Here is my situation: I am not a U.S. citizen but I am studying here under F-1 visa. My plan is to buy 3-4 apartment houses and rent them. I am not planning to apply for a mortgage and the payment will be all in cash and will not sell the houses for the good part of the next 10 years. The target apartments are about $100k to $150k, mostly 2 bedroom 2 bath apartment buildings (in the city of Pittsburgh, close to University of Pittsburgh and Carnegie Mellon University to be precise. My plan is to rent them out to students who are studying in either university). Each house will be rented somewhere between $1000-$1500 with an average around $1200. Now I have a bunch of questions that I have somewhat of an opinion about their answer but didn't really know if I am right:

  1. What would be the type of taxes I should expect? Correct me if I am wrong but each house would have about 2% of the market price as property tax (so roughly 2.4k), and the federal income tax would be around 25% of the income (since it pushes me to the third bracket) which would be $3.6k ($14.4k x 0.25). Assuming that there will not be any other tax costs, this leaves me with $8.4k per year per apartment (approximately).
  2. How is the insurance cost calculated? I have no idea but I am assuming that this is also a key player.
  3. How is the house price increase going to act as another source of income? Pittsburgh is expected to have a 6.1% increase in house prices which almost all of it is going to be pure profit. Is there anything that I am not accounting for? (except for small increase in property tax which will be cancelled out with rent increase. Also increase in rent will increase the federal taxes slightly but that is really marginal so overall it should be pure gain)

Please let me know if I am calculating anything wrong but my projection for one year is about $8.4k per house (assuming no maintenance is needed)

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    You need to assume quite a bit of maintenance each year. College students renting places don't have the best track record. Turn over will be high, which means lots of different tenants over that 10 year span. Also, (and I know nothing about F-1 visas), will your visa allow you to generate this sort of income?
    – BobbyScon
    Commented Dec 13, 2016 at 22:15
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    welcome to Money.SE. The two tags, real estate and rental property link to 700 questions already answered with some level of detail. Your projections over estimate income while underestimating expenses. I wouldn't count on any price increase as part of your profit. 6.1% is precise but hardly accurate. No offense to that city but why would it see an increase more than twice expected inflation? And do you think rentals see the same increase as single family homes? Commented Dec 13, 2016 at 23:08
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    Why not buy some REITS? You get inherent leverage, plus management at large scale (ie much more efficient than you can be yourself). Not sure if there is one for Pittsburgh (assuming that's specifically where you want to invest).
    – SMeznaric
    Commented Dec 14, 2016 at 12:39
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    @A2B - Maintenance doesn't mean having the nicest appliances. Maintenance will be carpet/flooring repairs and replacement, painting, drywall patching, window treatments, plumbing (from where they tried to shove who knows what down the drain), etc. They will treat the property like a rental, not like their own home. Resale value will reflect that. "Oh, did I forget to tell the landlord that the sink has been leaking for 2 months and the cabinets are ruined? Oops!" ~ surprisingly common occurrence. Of course I'm speaking in generalities, some students are awesome tenants.
    – BobbyScon
    Commented Dec 15, 2016 at 3:45
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    @A2B You ARE overestimating income because you're assuming a vacancy rate of 0 for each apartment. The cycle in student apartment buildings is accelerated. Your average tenant will stay 2 years, but you will have tenants who flunk out of school and have to move home and have to break their lease. So you may see tenants who move in and then out again within a 3-4 month period. With each tenant that moves out you'll need to clean up, repair, replace worn fixtures and appliances and find a new tenant. Takes time. If you don't plan for a 10-20% vacancy rate, your estimates will be badly off.
    – Xalorous
    Commented Dec 22, 2016 at 1:31

5 Answers 5


Carnegie Mellon University (CMU) and the University of Pittsburgh (Pitt) have different end of term dates but by less than a month. Both have summer sessions, but most students do not stay over the summer. You can rent over the summer, but prices fall by a lot. Thirty to forty thousand students leave over the summer between the two. Only ten to twenty thousand remain throughout the year and not all of those are in Oakland (the neighborhood in Pittsburgh where the universities are located). So many of the landlords in Oakland have the same problem. Your competitors will cut their rates to try to get some rent for the summer months.

This also means that you have to handle eight, nine, and three month leases rather than year long and certainly not multiyear leases. You're right that you don't have to buy the latest appliances or the best finishes, but you still have to replace broken windows and doors. Also, the appliances and plumbing need to mostly work. The furnace needs to produce heat and distribute it. If there is mold or mildew, you will have to take care of it. You can't rely on the students doing so. So you have to thoroughly clean the premises between tenants.

Students may leave over winter break. If there are problems, the pipes may freeze and burst, etc. Since they're not there, they won't let you know when things break.

