University Housing Hack: Invest in Real Estate
College is no small expense for most American families. Even for those fortunate enough to have the financial means or a scholarship backing, housing is largely an unavoidable and costly expense. College Board quoted the average cost of room and board in 2017 to be $10,000 at public universities and $12,000 at private universities, annually. That’s a whopping $40,000 to $48,000 over the course of a 4-year degree! As parents weigh the costs of sending their teens off to college, some are turning to an alternative housing option - investing in property.
While buying a home for college students may be a better solution financially than spending upwards of $40K over the span of your child’s college career on renting, there are two major considerations to weigh before committing to an investment property.
- Is the market viable for investing?
Buying a property for the dual purpose of providing your college student with potentially more affordable housing, and as a major asset investment, conducting thorough due diligence is essential. Does the neighborhood offer affordable housing stock? Will there be a steady rental demand? Bear in mind, university towns come with a level of seasonality. If there is no demand in summer, your property could be sitting vacant for three months at a time. The costs of maintaining the home with no income to offset the expenses for months at a time can quickly get expensive.
- Is your student willing and able to handle the responsibility?
This is a huge consideration when weighing the option of buying a property for your college teen. If they will be attending school out of state, will they be able to handle the responsibility that comes along with homeownership without having you nearby? With their newfound freedom, will they be able to handle maintenance issues or keep the house well taken care of? Are they willing to miss out on the community building that comes with living in dorms? All of these considerations are key when deciding if this is a worthwhile housing option. In buying a home for your college student, there is potential for them to gain valuable, real-world experience by being given the responsibility of being a landlord. They will need to find worthy tenants and this case, roommates, collect rent on time, and ultimately handle the management of the property. These skills set your child up not only for future financial success but lay the foundation for business leadership later in their lives. That said, you as the parent are putting a lot of faith in your child that they will make the right decisions. This is a major step into adulthood, are they ready for the task? That’s up to you.
For parents with children headed off to college, buying an investment property to supplement their housing needs may be a great path to consider. It will potentially provide your child with nearly free housing, as their roommates will likely pay the monthly mortgage. Not only does it present the opportunity to make money as a profitable investment, but it will be an invaluable life lesson in responsibility and entrepreneurship that your teen will carry for the rest of their lives. By doing diligence upfront to determine if prospective properties present quality investment opportunities and having a clear plan with your college student about what will be required on their end, this university housing hack has great potential to be a lucrative path, opening your child up real estate investing at a young age.