Watching a child graduate from high school is a joyous occasion for many parents. However, if they are planning on going to college, you may be worrying about the college bills that will soon be arriving as your high school graduate enters the next, and most expensive, phase of their education.
College expenses can be especially worrisome when a student will be attending school far away, making it impossible for them to commute from home. If you or someone you know has someone that may be college bound - or you are interested in an investment rental property, you may be surprised to discover that buying a home in a college or university town might be a way to cut college costs while having an investment property after they graduate.
Can This Work For You?
If the idea of taking on further debt to invest in a home far away from your own sounds a bit far-fetched, here are a few guidelines to help understand when doing so is the best choice;
In many cases, buying a home for a college student to live in is a great choice if all or most of the following conditions apply:
- will the student be attending the same school for at least three years?
- will it be possible to rent out the excess bedrooms to other students to cover most of the cost of the mortgage, utilities, taxes, and insurance?
- are there other similar homes for sale in the area immediately surrounding the college your child will be attending?
- does the real estate market in the area have a relatively stable history, indicating the possibility of resell after the student graduates?
- is it possible to finance the home, or pay cash, without financial hardship on your current situation?
While you may have to make the assumption the student will remain in college for at least three years, other details, such as those concerning the rental market, available homes for sale, and the likelihood of a fast resale can be answered by working closely with a real estate professional.
As with any home purchase, you will want to make sure to research anything and everything related to a home's value now and in the near future. When working with a great agent, you can move forward knowing that unexpected difficulties will be minimized before, during, and after the sale - should you decide to move forward with it.
When interviewing prospective real estate agents to assist you, search for one with specific experience in selling this type of housing in the area surrounding the college in the city you have chosen.
Finding Homes With the Best Returns
Once you have considered the factors necessary for making this type of home purchase and investment - and have found a real estate agent to assist you, it’s time to begin searching for the right home. If possible, you will want to find and purchase the home a few months before moving in so that there is time to make minor changes that will help increase rental income and resale value.
Remember that space, square footage and the number of rooms is very important in making your home purchase. In most cases, the best homes for maximizing potential rental income and future resale value will have at least three to four bedrooms or areas that can be easily converted to bedroom space and at least 2 or more bathrooms, as well as a large kitchen and living area. In addition, don’t forget about parking or how close the home is to public or university public transit.
When selecting the home, be sure to know what the expected monthly rental income might be compared to the expected mortgage payments that will need to be made (plus expenses) on the home.
By choosing the correct home and working diligently with your real estate professional while finding and retaining good renters, you may be able to cover the cost of your student's housing costs while the student attends college. Even better, once the student child graduates, your real estate professional will be able to assist you in either reselling the home or keeping the home for investment property for the future.