If you are getting ready to put a student through college or already have one in higher education, no doubt you are looking at the staggering cost of room and board. On-campus housing is priced far above the value of those cubby-sized dorm rooms shared with assigned roommates. In fact, the only benefit is closeness to lecture halls and moderately increased safety for Freshmen. In high-demand college cities, on-campus housing can range anywhere from $9,000 to $27,000 a year. With numbers like that, it’s no surprise if you’re thinking about just buying a near-campus home for your college student.
Should you buy a home for your college student? Is this a truly beneficial financial choice? If you do buy, what will you do with the house after they are done with college? Weidel Real Estate is here to help you break down this important question into the most important factors: Finances, Property Management, and Future Plans.
Compare the Total Costs
- Student Housing
- Dorm rent or
- Near-campus rent
- Buying a House
- Property Tax
- HOA Dues
Start with the base price of student housing. From this, subtract the total cost of homeownership including mortgage, property tax, insurance, and maintenance. Compared year-to-year, you will quickly see whether student housing is more or less affordable than buying a modest home near your child’s college campus.
When considering ROI, don’t forget to include the initial and closing costs of the home purchase and the costs of moving, furnishing, and establishing the home as well.
If you do not rent the home, including paying roommates, then you can deduct 100% of your interest payments, as you do with your primary residence. However, if the home becomes the asset of a profit-generating business model, you will need to use the rules of business expense tax deduction regarding real estate instead.
Property Value Appreciation
In many college towns and near-campus neighborhoods, property is always in high demand and values tend to rise over time. This makes a home purchase in a college town a good investment in most markets. You are likely to satisfy value appreciation from the property over time, provided that you continue excellent maintenance during your student’s residence in the home.
Maintaining Your Student’s College Home
Buying a home for your college student is a lot like becoming a student housing landlord. Your child is not yet experienced in home maintenance. They will also likely want to bring along equally inexperienced college roommates. So you will need a plan to keep the home in good condition. A property management team or just a reliable set of on-call home services can help you and your student prevent damage and fix maintenance issues as soon as they occur.
Is Your Student Responsible Enough?
When considering whether to buy a home for your child to live in, their temperament matters. Are they mature and respectful enough to treat the home like an asset instead of a crash pad? Can they help you keep up maintenance by promptly reporting any leaks or issues with the house? And perhaps most importantly, can they choose roommates who will be equally respectful and trustworthy in the home?
Buying a home for your college student can be a valuable investment, but only if the house does not depreciate in value due to wild parties and collegiate mistreatment.
Roommates and Paying Tenants
Most college students do not want to live alone. Many already have friends they would bring as roommates if you are buying them a house to live in. This is an important decision for parents who must choose to trust the roommate. It’s also an important decision regarding rent and paying tenants. To maintain residential tax deductions, roommates must not pay. To offset the monthly home cost, a few paying roommates can make a big difference.
If you do let your child bring in roommates who pay, how will you handle roommate leases, house rules, and replacing roommates who leave?
Considering Holidays and Summer Residence
Where will your student spend the time when class is not in session? Holidays and summer breaks may leave the house standing empty, or they may choose to stay year-round. Buying a home for your college student is especially useful if they tend to enjoy spending summers near campus pursuing additional academics or career opportunities.
If your student is leaving for summers and long holidays, you might work with them to book the place as a vacation rental for a few weeks or months. You might also continue to collect rent from roommates who stay.
What You Will Use the Home for After Graduation
Buying a home is a property investment. While you could sell after your student graduates, you don’t have to. Many parents are using a student housing purchase as their retirement vacation home or a way to smoothly downsize to a pleasant college town for retirement.
If you have a younger child or children who may be going to the same college – or in the same region – you can keep the house as student housing until all of your brood are finished with college.
You can choose to rent the home as continued student housing to the high-demand population of students near your chosen campus, or you can book it as a cozy vacation rental for visiting parents, business travelers, and students touring campuses before enrolling. You may turn it into your long-term vacation home, guest home, and occasional Airbnb. Finally, you can sell and buy a house in the town where your next child is going to school.
Should You Buy a Home for Your College Student?
When talking about college room and board, there are situations where just buying a house, condo, or townhouse for your student could be a better financial decision. Especially if you fancy turning the home into a retirement home or investment property when your student is done with their college schooling.
To find out if your student’s local housing market is better or worse than student housing prices, contact us today. Let us help you find the perfect cozy home for your college kid and their friends.