Students drop out during the term and move out. You probably won't be able to replace them when that happens. If you have three people in two bedrooms, two of them may be in a romantic relationship. Romantic relationships among twenty-year olds end frequently. Your three people drops back to two. Your recourse in that case is to evict the remaining tenants and sue for breach of contract. But if you do that, you may not replace the tenants until a new term starts. Better might be to sue the one who left and accept the lower rent from the other two. But you likely won't get the entire rent amount for the remainder of the lease. Suing an impoverished student is not the road to riches.

Pittsburgh is expected to have a 6.1% increase in house prices which almost all of it is going to be pure profit.

I don't know specifically about Pittsburgh, but in the national market, housing prices are about where they were in 2004. Prices were flat to increasing from 2004 to 2007 and then fell sharply from 2007 to 2009, were flat to decreasing from 2009 to 2012, and have increased the last few years. Price to rent ratios are as high now as in 2003 and higher than they were the twenty years before that. Maybe prices do increase. Or maybe we hit a new 20% decrease. I would not rely on this for profit. It's great if you get it, but unreliable.

I wouldn't rely on estimates for middle class homes to apply to what are essentially slum apartments. A 6% average may be a 15% increase in one place and a 3% decrease in another. The nice homes with the new appliances and the fancy finishes may get the 15% increase. The rundown houses in a block where students party past 2 AM may get no increase.

Both the city of Pittsburgh and the county of Allegheny charge property taxes. Schools and libraries charge separate taxes. The city provides a worksheet that estimates $2860 in taxes on a $125,000 property. It doesn't sound like you would be eligible for homestead or senior tax relief. Realtors should be able to tell you the current assessment and taxes on the properties that they are selling you.

You should be able to call a local insurance agent to find out what kinds of insurance are available to landlords. There is also renter's insurance which is paid by the tenant. Some landlords require that tenants show proof of insurance before renting. Not sure how common that is in student housing.

  • Thanks for your answer. It seems that you are aware of the Pittsburgh market. Couple of things I wanted to discuss more. Leases and rentals here work mostly 6 month or 12 month leases. I have rarely seen 9 months or so. What students do is that they sublet the apartment during summer. In any case the market has grown towards the direction that students accept this fact. Is the property tax for Allegheny county added to the property tax that I mentioned in my post or is it just the fact that it should have been $2.8k instead of my estimation of $2.4k? (continued)
    – Amir Zadeh
    Commented Dec 15, 2016 at 20:46
  • You are right about the fact that students may drop out. These things rarely happen at CMU or Pitt but still possible. I would hate to have to sue anyone even if they could pay, let alone suing a poor student. If I want to be honest with you, I would probably renovate the apartment and make sure that they have a good time, specifically if they are grad students. There is no such thing as partying till 2 am in either CMU area or Pitt (they party a little bit more but in general it's not a party school like USC). Another option for me is to buy a property in Squirrel Hill. (continued)
    – Amir Zadeh
    Commented Dec 15, 2016 at 20:53
  • Or Shadyside, where if anywhere is going to go up it's going to be these two places, and well, obviously they are going to be more expensive. In general I have two options 1) continue with the idea of renting the places or 2) invest in stock market! Really nothing else I can do with my money.
    – Amir Zadeh
    Commented Dec 15, 2016 at 20:55
  • When I was searching, the estimate that I found for Pittsburgh was 2.16% of the assessed value. But I just used the worksheet and put in $125k as being in the middle of the range of property prices. I would encourage you to check it directly for more detail. Squirrel Hill and Shadyside will be more expensive to buy but will pay more rent. They're less risky though, so you might make better profit in Oakland. As an investment strategy putting some of your money in stocks/bonds is going to be safer. It will also help provide a cushion in case of emergency.
    – Brythan
    Commented Dec 15, 2016 at 21:05
  • I would consider 60% stocks, 20% bonds, and 20% real estate a diverse income. It's possible that you might find the scale better at 35% stocks, 15% bonds, and 50% real estate. The main point that I'm making is that you should expect the rentals to be less profitable than they seem, as it's easier to miss expenses than income. I.e. you are probably right about the upper limit of the income. You are probably missing at least some costs. So don't leave yourself overextended where you need the income from the rentals. And do have enough money that you can survive a major repair.
    – Brythan
    Commented Dec 15, 2016 at 21:19

I’m not an expert on the VISA/US tax or insurance, but you're making enough mistakes in terms of all the associated costs involved in owning and renting houses/apartments that this already looks potentially unwise at this stage of your investment career.

Renting cheap properties/to students involves the property constantly being trashed, often being empty and requiring extremely close management (which you either have to pay someone a lot to do, or do yourself and lose other potential earning time. If doing yourself you will also make lots of mistakes in the vetting/managing/marketing process etc at first as this is a complex art in itself).

