Buying a house or Condo for college student?

<p>Has anyone here bought real property for their child to live in while in school? My soon to be college junior is looking for housing for next year. He is in an apartment this year and has handled rent and utilities in a responsible manner. He is looking for housing nearer to his campus and would prefer a house to an apartment. Comments, anyone?</p>

<p>The Seattle Times had an interesting article about this a few months ago, but I can't find the right keywords to bring it up on the website. One approach was to have the student be in charge of maintenance, roommates, cleaning, etc. When the house was sold, the student got any profit. This is a great incentive to keep things in order and roommates under control!</p>

<p>In a housing market with reasonably affordable properties, it can be a good deal, espeically if it's for all four years. But if your son will be moving again in two years, it may not pencil out.</p>

<p>Hi: As someone who lives in a city where this is a prevalent practice, I would offer one piece of advice: Make sure your child (and his/her roommates) behave, and give the neighbors your phone number to call if they don't! This will go a long way toward better relations with other homeowners.</p>

<p>You probably want at least a four year time window to allow for market changes to make enough money to be worth the hassle. The next few years might be a little flat.</p>

<p>That is one of my concerns, especially since I don't think the market has bottomed out yet. I was thinking though, that if we bought something near the campus it would retain some value due to proximity to the school.</p>

<p>I found this article about it: <a href="http://moneycentral.msn.com/content/CollegeandFamily/Cutcollegecosts/P65745.asp%5B/url%5D"&gt;http://moneycentral.msn.com/content/CollegeandFamily/Cutcollegecosts/P65745.asp&lt;/a> </p>

<p>that was not too gung-ho. Not sure what the original source was. Maybe it is the same article you mentioned, as it describes a Seattle family.</p>

<p>Oops- am I allowed to post a link like that? If not- I am sorry!</p>

<p>I have friends who bought a 2 bedroom condo when their first went to college, #2 was also certain that was his destiny so in this case it was a minimum 6 year investment. I think you would need to know the market and run the numbers to see if it made sense financially. Also many schools do not allow freshmen to live off campus which also decreases the use by one year. If it was something you might keep for yourself post-kids college then it even makes more sense i.e., if you child is going somewhere you would use in retirement, vacation etc. or perhaps there might be a scenario where it makes sense to keep it after the kids as rental, but property management could be a strain or the property management costs would have to be factored in.</p>

<p>My parents were in a similar situation when my older sister began college. At first my sister rented a place with my mom's bestfriend's daughter, but it didn't work out i guess. So my mom decided to buy a house for my sis to live in. The house was in a city where housing isn't really expensive (well, compared to where we live); I think she purchased it for ~$70K for a three family house. My sis lived on the third floor and got two roommates, and the other 2 floors were rented out. Well, my Sister's roommates left but the rent made ffrom the property was pretty good so the house sort of pays for itself. My sister is no longer in college, but this situation worked out great for my family. In fact, my parents still own that house and have become involved in buying, fixing, and renting other properties. Now, the first house we were really lucky b/c we have had some not-so-great tenants with other property. But I think this is a good investment overall, if you will be able to travel to the house and take care of any problems/collect rent.</p>

<p>We bought a condo for our 2nd child (D) her soph. year--so she will be in it for 3 years. We set the rent for the roommate at 1/2 the payment which worked out to be 250.00, which was a great price for her considering it is a 1400sq. ft. 2 story condo with basement, within 1/2 mile of school. Had to spend about $3000 in appliances and paint and minor repairs. Think it is going to work out well, but if market not good we can always rent it. She is in a condo complex where the next youngest resident is 55yr old. Luckily I could trust her to be a quiet neighbor. However, like sloparent said I gave our home number to her immediate neighbors and the homeowner association pres. if there were any problems. We would have been paying more in rent and this way are building equity.</p>

<p>All this said we did not do it with our oldest---every apt. he and roommates had was trashed! Think we would have lost money with him.</p>

<p>The killers for deals like this? Transaction costs and opportunity cost.</p>

<p>Transaction costs = the costs of buying and selling, not to mention $3,000 in repairs, as mentioned in post #8 (how many months, at $250/month rent, does it take to recover $3000? Put another way, the buyer spent 6 months payments just on routine work...)</p>

<p>Opportunity cost = what you could have done with the money you now have tied up in down payment and transaction costs.</p>

<p>There can be tax benefits of owning a rental property, but you lose some or all of the benefit if you have a dependent occupy the property.</p>

<p>Me thinks there's reasons most folks do not do this, and it isn't lack of capital.</p>

<p>You are forgetting that the $3,000 in home improvement can add $3000+___ to the value of the home.</p>

<p>Yes, brackis that is what we are hoping. We replaced 15+ yr old appliances and updated kitchen. Bought condo for 74,000 and all the ones sold recently around it had gone 82,000 and up.</p>

