Should You Buy Off Campus Housing?

Should You Buy Off Campus Housing?
  • Opening Intro -

    Forget the costly home improvement project: you still have one or more children to put through college, an expense that will drain you of your available capital.

    A desired home renovation project can wait, with those plans perhaps shelved until after your youngest graduates from college.

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One way to lower the cost of college and to save toward a renovation is to invest in new real estate. Especially living quarters near where your children are going to college. If things work out the right way, your children will choose schools in the same area and will be open to living off campus. That off-campus site can also be a place that you own, one that can house your offspring and their rent-paying roommates.

Housing Benefits

Let’s take a look at the benefits of owning additional real estate:

1. Housing prices are excellent. Much of the run up of housing prices in the 1990s and 2000s has been wrung out. In areas where housing is in abundance and a major college or university is nearby, housing prices may have long since stabilized. This means that housing prices have only one way to go and that is up. If the real estate you’re considering buying is especially desirable (i.e., in good condition, conveniently located, roomy) then you stand to make moony on your investment when you sell.

2. Qualified and motivated students want to rent. As the owner of a house, condo or townhouse near campus, you’ll be the landlord and students will be your tenants. Even if your children aren’t ready to head off to college for a few more years, buying now will all you rent it out and make some money. As a landlord you’ll need to screen tenants, something that you can do by interviewing their parents and getting their signature on the lease agreement. If dorm housing is limited or substandard, you’ll attract a ready supply of capable tenants.

3. You’ll lower your college costs. True, your children living in a home that you own means that one less person will pay rent. But, you’ll also avoid paying board to the college. Off campus housing can attract both premium renters and allow you to charge a premium rent, covering the cost of your adult children living away from home. For example, a four-bedroom home means that three students are paying rent and the fourth student is your offspring. You can work out the rent to where the other three are covering the mortgage, utilities, taxes and upkeep, with you providing food, cell phone and other costs for your son or daughter.

4. A tax benefit can be had. You’ll need to work with your accountant here, but there should be some tax benefits available for owning a second home. Property taxes are deductible on your incomes taxes. Improvements are an expense that can be taken when you sell the home. If you run your off-campus property as a business, there could be some business expenses that can be reflected on your taxes.

Housing Challenges

Of course, there is no guarantee that everything will go as smoothly as planned. The following are some considerations about owning another home:

1. Your son or daughter may drop out of school. You can insist that your children finish college, but staying in or dropping out is their decision as adults. Even if your child continues with school, they might transfer to another college far away from your investment property. You can still be a landlord, but each tenant will be a stranger. Moreover, you’ll need to arrange housing for your child elsewhere and pay for it.

2. Your investment may not be a sound one. When renting out property, you’ll need tenants to sign a lease and pay a security deposit. The money you receive should offset your costs including your mortgage, insurance and upkeep. If you can’t fill the house, you could be left holding the bag.

3. The housing market could drop. You could buy a home and discover that the housing market hasn’t finished dropping, decreasing the value of your investment over time. It could take years for you to recoup your money, something that might not happen until years after your children graduate. This leads to an important question: how long do you want to be a landlord?

Final Thoughts

Buying additional property means fully understanding what you are getting yourself into. Your children need a place to stay and you need a place to invest your money. Likely, you’ll want to make some improvements before the first tenant moves in, another expense you’ll need to take into consideration before you sign on the dotted line.

See AlsoWhere to Find Student Housing

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Categories: Home Financing

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Auto Trends Magazine", an online publication. Matt covers campus, consumer, business and financial topics on various websites and weblogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".