Considering Buying a Home for Your College Student? Think Twice.

Considering Buying a Home for Your College Student? Think Twice.

Buying College Rental AdviceFor many experienced home owners and home buyers, the prospect of purchasing a home for your child to live in while away at college may seem like a promising one. Owning an additional property that your child can take care of and that you may gain equity in has a few perks, however many more issues lie in owning a student-rented property.

Before you buckle down and settle on a property for your college student, here are a few precautions to take into consideration before making a very large, and very risky investment.

Short-Term VS. Long-Term Ownership

One of the golden rules in real estate is to focus on long-term ownership. The typical length of a college program of four to five years is simply not enough time to warrant an such a large investment. Chances are, your college student will spend a few years living in the property and then, hopefully, will move on to bigger and better things in life. After that, what will you do with this property that you’ve put time and money into? Selling after only a few years of ownership is not likely to give you a substantial return on the property to consider it profitable, meaning you will most likely lose money in the investment.

Difficulty of Student Rental Market

The student rental market is a notoriously difficult market to propagate a “good deal,” or a deal that is cash-flow positive and will provide a fair rate of return on your invested capital. Because of the popularity of this market, the initial cost of student rental homes is often driven up while investment returns are driven down. Figure out conservative rent and expense estimates and work out what a good deal would be from there. Otherwise you will be pumping money into a property that will give little back.

Hard Lessons in Property Management

If you’ve ever managed a property with tenants, or even just your own home with your family as inhabitants, you know how difficult it can be to simply maintain a home. All real estate, no matter how new or state-of-the-art, has issues that need to be dealt with at one point or another. Leaving these responsibilities to your young tenants might be a bit much for them, so if you are planning on investing in a rental property, prepare yourself for a world of work.

Summer Insurance Issues

The thing about college towns is that they tend to clear out for the summer, meaning your property could be vacant for as much as three months out of the year. Many insurance policies expire if your property is vacant for more than 30 or 60 days, and you may be forced to invest in an additional policy that makes provisions for these policies. To add expense on top of expense, you won’t be collecting rent during this time and will be spending more in something that isn’t even being used by your child.