<p>Another potential killer for a deal like this could be local housing or zoning laws concerning rentals to unrelated persons. Also, you need to check into local ordinances concerning whether the "owner" needs to live on the premises if he plans to rent space -- in which case you might need to transfer the title to your son as soon as you purchase the property. This might also mean that once he departs, you may have to sell the property if it cannot totally renter-occupied -- except perhaps to a "family" rather than to unrelated adults. Again, check all of the relevant ordinances, including the needs and conditions for rental licenses.</p>

<p>We recently (just last month) purchased a duplex where our D will live next year as a sophomore. Each unit has 3 bedrooms, we told her she must acquire 2 roommates. Her unit is currently empty and needs some work, which we will do over the summer (most of it ourselves). The other unit is currently rented and is in decent shape, just a couple of minor repairs needed. </p>

<p>We didn't buy this just for our D--it is also an investment that we will use in the future (5+ years) to step up to a vacation property or possibly a retirement property. We are 700 miles from her school, but she is in a lovely city 10 min from beaches that we love to vacation at. We are currently debating whether to continue to use the property manager that handled it for the previous owner.</p>

<p>So, yes, we've done this, but can't relate any experiences yet since we just bought it. It is not in a condo community, but we did meet the next-door neighbors (whose house is identical) who live there and rent their other unit, and we gave them our phone number!</p>

<p>This whole issue has been a huge problem in my community: San Luis Obispo, California (for Cal Poly students). Many people can afford to buy an expensive home for their student, which is right in the middle of a family neighborhood. Sometimes this situation becomes, well, strained.</p>

<p>Because home prices here have skyrocketed, many neighborhoods have been, for lack of a better word, "taken over" by students--often living in homes purchased by a Cal Poly parent or group of parents. Or, people from out of the area buy a property as an investment and rent it out to students.</p>

<p>The biggest problem here is that Cal Poly doesn't guarantee student housing, not even for freshmen. The school has built more dorms, but it's not enough. This has caused a lot of friction between the school and the city residents. </p>

<p>One last example: My husband and I are considering moving from here in about a year. Our house is worth about $700,000--and the house next door was just purchased by a Cal Poly parent for use by their son and other student roommates. It may be difficult for us to get that market price for our home if people know they are living next door to 4 college students.</p>

<p>It has gotten to a point where people purchasing a home for that purpose actually lie to the seller about why they're buying. Many sellers are hesitant to sell to Cal Poly parents because they care about the status of their neighborhood. Anywhere you have a lot of rentals, the housing values begin to decline.</p>

<p>Just wanted to provide another perspective on this issue.</p>

<p>We have the same problem in my university community. Once houses turn over into parent-student owned, they tend to remain either in that category or in rental status -- not to revert to traditional owner occupied. However, the problems are ameliorated somewhat by enforcement of a rental code that has elements that I described in a previous post: need for rental licenses, limitations on number of unrelated persons who can occupy a residence, and enforcement of over-occupancy. Does SLO have these ordinances, and enforcement in place?</p>

<p>I agree with newmassdad that the buy/sell transaction costs together with insurance/maintenance costs make this far less appealing. And if the real estate bubble is about to burst the financial hit could be significant.</p>

<p>Off campus student housing is typically relatively cheap. Our son pays $400/mo for rent, utilities, telephone, internet, cable tv and FOOD.</p>

<p>Wow, originaloog that's great rent. In Chapel Hill, rent usually runs 400-500/person not including phone or food. At Elon my S. paid alittle over 300/person not including any utilities. In Winston Salem the little I have looked around so far I think rent close to campus will run 600-800 for a 2 BR with no utilities. My D's boyfriend in Fairfax paid 1200/mo plus utilities for a very basic 2br apt. in complex.</p>

<p>I also live in a university town. DH and I have talked about purchasing rental property so we keep an eye on the market. In the last few years we have seen a number of very large student apartment complexes built around town. These places are able to offer many amenities that I think some kids have come to expect (bus service to campus, high speed internet, weight rooms, pools, housekeeping in common areas . . .). Because enrollment caps keep the student population stable, we are seeing higher vacancy rates and just from the For Rent signs around town I would say that the "single family" type of rentals are often affected.</p>

<p>i'm canadian, and most university students here lease houses after 1st year to share with friends...there's commonly a "student ghetto" right next to campus where virtually all upper-year students live. however, as i said, they usually lease rather than buy them, and split the rent/utilities among the anywhere frm 2-8 housemates, much as i'm sure your son did in his 2nd year. if you think you can easily lease out or sell the house to other students after your son graduates, than by all means purchase one-property is always a great investment.</p>

<p>Edit: rent in student areas commonly runs anywhere from $400-700 (canadian), with or without utilities.</p>

<p>Anothermom,
I think what you can take from these posts is that each location needs to be assessed on an individual basis, at least on determing whether it is a good financial move.</p>

<p>And take an honest look at your student. My D. would maintain a property well (but wouldn't have kept up a yard), my S. and his friends wouldn't have been good neighbors in a nonstudent neighborhood nor would he have taken good care of the property (there goes resale value!)</p>