The following article is a summary of content from the book, “Realtor for Life,” written by Duane Duggan, REALTOR and Author, RE/MAX of Boulder.
Every spring and summer college students start to look for a place to live in the fall. The rental market is usually pretty tight in any college town. Because of that, many families consider purchasing a home for their college student to live in while attending school.
This can prove to be a worthwhile investment financially, as well as an excellent learning experience for the student. In Boulder, if a parent bought a condo in the 1980s and held on to it for four years, the condo would most likely have sold for about what was paid for it. If a parent bought a condo in the 2012 and sold it in four years, most likely there would have been enough profit to pay for their child’s education at University of Colorado Boulder.
Owning the property the student lives in while attending college can be beneficial in several ways. The student will have a greater sense of stability in not having to look for a different apartment to live in each year. In addition, you, as a parent, can pick the lifestyle that will help your student succeed in school by choosing the location and the quality of housing that best fits his or her needs. In the past, apartment rents in college towns typically increase on an annual basis. By purchasing a property with a fixed rate mortgage, your student’s housing expenses will be fixed. In addition, your student won’t have to deal with paying security deposits or going through the hassle of getting the deposit back. Having a single place to live in that you own means your student will not have to worry about storing furniture over the summer break. By purchasing a home for the student, you will be providing your child with an excellent learning experience. Your student will learn not only about the process of investing in real estate, but will also learn about the responsibilities that go along with property ownership.
In my own personal situation, I have two sons who attended the University of Colorado Boulder. I bought them each a condo using owner-occupied FHA financing. Each lived in the unit and had a roommate paying rent to help pay the monthly mortgage. At the end of their college careers, they had built up significant real estate equity to utilize in the next phase of their lives.
I have had clients buy a piece of real estate in which two, three or more of their children have lived in while attending college. In some cases, this has spanned a 10-year time frame. Rather than throwing money down the “rent drain,” they have built equity in a real estate investment over a period of time.
Here’s a simple worksheet to help you determine the month-to-month expenses for owning a condo or house for your college student while you evaluate if this is the right decision for your family:
In my next article, “Part 2: Should I Buy a College Home for my College Student?”, I will provide you with a list of items to think about and plan for when deciding whether or not to buy a condo or a house for your college student.
Duane Duggan has been a Realtor for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed by RE/MAX International: the Lifetime Achievement Award and the Circle of Legends Award. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life.