Part 2—Now is the Perfect Time to Buy College Housing

In Part 1 of my previous article, now is the Perfect Time to Buy College Housing, I discussed how purchasing a condo or home  for your college-bound student can be a smart investment—both financially and personally. To help you move forward with confidence, here’s a practical guide to consider as you evaluate your options:

If you’re considering putting your student on the mortgage and deed, it’s wise to start building their credit well in advance. One effective way is to help them open a credit card in their name—ideally at least a year before the home purchase. If your student owns a car, having a small loan in their name can also contribute positively to their credit profile. Meeting with a mortgage professional early in the process is a smart move. They can help you explore options and develop a strategy that supports your long-term financial goals while setting your student up for future success.

It’s important to consult with your accountant and attorney to determine the best ownership structure for your situation. Some families choose to purchase the property as a second home or as an owner-occupied residence, with the student listed on the deed and mortgage. Others opt to treat it entirely as a rental property to take advantage of potential tax benefits. There are

also various title-holding options to consider, such as forming a Family Limited Liability Company (LLC), which can offer flexibility and legal protection.

One option is to purchase a 1-bedroom condo for your student to live in alone. However, opting for a 2-bedroom unit allows for a roommate, whose rent can help offset the mortgage. A 3-bedroom condo or home can offer even greater cash flow potential with two roommates contributing. Just be sure to check local occupancy limits—many communities have regulations

that restrict the number of unrelated individuals who can live in a single residence. Knowing these rules in advance can help you avoid issues down the road.

Even if potential roommates are close friends, it’s wise to have a written rental agreement in place. A roommate agreement should outline the same key terms typically found in a standard residential lease, including:

• Term

• Rental rate and due date

• Security Deposit

• Notice to Vacate

• Utility payment agreement

• Maximum occupancy

• Parking

• Pets

When purchasing a condo, financing options and down payment requirements often depend on the owner-occupancy ratio within the complex and whether the property has specific approvals —such as FHA or Fannie Mae. It’s important to have your lender verify that the condo complex is approved for the type of financing you plan to use before moving forward.

Is it Better to Purchase a House or a Condo/Townhome?  The decision often comes down to whether the student is willing to take on homeownership responsibilities, such as exterior maintenance, snow removal, and lawn care. For most college

students, a condo may be the better fit, as they’re unlikely to want to spend their free time mowing the lawn. Condo or townhome owners typically pay a Homeowner’s Association (HOA) fee to cover these maintenance tasks. While this adds to the monthly cost, it ensures the upkeep is taken care of.

• No lawn care, snow shoveling, or exterior maintenance

• Easier to “just leave” for the summer

• Owner occupancy ratio of the complex could affect the ability to purchase, sell, or refinance.

• Homeowner’s Association fee may be high and out of your control

• Loud stereos might bother nearby neighbors

Advantages of Choosing a Single Family Home for a College Student

• No concern over occupancy ratios of the complex for financing

• A single-family home might be easier to resell than a condo since you tend to have more

competing properties when selling a condo or townhome, of course, depending on current

market conditions.

• Typically, there is no Homeowner Association fee

• The student needs to mow & water the lawn & shovel snow

• Neighborhood may be less friendly to a group of students living there.

 When your student is ready to move on—hopefully after graduation—you’ll have several options  to consider. You can keep the property as an investment rental, allow the student to retain it as their first home, or even exchange it for investment real estate in another location.  For example, I worked with one family who purchased a property for their first child attending

and graduating from CU. Afterward, they sold the Boulder property and used the proceeds to buy a new property in another college town for their next child.

• Possible appreciation in value

• Possible tax benefits

• Debt reduction on an amortized loan which increases equity build up

• Keep as an investment after college for cash flow.

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