estate investing due to New York’s new tuition-free education program. While New York City has always been an attractive though extremely expensive real estate market, many other locations beyond the City might soon become not less appealing. So, let’s first see what this new education policy is all about.
What is New York’s new tuition-free education policy?
In early April this year New York State’s Legislature approved a tuition-free plan introduced by Governor Andrew Cuomo in January. According to the new legislation, students will be eligible for tuition-free education at all State University of New York (SUNY) and City University of New York (CUNY) academic institutions. Whereas many states have free community colleges already, New York is the first one to introduce free education at four-year public colleges as well.
Would all students be eligible? No, the new tuition-free policy will apply for students whose household’s annual income does not exceed $100,000. The income cap is scheduled to increase to $125,000 by 2019. Furthermore, in order to be eligible, a student must be a New York citizen, permanent resident, or refugee.
Although the new plan will definitely have important repercussions on the state budget, it is also expected to spur the local economy by attracting new populations to cities which host SUNY and CUNY colleges.
How is the tuition-free policy expected to affect the New York State housing market?
“How would free education impact a real estate market?” Well, the answer is quite straightforward in this case because the free education policy applies only to tuition, while students will keep paying for fees and accommodation themselves. This is great news for all existing and new real estate investors in New York State. SUNY and CUNY colleges will immediately attract many new students whose families could not afford college education before. As in many cases these students will be from locations outside the college towns and since room and board will not be covered by the State, they will look for affordable rental properties around. This wave of new expected tenants means that now is the right time to buy an income property in New York State. Such an option could be an excellent choice even in terms of out-of-state real estate investing.
Related: The Guide to Renting to College Students
Actually, the new policy is forecast to have a further, long-term positive impact on real estate investing in New York. First of all, one of the requirements of the new policy is that beneficiaries will have to remain and work in New York after graduation for the same number of years for which they have received tuition-free education. This means that recent graduates and young professionals will form another new pool of tenants in New York State. Second, many families with younger kids might decide to move to New York State in order to become residents to be eligible for free public college education when their children reach 18. These families will generally be lower- and medium-income ones, which means that they will probably not be able to afford buying a home right away. So, in the meantime, there will be an influx of new tenants who have to be accommodated by local rental properties.
What New York State investment properties would be best for this new policy?
While the overall demand for rental properties will increase, not all properties and all locations will be equally pursued. Let’s take a look at the characteristics of what are expected to be the most popular choices among the new tenants.
1. What kind of investment properties?
As mentioned above, new tenants will be divided into two main categories: 1) individual students from other cities and towns around the State as well as recent graduates and 2) entire families. When it comes to students and new graduates, they will most likely look for rental units with a few bedrooms in condos or multi-family properties that they can share with other students in order to reduce the cost as much as possible. At the moment, the cost of room and board on campus is about $12,600 per academic year, so rental properties would have to offer lower than these rents – when shared by a few people – in order to be attractive for students. Meanwhile, new families which might move to New York State to benefit from the new legislation in the coming years are expected to be interested in single-family homes. Once again, such properties will have to be highly affordable because these households make less than $100,000 per year.
Related: Invest in Condos or Single-Family Homes?
2. Which locations?
A wide range of locations will be affected by the new tuition-free education policy. Public colleges are spread around the State, and all these places will be good choices for buying an investment property. Examples include Albany, Buffalo, Plattsburgh, Cobleskill, Cortland, Monroe, Oneonta, Rockland, Valhalla, Potsdam, and others including New York City of course.
Since as a real estate investor, you will be mostly targeting students at four year colleges and graduates, you could offer a five year lease with preferential conditions to make your investment property more attractive.
What rental strategy would be best under the new policy?
Real estate investors would be happy to hear that both traditional and Airbnb rental strategy could be very profitable under the new tuition-free education policy. Traditional renting would be good for students, graduates, and families, while Airbnb would offer wonderful opportunities on special dates such as home coming weekends, sports games, and graduation among others when out-of-town families come to visit their children at college. However, before you decide to go for Airbnb, you should check the state and local Airbnb-related legislation to make sure that this rental strategy is legal in your location.
Related: New 2017 Airbnb Legal Issues
All in all, the new free college education policy is expected to have a very positive effect on real estate investing in New York State, especially in the cities and towns hosting public colleges. However, be quick in buying your New York investment property as real estate prices might go up as investors decide to purchase rental properties there. In your search, make sure to check out Mashvisor for numerous available properties across New York. The investment property calculator will save you lots of time and money by doing the real estate market analysis as well as the investment property analysis instead of you and providing you with reliable forecasts of the rental income, cap rate, CoC return, and occupancy rate for both traditional and Airbnb renting.