My soon to be father-in-law is looking to buy a property. We've been talking about it for a few days. I wanted to get your opinions on it as well. Unfortunately I do not have all of the specifics (he doesn't want to tell me dollar values).
He is looking at purchasing a property in upstate New York. It is in a relatively "small" college town. There is currently a franchised (backed by corporate) tenant in the property. If he decides to purchase the property, the tenant's rent will be 4.5% of the purchase price. The corporate entity will guarantee the rent for 16 years. This corporation will not go out of business anytime soon.
He is concerned about the health of the town the property is in. It is a fairly small town with a strong state college presence. Average income is about $20,000 and average household income is closer to $40,000. The town has survived for so long because of the college. I consider the location to be extremely positive. It is very close to shopping (e.g. the local Walmart) and others. College students are also within driving distance. The building is a few years old and recently redone.
With the new NY student loan assistance, I do not consider the university a risk -- it's also a fairly popular university. From my perspective, 16 years of guaranteed rent means worst case scenario, he will make back 72% of his purchase price and still own the land, meaning the value of the property can drop by 72% and he would still break even. I believe the yearly rent for the property is about $55,000 per year, but I'm not entirely sure.
I'd appreciate any thoughts on this, thanks!