Housing options for college students
Driving around the college town on Parents Weekend, our son discussed his housing options for his next few years and my mouth opened faster than my mind could think. Out it came: "We should just buy a place."
It was an impulse based on the facts that we are landlords, we have been in the student rental business in the past, and we see that the real estate around the university is reasonably priced. I know other parents also consider buying a property as an option when they see the cost of renting, so let me throw out some thoughts:
For the cost of renting, why not invest in a property instead? If you have good credit and the down payment money, you might be able to secure a place that seems financially in-line with the rental costs. This could work specifically if you know a second or third child may be attending the same school within a short timeframe. Then, you would have an extra set of years to let the house value hopefully grow.
- However, if it's only one child, you are looking at an investment for only three to four years, unless you plan to remain a landlord. That may not be enough time to cover the closing and transfer costs two times as you buy and then re-sell the property.
- If you rent instead for your child, you will have a fixed budget number of rent plus utilities for the duration of the lease. If you own, it can look appealing to collect the rent from a few other bedrooms to cover your own child's expense. But if you are the property owner, your fixed budget number is blown. It takes only one newly installed water heater to eat up three months of rental income. Any plumbing, heating, electrical or roofing issue rarely falls below $500 per crisis, and unless you are skilled and local to fix it, prepare for a few capital expenses each year.
- For out-of-town properties, you will need to contact services from afar--and may not have the opportunity to compare multiple quotes when your child and child's roommates are without heat in February. Hiring an agent to manage the property is a good option, but adds another fee to your expense line.
- Think about those roommates and the parents of the roommates. You can put any agreement in writing, have leases arranged, and get your insurance in line, but anything that happens in that property is ultimately your responsibility. Be cautious of the expectations of other parents and students...even those you may call close friends. All it takes is one trip down the back stairs and that friendship will be over.
- You will put your child in the position of being the "kind-of-owner" of the property. Is he/she ready for that? Will he/she be able to tell friends to knock it off when walls are being damaged that you will have to fix?
I reminded myself of these issues after I blurted out the buying suggestion. Now I am reminded it will be best to keep our real estate ventures out of our son's college experience.
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