Is Buying a Home for Your College Student a Good Investment?

Is Buying a Home for Your College Student a Good Investment?

It can be hard sending your child off to college. It can also be hard forking out money that you'll never see again on her room and board or monthly rent, especially when student housing is hardly ever as clean or stable as most people would like. This is why many parents make the choice to purchase a house near their child's college. By making an investment in this kind of housing, parents are able to provide their children with a more desirable living situation with the possibility of making a profit once graduation sneaks around.

If this is a path that you're considering, here are some important factors to consider:

1. Location

Just like any other real estate transaction, purchasing a home for your college student is still about "location, location, location." Zillow has a useful chart that compares home prices with average rents in different college towns, providing potential homebuyers the numbers they need to crunch. You should also take into account the price of on-campus housing (The average cost at a public university was $8916 in 2014.) In some communities, especially those in rural areas, it might not be a smart investment as it would probably take all four years to break even with your investment. In more expensive, urban areas, you are more likely to break even at a faster rate. (In Chicago, it would only take an average of 2.3 years of residence to swing in favor of the purchase decision.) So, once your child gets the financial aid package and accepts admission, explore the real estate and rent rates of her upcoming hometown. 

2. Amount of Responsibility

It's also important to be realistic about the amount of work it takes to run a house and whether or not your student can handle this kind of work. Remember that all houses will eventually need plumbing repairs, electric work, and utility coordination. And, if you decide that you'd like for her to take on roommates and collect rent from them, it's also important to screen for good candidates with renter's insurance and make sure that your child feels comfortable depositing the rent money. Have a conversation with your student about what your expectations will be and what they should honestly expect from you. Think of it as a good opportunity to talk about drinking, grades, and other pressures of the college experience. 

3. Being a Landlord

You've gone to campus visits with your child, helped her research different programs, and supported her through opening all of those acceptance letters. But, if you're going to buy a house and rent it out, you've got to do studying up on the laws of landlord-ing. This guide from Fannie Mae is a great place to begin and offers guidance in everything from the screening process to eviction paperwork.  Here's a PDF of the Chicago Tenant Landlord Ordinance a must read in Chicago. You also might want to do some self-reflection of your own and consider whether or not you've got the personality for this. Being a landlord is a job- Make sure that it is one that you will enjoy!

When taking the necessary steps towards purchasing a home, make sure you use a great realtor! Give us a call when you're ready to begin the process here in Chicago!

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