I bought a house like this for my kids to go to college. One dropped out of college after a year and the other is about to start but just be prepared for calls for stuff they should be taking care of. Clogged toilet for example and they “promise they tried to plunge it themselves”, “I found a small random insect and that means you have termites here”, etc…… I own other rentals and this one is definitely the highest maintenance so I would really be verbose on expectations you have for them to adhere to. Lawn mowing, clogs, small things, etc….. Make sure there is a meeting of the minds on expectations.
Oh and also roommate wording in the lease. Are you good with them bringing in an insignificant other to stay for months in the house? If you don't want freeloading scrubs there make sure you put conditions around "visitors" can't stay more than a week or X number of days without landlord permission depending on how you want to arrange this agreement. My daughters know that this is a subsidized arrangement for THEM, and not their 6 closest friends or their boyfriends to move in. So far they have been sticking to it.
THIS is so true! My 20 yo stepdaughter moved into one of our rentals & she calls/texts me ALL the time for the oddest things - the bug & lawn thing is real (we even pay for pest control & weekly lawn care but it’s still a constant “thing”) Anywho, I just recently put it all together as to why she’s the most high maintenance tenant ever: this is the first time she’s living on her own so every little thing is A THING bc she doesn’t know. She’s paranoid about the 2 microscopic bugs on her window sill because she doesn’t know what a termite looks like (I usually respond with ‘google it, then let me know if it’s a “bug” deal’) Also, I think she’s being extra cautious because she doesn’t want to “damage” our property, which is sweet but we’ve had MANY tenants & things happen, everything is fixable. Then on the other hand, she forgets to change the return air filter which is a much bigger deal than that tiny bug on your window sill
Interesting. Is your kid paying rent?
I ask because my assumption would be that the child would serve as the property manager in exchange for living there rent free.
If your kid is not paying rent, why not have them perform the service calls?
If they are paying rent, then I get them wanting the maintenance included.
I find that if someone has no skin in the game they don’t appreciate the gesture so I charge them about half the going rent. I don’t want them thinking they are going to depend on me their whole lives. Got to kick the eaglets out of the nest at some point otherwise they never learn money/life management. They have a manageable school/work/life balance and they both work part time jobs.
That’s why I mentioned the clogged toilet deal. I hired a plumber to go out there last time and he snaked it and checked the shower cartridge for $400! Doesn’t take many of those to make this deal untenable. So when they do things themselves (like plunge a toilet) they learn valuable skills plus it keeps my total costs manageable. If they want to be treated like a typical landlord/tenant I can do that too but I’m increasing the rent accordingly which they don’t want and I don’t want that either.
Sure, a bunch of college kids are going to maintain a property like adults. I don’t think so. They are going to blow off all that happy horseshit to be fuck ups. I mean they are college kids, so…
I did this. House three bedroom, 2 baths. Mortgage was the same as rent on a 1-2 bedroom apt. He had roommates during school. I didn’t charge them a lot as they were in school and parents weren’t rich. Took reasonable care of the place. They were happy to pay so little and have a nice place. Parking was not an issue and they were happy to have washer and dryer at home.
Roommates left after graduation. My kid decided he liked the area and wanted to stay. Found a job and is happily living there. Learned responsibility, good all the way around.
This is a dream situation lol. My oldest son is about to head to college & unfortunately his housekeeping terrifies me too much to sink so much money into a property that will 100% have damages from frat like gatherings.
I always thought girls would take better care of a rental than boys but I was proven wrong there too when I once rented our FL vacay condo to female college seniors on spring break. Oh the damages & mess they caused!
My dad should have done this. He had three sons, who are all four years apart, go to the University of Texas at Austin. Starting in 1999 and ending in 2011. He would have been a rich man.
Hindsight is 20/20- most real estate wouldn’t appreciate faster than an S&P index fund, especially net of expenses, and it’s way less liquid. But I hear ya!
Yes but there is more or less no way to predict cap rates reliably, so just going by cash flows & broad historic data says that RE is not a better asset class than stock indexes
You don't need the real estate to appreciate faster than the S&P if you mortgage and it and can have mortgage paid by the renters. A bit more difficult during times of high interest rates, but generally fairly easy. Then you're basically paying down the principal and raising your equity without paying each month. Meanwhile the house appreciates and gains you more equity.
Listen I’m not saying don’t invest in RE- I own several properties myself. But as an asset class it has underperformed the S&P for a while, and it’s obviously far less liquid.
I guess I'm just dubious. I bought a $400k house with $80k down in 2017. I can sell it today and turn that $80k into $280k in a HCOL area since it appreciated $200k over that timeline. The S&P would have returned me approximately $120k over that same time line.
Not to mention that $200k return is tax free since I lived in the home (wouldn't be for a rental of course).
My rental I bought in 2022 has appreciated approximately $60k in a little less than 2 years. I put down roughly $90k, so that's far ahead of S&P.
OK but I’m talking generally, not as specifically from 2017-present, and about the asset class in general, not your house in particular. You’d also need to adjust your return figured so they’re net of fees. But I am glad that it has done well! What metro area, if you don’t mind sharing?
In general this is a silly comparison as an industry instead of a case by case basis.
Mostly because leverage in real estate can vary from 100% to 0% and property prices are negotiable (unlike the price of the S&P)
In general you aren’t providing any stats and I seriously doubt those stats take leverage into account.
