<p>Friends of mine, who are wealthy, bought their son a house, in his name, as an investment property, near his school in New York state. Because money isn't a concern for them, they told their son to rent out the other 3 bedrooms to his friends as he saw fit. So, he charges different rent to different people, depending on their financial circumstances. One guy lives there nearly rent-free, but is responsible for lawn care and general household maintenance.</p>
<p>OK, been there, doing that right now. We purchased a duplex at end of d's freshman year--she was excited, she'd get roommates, etc. etc. We did it because she's near a beach town we love and are thinking of retiring there, thought it would be good investment. A property manager handles the downstairs apt., he gets 10% of rent and also does repairs if necessary on my d's apt. So that part works fine. However, this is our third year of owning, and only for 1 year has my d had 2 roommates the entire year (it's 3 bedrooms), and one of them we had to evict after he bounced numerous checks. She doesn't like dealing with this stuff anymore either. We live 700 miles away, get there 4-5 times a year. Now we have potential roommates for her apt. fill out a credit/background check (costs $29.95 online to get one done) which they pay for. Still, most of these kids have no real credit so things won't show up. There is a very small garden in front of the house that takes 3 min to weed, but every time we go there it needs to be done since our d is 'too busy' to do it.</p>
<p>So, it's been roughly a break even proposition so far. Our d will graduate in May, so we'll turn both apts. over to the property manager. Haven't decided how long we'll hang onto it yet. Housing prices are not depressed in this area but are not rising. At least with a manager we don't have to deal with the tenants--he even evicted our d's roommate for us (of course we had to pay for it). Would we do it over again? Most likely not, knowing what we do now. But I can't decide that until it's time to sell and we see if we actually made any money on it or not.</p>
<p>Mostly I want to warn you that students do not really want the landlord responsibility. My d bought into this hook, line and sinker and now can't wait until she doesn't have to deal with it anymore. I think, in retrospect, part of it was that she hated living in the dorm her freshman year, bad roommates, etc. We tried to spell everything out, but she just didn't get it.</p>
<p>Good luck whatever you decide to do.</p>
<p>I've heard of this happening before and I think it can work so long as you know what you're getting into and do your research beforehand (which you're obviously doing).</p>
<p>In terms of buying property, right now is probably the best time in a long time (and probably for a long time) to buy real estate. Of course you have to have a track record of responsible financial management and be prepared to slap down a nice fat down payment (otherwise the banks will just laugh you out of their office), but if you can meet those requirements then it could be a really good investment. </p>
<p>In terms of the other issues, you need to have a plan for what happens after your child finishes school (do you sell or keep renting it out and if so how are you going to manage that, eg yourself or through an agency). Also these arrangements where the 'landlord' is the parents of one of the tenants can get a bit ackward depending on the personalities of those involved. </p>
<p>The child tenant playing the 'well my mom's your landlord so you have to do things my way' card with the other tenant's is quick way to ensure everyone hates each other. </p>
<p>So in short, it can be done and could be a great investment but just make sure you know what you're getting into.</p>
<p>GoalieDad is correct regarding potential liability. I speak from personal knowledge, since I know of a situation in which a family member was seriously injured as a college student at a house owned by parents, rented to a group of kids including one of their own kids. The parents sued - it was years before it was resolved, which was obviously a difficult time for everyone. Having insurance doesn't address the problems (and guilt) if something goes seriously wrong, not to mention the effect on your family's insurability in the future. </p>
<p>As an investment in today's real estate market, the math doesn't appear to work out but you'd need an accountant to tell you whether after taxes, insurance, maintenance, etc. the rent you'd receive would result in a beneficial tax loss or not, even offsetting the cost of your kid's remaining room fee or rent in an existing rental unit. Board is going to cost $, whether you're paying it to a college or to the grocery store. As rocketman08 pointed out, you're also losing the use of money tied up in your equity. </p>