Costs on this type of rental can often get as high as 25% a year depending exactly how lucky you get even if you do it all yourself, and will typically be in the 5-15% range every year once everything you have to constantly maintain, replace and redecorate is totalled up. That's all pre what you could be earning in a job etc, so if you could earn a decent clip elsewhere in the same time also have to deduct that lost potential.

Send it all to third parties (so all upkeep by hired contractors, all renting by an agency) you will be lucky to even break even off ~15k a year per property rents to students.

You’re not seeming to price in any transaction costs, which usually run at ~5% a time for both entrance and exit. Thats between half and one years rent gone from the ten per property on these numbers. Sell before ten is up its even more.

On point three, rounding projections in house price rises to one decimal place is total gibberish – no one who actually has experience investing their own money well ever makes or relies on claims like this. No idea on Pittsburgh market but sound projections of likely asset changes is always a ranged and imprecise figure that cannot (and shouldn’t) be counted on for much. Even if it was, it’s also completely unattainable in property because you have to spend so much money on upkeep: post costs and changes in size/standard, house values generally roughly track inflation. Have a look at this chart and play around with some reasonable yearly upkeep numbers and you will see what I mean.

Renting property is an absolute graveyard for inexperienced investors and if you don't know the stuff above already (and it's less than 10% of what you need to know to do this profitably vs other uses of your time), you will nearly always be better off investing the money in more passive investments like diversified bonds, REITs and Stock.

  • People can get lucky with rentals, sometimes. The absolute graveyard for inexperienced investor is FOREX. Commented Dec 14, 2016 at 10:52
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    With his F-1 Visa, he's not actually allowed to have a job off-campus (or outside of his specific field...I'm not entirely clear on that). It seems that there is some benefit to rental properties because it's deemed passive income and gets around the employment restrictions of the F-1 Visa. I agree with your answer, but there may not be a more profitable use of his time available.
    – BobbyScon
    Commented Dec 14, 2016 at 14:05
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    I like this answer except the use of the word "depreciation" which has an explicit calculation and would only be variable if the taxpayer elects to use section 179 acceleration. If you mean variable wear and tear or repairs, state that.
    – user662852
    Commented Dec 14, 2016 at 17:28
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    Like student damage isn't stuff like quality of refrigerator/sink etc. Students do stuff like kick holes in the walls during parties, leave refrigerators open until the motor blows, turn the heat up to insane levels all winter and run the boiler into the ground, not report major leaks until they have destroyed the floor/neighbours' ceiling etc. They are a group who (mostly) have never maintained or run a house before and make constant, huge and costly mistakes on you and the neighbours.
    – Philip
    Commented Dec 15, 2016 at 9:50
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    Also not sure on apartment block maintenance fees and likely liabilities. Usually apartment blocks have a decent fee each year for overall block maintenance and rules around liabilities for damage to neighbours properties etc. These need to be factored in obv as well. If you have a background in rental already and a load of free time this could work if you can't take a regular job, but it’s much riskier and less profitable than you have so far outlined unless you get very, very lucky.
    – Philip
    Commented Dec 15, 2016 at 9:54

I am not going to argue the merits of investing in real estate (I am a fan I think it is a great idea when done right). I will assume you have done your due diligence and your numbers are correct, so let's go through your questions point by point.

What would be the type of taxes I should expect?

NONE. You are a real estate investor and the US government loves you. Everything is tax deductible and odds are your investment properties will actually manage to shelter some of your W2(day job) income and you will pay less taxes on that too. Obviously I am exaggerating slightly find a CPA (certified public accountant) that is familiar with real estate, but here are a few examples.

  • Depreciation will be your biggest chunk of write off. lets say you buy a 100k property the most recent assessment has the building valued at 90k and the land at 10k. Since the standard depreciation is 27.5 year you do not have to pay taxes on your paper loss of 3.2k.
  • Lets keep going with property tax. with our 100k home at a 2% tax rate you are pay 2k in property tax which is written off.
  • If you paint the property or make another repair that is tax deductible. Any improvements can be depreciated: new flooring, oven, fridge, washer/dryer.
  • If you use property management that is tax deductible.
  • Your insurance is tax deductible as well.

I am not a tax professional but hopefully this gives you an idea of what sort of tax benifits you can expect.

How is Insurance cost calculated?

Best advice I have call a few insurance firms and ask them. You will need landlord insurance make sure you are covered if a tenant gets hurt or burns down your property. You can expect to pay 15%-20% more for landlord insurance than regular insurance (100$/month is not a bad number to just plug in when running numbers its probably high). Also your lease should require tenants to have renters insurance to help protect you. Have a liability conversation with a lawyer and think about LLCs.

