Every August in college towns across the country college students return for the fall semester. This year is an exception due to coronavirus, although for the colleges that are holding in-person and not just online classes, it has had a drastic effect on housing for college students. The virus has made the close proximity of dorm living a challenge for universities. Occupancy levels in dorms have been reduced for the safety of the students. This has pushed more students into off-campus housing. Even in a non-coronavirus environment, the return of students to college towns adds pressure to off-campus rental markets. The combination of a tight rental market and the desire to have more personal space due to coronavirus makes it a great time for parents to consider buying permanent housing for their college student. Since inventory is in short supply, starting to search for housing for NEXT August should begin now. This will give you time to explore options and learn about the market. Ideally, parents will buy housing for their child in late spring and close on it in July. This allows the student to get settled in before classes start in August.
Buying a college condo 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, they most likely would have sold it for about what they paid for it. If a parent bought a condo in the 2012 and sold it in four years, they most likely would have made enough profit to pay for their child’s in-state tuition at CU-Boulder. In 2020, there is an inventory shortage of available condos and there has been continued upwards market pressure on prices. This all makes it tougher to find a place to buy, but history has proven it can be worth the effort.
Owning the property the student lives in while the student attends college can be beneficial in several ways. The student will have a greater sense of stability by 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, hunting for rental properties, or moving. By purchasing a home for the student, you will be providing your child with an excellent learning experience. Your student will not only gain knowledge about the process of investing in real estate but will also take care of the responsibilities that go along with property ownership.
In my own personal situation, I have two sons who attended CU-Boulder. I bought them each a townhome 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 also had clients who have bought real estate for two, three, or more of their children to live 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 this period of time.
Here’s a simple worksheet below 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: Coronavirus and Buying a College Condo” 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.
By Duane Duggan. Duane has been a Realtor for RE/MAX of Boulder since 1982. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail DuaneDuggan@boulderco.com, call 303.441.5611 or visit BoulderPropertyNetwork.com.