<p>Another thought to consider is that you'd need significant appreciation to cover the cost of realtors' commissions and closing costs in & out, if you hoped to make a profit after short-term ownership (unless you intend to become a landlord in a college community after your kid has graduated and moved on). </p>
<p>Parties? Property damage? Collection of rent and utilities? Finding reliable room-mates...would it be furnished or not? Seems like a LOT of aggravation.</p>
<p>Lots of math involved too, to determine if there's any financial reason at all to commit to an investment of this kind that could offset the potential liabilities. To save how much in dorm or apartment fees?</p>
<p>Actually today's market is what is making this potentially work... Real estate near both schools has been going down for the last 18 months - and both schools keep increasing their housing costs. The latter is hardly news to anyone on this board :(</p>
<p>Assuming purchase of a 3 bedroom 2 bath house within 4 blocks of campus, I have been building out a spreadsheet with estimated PITI, maintenance, tax consequences, opportunity cost of money (e.g. what else the money could be earning), etc. Thus far, the cost of two students (e.g. my DS and one more) rooms (no board) is enough to make the investment slightly cash flow positive. </p>
<p>What I would not recover would be the cost of the purchase of the house - e.g. real estate fees - unless there is appreciation or if I held on to it for longer than the expected 4 years.</p>
<p>The intangibles are the things that I am most concerned about - focusing on house rather than school, landlord issues, etc. And of course there is always the potential of him transferring early and being tied down.</p>
<p>I appreciate all of the input- please keep it coming as it is really improving the quality of my analysis of the situation.</p>
<p>I don't know where the school is, but another thing I would look at is just how bad the particular housing market is in terms of how many years it would take for the inventory to sell. There are some markets where things are so bad it wouldn't look good for a break even sale in 5 years. I can't remember the town but CNN recently profiled a California town with a new UC where prices had gone up dramatically and now the majority of homes in the town are facing forclosure. In a market like that I wouldn't consider buying.</p>
<p>Aside from financials, you have to factor the time and convenience of having the board plan vs. grocery shopping and cooking, the social life in the dorms, commuting time (and gas) back and forth to classes and school activities, more cleaning, and finding parking or taking buses unless the kids will be well within walking distance to the campus.</p>
<p>we have tossed the idea around to purchase a home near son's campus.' comments made cover most of what i would offer except for one thing: at many schools, kids are forced to pay by the semester, just as they would do for the dorms.
my cousin in michigan does this. my daughter at school in evanston only paid monthly, but two sets of parents signed the lease--as opposed to the kids.<br>
where school begins in august, the 12 month lease begins in august and ends in august.
when the kids graduate--be it may or june--they are still responsible for the rent through august or september. this required some subleasing for a few months, but the kids did it and the kids stayed responsible for their entire lease periods.
so my point is that monthly rentals do not need to exist. if the kids pay for the entire semester, you shorten your frustration list some.</p>
<p>I have a friend who did this. Two kids at same college, one a junior and one an entering freshman. The older one graduated, but the younger one dropped out. Now they have a house somewhere that they don't want to live and it's too far to manage. </p>
<p>Food for thought.</p>
<p>college freshmen need to be college freshmen. they need to experience life in the dorms....making friends....living through experiences that are unique to freshmen! going to games together, eating together, finding out that the world is a lot larger while at the same time a lot smaller....</p>
<p>isolating a freshman in a house is not what being a college student is all about....maybe later...not first year! </p>
<p>the house may make financial sense, but there's more to the college experience!</p>
<p>but then, that's just my opinion!</p>
<p>If your son has need based financial aid, the house you buy will be listed as an asset on the FAFSA and on the Profile. Any rent you collect will also be listed somewhere...in other words, this will be considered an expendable asset in the eyes of the financial aid department.</p>
<p>Now...having said that...we had offered to buy a condo for DD as a junior if she attended one of her choices (because the cost was VERY modest). The reality was that we figured that by her junior year, she would know a reliable roommate to rent the second bedroom to. And the cost overall would have been the same to us. Didn't happen..she went to a different (and much more expensive) school.</p>