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Thinking About Buying an Investment Property for Your Child to Live in While at College? Ask Yourself These Questions First…

You don’t even need to have a child going to college to know that it costs a ton of money! But when you do have a student about to enter college or already there, you become extremely aware of how much it actually costs.

For those who aren’t quite there yet, when you hear how much tuition is, that number often doesn’t include room and board. So on top of what the classes cost per year, you need to include housing, which can be a hefty amount.

According to a recent article published by Education Data Initiative, the average room and board cost can range anywhere between a low of around $8,000 to a high of just over $14,000 per year. The average cost varies depending on whether it’s a private or public school, and whether it’s a 2-year or 4-year institution:

  • A 2-year public school averages $8,360.

  • A 4-year public school averages $12,640.

  • A 2-year private school averages $11,380.

  • A 4 year-private school averages $14,410.

But those are averages, so the actual cost may be higher or lower depending upon the school your child attends, and the type of accommodations they choose.

Regardless, no matter where a student goes to college, or what their living arrangements are, a significant amount of money will be spent on their housing. Which is why it makes sense for some parents to buy an investment property for their child to live in while in college, according to this recent realtor.com article.

But does it make sense?

Let’s rephrase that… does it make sense for you?

There’s no absolute answer to whether or not it makes sense to buy an investment property for your child to live while at college. It certainly might be a wise decision for some parents and students, but it really depends upon many factors. Here are some questions to ask yourself if it’s something you’re considering:

  • Will your child be allowed to live off campus? Even if your child is only required to live on campus for their freshman year, you’ll only be looking at three years of benefiting from the investment property as a place for them to live. But do they plan to attend graduate school as well?

  • Does the math make sense? Would buying a place actually be more cost effective than paying rent? Depending on the real estate market, the cost of buying a place—or even just paying the property taxes—may be more than it would cost to rent.

  • Is it worth having to pay for repairs and maintenance? It’s almost impossible to put an exact number on, but don’t forget to factor in some costs for emergencies and upkeep each year.

  • Is your child responsible enough to handle living in their own place and being in charge of it? It can be a great growing and learning experience for a child to live in their own place and be responsible for the day-to-day upkeep. But it can also be overwhelming (or at least distracting) for a student who isn’t quite ready for that kind of responsibility, and impact their ability to focus on their studies.

  • Are you counting on other students to also pay rent? One way many people justify the cost of buying a place is that they’re able to defray the cost by having other students pay rent to live there as well. If that’s your plan, try to make sure you have some other students your child feels comfortable living with who are committed to renting there, and have them sign a lease. It’s easy for a student to say they want to live there, but it’s easy for them to back out, or have their parents not agree to the arrangement. If you’re counting on tenants that don’t pan out, you could end up paying more than you would for a rental.

  • Are you prepared for the potential risks and liability? Not to say that your child is a party animal, but if you’re being completely honest with yourself, you probably know that any place you buy might be the site of a keg party or two. Unfortunately, parties can lead to problems, and potential legal issues.

  • What if your student decides to transfer? Many students end up transferring to another school after a year or two. What would you do if your child left the area? Keep it and rent it out, or sell it?

  • Will it appreciate enough over the course of their time at school to offset the closing costs, carrying costs, and selling costs if you decide to sell it? It’s impossible to predict how much (or if) a house will appreciate during a period of time. Keep in mind that you may not make a profit after four years of college.

  • Will it be easy to sell when your child graduates or transfers? It’s also impossible to predict how long it will take to sell a house when you want to, but if there typically aren’t a lot of buyers in the area you’re considering, be aware that it might take some time to sell when you decide to. If it can’t be sold readily, be prepared to hold onto it as a rental, and have a plan for who will manage and maintain it at that point, once your child has moved out of the area.

Those questions aren’t meant to scare you away from buying an investment property for your child to live in while at college, they’re meant to help make sure you make a well-informed decision.

And If you feel like it’s the right decision for you and your child, reach out and let's explore your options!

The Takeaway: College is expensive, and tuition doesn’t usually include room and board, which adds significantly to the cost. The average annual room and board costs can range from $8,000 to $14,000, depending on the type of school and whether it’s public or private. Given these costs, some parents consider buying an investment property for their child to live in during college. However, whether this makes sense depends on several factors: campus housing policies, cost comparisons between dorms, renting and buying a property, maintenance responsibilities, the child’s readiness to manage a property, reliance on rental income from other students, potential legal liabilities, and the property’s future value and ease of sale. These considerations are important to ensure a well-informed decision. If it seems like the right choice for you and your child, give me a call to explore your options!



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