School accommodation and meals can be a significant expense for students who leave to study. Jeffrey Decatur, real estate agent for RE / MAX Capital in Latham, New York, near Albany, said he sees a growing trend for parents to buy properties for their children to live in while studying, and as a way reduce costs, and as an investment. … He spoke with Bankrate about this strategy and talked about what you should think about when deciding if it is right for your family. His answers have been edited for clarity.
Q. How often do parents consider buying property on their child’s campus?
A. Parents understand that this is a very viable option to buy and not clean up the room and meals because it will ultimately benefit everyone in the long run. You get a write-off, in the end you can earn some money and it will increase your child’s learning level. They have a different level of responsibility than the average college student.
Q. Why is this a good strategy?
A. There are eight colleges or universities within five miles. It’s not super-super-common, but considering I’m just one agent out of 3,800, I’ve seen enough for this to be something.
One parent bought a house for their child because freshmen were not allowed to have a car. So the parent bought them a house so they could keep their car and live. That was the first, and I thought, “Oh, crazy rich people.” But in reality, they were insanely smart people, because they benefited from owning a house.
I began to see this more and more often in medical and law students. Their parents wanted to make sure they had all the benefits and were not distracted by other distractions going to school and that they had a place to focus, be quiet, learn, and the like.
One of the houses that I sold three times was for medical students each time. It was then that I began to realize that it would be much more reasonable for someone to buy a house. One of my best friend’s kids, they paid $ 6,000 or $ 7,000 a semester for room and board, that’s $ 14,000 a year. In our area, you can buy a house for this. My only friend who bought a house for his child, they bought three bedrooms and two bathrooms, their child got his bedroom and a bathroom, and then they rented out two other rooms. They took that $ 14,000 a year, which was just a waste, they invested it in paying off the mortgage, and then they rented out two other rooms for less than the college charged for room and board. They made money from it, and then when it was time for the kids to leave, they have a college lease or they can sell it.
Even if the market is down, they still save money and make money because they don’t light up $ 14,000 a year and throw it out the window along with college room and food.
When you look at it from this perspective, there is no real losing situation. You may end up making money or saving on paper.
Q. Are there any disadvantages?
A. I suppose you have to be confident in your child that he is responsible and not going to destroy this place and does not need a brick wall, and that he will continue to study for four years in school. This could be a potential drawback. In general, real estate is never a bad investment because it is tangible and historically yes, there are ups and downs in the market, but historically, real estate always grows. There are no real drawbacks in this aspect, but it can be more of a hassle when your student finishes his studies, because then you will have to sell the house.
I don’t know what this is for everyone, but for financially astute people or those with a little extra money to play around, this is a viable option for them and saving everyone around.
If your child takes on student loans, you are not funding their life. You take $ 60,000 of debt out of that equation for your child and turn it into an investment.
Q. What should people know if they are going to do this?
A. I always tell people to talk to their accountant or financial planner to make sure it makes financial sense. If it makes more sense for you to pay for your child’s room and meals than for rent or investment property, then your accountant will be able to tell you that, and this is above my level of payment. I know what I’m doing, and I know the benefits of it from some of the people I’ve worked with, but each person has different finances. Some parents see this as a good moment for their children, which gives them the opportunity to get a home.
Q. Anything else?
A. Always consult with a professional, whatever the situation, and make sure you are making a comfortable and informed decision. This is not something to enter lightly.
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