How is the house price increase going to act as another source of income?

Appreciation can be another source of income but it is not really that useful in your scenario. It is not liquid you will not realize it until you sell the property and then you have to pay capital gains and depreciation recapture on it. There are methods to get access to the gains on the property without paying taxes. This is done by leveraging the property, you get the equity but it is not counted as capital gains since you have to pay it back a mortgage or home equity lines of credit (HELOC) are examples of this. I am not recommending these just making sure you are aware of your options.

Please let me know if I am calculating anything wrong but my projection for one year is about $8.4k per house (assuming no maintenance is needed)

I would say you estimated profit is on the high side. Not being involved in your market it will be a wild guess but I would expect you to realize cash-flow per house per year of closer to $7,000. Maybe even lower given your inexperience. Some Costs you need to remember to account for: Taxes, Insurance, Vacancy, Repairs, CapEx, Property Management, Utilities, Lawn Care, Snow Removal, HOA Fees. All-in-all expect 50% or your rental income to be spent on the property. If you do well you can be pleasantly surprised.

  • Thank you for your answer. One thing that keeps coming up is property management, repair and extra costs. Doesn't most of that get covered by the security deposit?
    – Amir Zadeh
    Commented Dec 17, 2016 at 21:15
  • Also can you comment on what can be deductible? Is it going to count as a different kind of income? Can you cite a few of the deductibles?
    – Amir Zadeh
    Commented Dec 17, 2016 at 21:16
  • @A2B If you do not self manage you can expect the property management to charge 10% of the rent plus additional fees which can be for example one month's rent to place a tenant. This differs depending on your area, I would call the more popular ones in your area and get them to explain their fee structure. Commented Dec 18, 2016 at 17:50
  • @A2B Taxes are complicated so I would definitely talk to a professional, but you will fill out a 1040e form which is a Supplemental Income and Loss Statement for rental real estate and royalties. Commented Dec 18, 2016 at 18:09
  • @A2B The Security deposit will help with repairs when the tenant moves out but often it needs to be placed in escrow, and the law is explicit in what it can and cannot be spent on. If the oven, water heater, etc needs repaired that does not normally come from the security deposit. Also where I am the security deposit is one month's rent it is not overly difficult for a bad tenant to cause more damage than that will cover. Commented Dec 18, 2016 at 18:21

Insurance - get estimate from an insurance agent who works with policies for commercial real estate. See comments below regarding incorporation.

Taxes - if this was basic income for a simple LLC, estimating 25-40% and adjusting over time might work. Rental property is a whole different prospect. Financial experts who specialize in rental properties would be a good source of advice, and worth the cost. See below regarding incorporating.

Real estate appreciation - not something you can count on for developed property. Appreciation used to be almost guaranteed to at least keep up with inflation. Now property values are not even guaranteed to go up. Never have been but the general rule was improved real estate in good repair appreciated in price. Even if property values increase over time, rental properties depreciate. In fact, for rental properties, you can claim a certain rate of depreciation over time as an expense on taxes. This depreciation could mean selling for less than you paid for the property after a number of years, and owing capital gains taxes, since you would owe the difference between the depreciated value and the sale price.

Related to taxes are local codes. Some areas require you to have a property management license to handle buildings with more than a certain number of units.

If you are going to own rental properties, you should protect your private financial life by incorporating. Form a company. The company will own the property and hire any maintenance people or property managers or security staff or any similar employment activities. The company takes out the insurance and pays taxes. The company can pay you a salary. So, bottom line, you can have the company pay all the expenses and take all the risks. Then, assuming there's any money left after expenses, the company can pay you a manager's salary. That way if the worst happens and a tenant breaks their hip in the shower and sues you for ONE MILLION DOLLARS and wins, the company folds and you walk away. You might even consider two companies. One to own the property and lease it to a property management company. The property management company can then go bankrupt in case of some sort of liability issue, in which case you still keep the property, form a new management company, repaint and rename the property and move on.

TL;DR: Get insurance advice from insurance agent before you buy. Same for taxes from an accountant. Get trained as a property manager if your local codes require it (might be a good idea anyway). Incorporate and have the company take all the risks.

  • Hitting the 25% marginal rate does not mean all of your earnings are taxed at 25%, only those that exceed the top of the 15% bracket.

  • You can deduct any expenses for upgrading or repairing your apartments, those are subtracted from the earnings before tax is calculated as income, so you will probably stay in a lower marginal rate.

  • Property tax will hit you annually, and capital gains tax will hit you when you sell them at the end.

If you already have experience with this business in your home country, then this sounds like a good option for you. The only caution that I would give you is to find an accountant to help you with your taxes and pay for a consultation before you get started so that you know what to track that will help him/her minimize your tax bill.

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