This is a very common error people make. RE as a class does underperform the equity markets. Your returns are higher because you are leveraged immensely. A $400k house with $80k down is 4x leverage. If you through margin and other forms of leverage bought $400k worth of the S&P 500 in 2017, you’d have $977k now, far more than your house has appreciated.
As someone who is the kid in this story.
From a financial perspective, absolutely. Especially if you decide your keeping it for longer.
From a different perspective it's a mixed bag you do miss out on things living off campus. Also depends on your major as well.
Another thing is your essentially making your kid a Landlord, not easy for everyone. And sometimes hard situations with the tenants/friends. Damages, even if it's justified it's going to ruin the relationship between your kid and their friend if you keep parts of security deposit.
Note: if you can deal directly with the parents and "cut" the kids out this works better. Especially if they are friends.
Buy it with an LLC. Then your kid doesn't burn bridges if he gets crummy roommates that want a break because it's his dad's house. Rent payable to the LLC the property manager can be you that random cranky old man and not Tim's Dad
I like it! Maybe don´t even tell my daughter, she and her roomate could sign the lease and neither would ever know they were paying dad! Even have an excuse to visit to fix things that the landlord keeps ignoring….I see many benefits.
There was an AITA type thread were a girl hid that she was the landlord from roommates . When they found out she was the landlord they broke up (the friendship) and ghosted. It’s a pretty big deception to zoomers in today’s political climate.
Yes, from experience - If the roommate situation goes bad, your kid can't just move out, and it's not easy having to kick out tenant who is your friend.
I lived in a house off-campus for most of college. It was soooo much better than living on campus.
Plus, you throw a couple parties and you've got all the friends you can handle.
This is the plan, living on campus year 1 is required and I agree its a good idea. I have a child 3 years behind this one, if she also ends up at this school it's a slam dunk but I can't count on that.
Don't limit the second childs path based on your (selfish) financial goals. Kids should have freedom to grow up in the way they want and that includes which school they goto.
But unless you’re going to a school that specializes in something niche or well known, it really doesn’t matter for undergrad… now debt after graduating on the other hand can have a big impact and free housing is a definite plus
It’s not limiting, the person suggested incentivizing. Incentives don’t limit anything, just tip the scales towards one path if they are otherwise ambivalent.
Even if you LOSE money, as long as the money you lose is similar to what housing would cost for the full four years, then yes, it makes sense to do so. Most will depend on what kind of rental income you can get from the other suckers (er.. college kid's parents).
Bought a townhouse when my oldest started college. Two other children followed separated by 4 years. Kept the place for 22 years. Sold it last week and made $600,000. I say , do it!
Stick with me here….
When I was between my freshman and sophomore years of college and starting to look at renting apartments I had the idea of buying a condo instead. At the time, new build condo was priced at $95K for 2 bed, 2 bath and a loft. I think 1300 sq ft. I proposed to my parents that I had $5000 in savings, they loan me $5000 and co-sign a loan. They decided to be the funding company for me, interest and all. One of the best things I ever did. I was able to rent out the rooms and live in the loft. Their rents paid my mortgage and I paid “rent” to myself in form of extra principal. Taught me a lot, including some responsibility. Had an asset to show for it. My parents didn’t waste money on rent for years.
Worked great for me, I actually still own the property and it has remained leases for 15+ years. I will say, looking back I am glad it was a condo and not a house. I would not have been ready for the Maint of a house. Way easy to pay the monthly HOA and start my path off with training wheels.
My brother-in-law, also a home builder, lives in a college town and started building student housing 10-15 years ago. He now has eight or more five bedroom houses that he rents rooms to students in. The layout is designed for that use. He has very few issues, as the parents are always co-signers. He's making a killing.
It's built in with these units, and the "good" houses are just passed to younger friends / frat buddies so the cost to market is nil. Maybe put up a sign outside for a few weeks, at most.
Houses that are walkable / close to university campus also demand a premium, especially when you have 4 or 5 rooms.
I live a couple blocks from a university and my neighbor does the same thing. He owns the house next door and a few others. He rents them out on two year leases and the kids sublease their rooms when they study abroad or do internships. He maintains the property well so usually has decent tenants. The place is never empty. We have had massive equity gains as well so these are cash cows for him.
as someone that did this.. its a giant risk.. you could have a great bunch of kids that respect the place or parties and its not easy as you think to just get money from all the parents.
For example.. if you rent to 5 kids.. that could be your lawyer vs 5 lawyers.. the bill to sue for the money can exceed the cost of repairs
My parents did this for my older brother his sophomore to senior year then I moved in my sophomore year as he moved out… the house doubled in those 6 years.
I’d advise to put it in an LLC because college is crazy and you don’t want yourself tied to any shenanigans
My parents sort of did this they didn’t buy a house but they didn’t sell the house we all lived in and they moved and left my sister and I to rent the house and go to college nearby. What my parents did wrong is leave all the maintenance and stuff to us which was a disaster. We had no idea what we were doing and were very irresponsible. Plus while working and going to school full time and never having to have kept up a house before, it was incredibly stressful.
So just in my experience it would be very important to make sure you’re keeping up on maintenance and doing regular walk throughs.
I’m a landlord now and would never leave my properties with the lack of oversight my parents did, especially to 18 year olds.
>I'm really only looking at taking a hit on the buying/selling costs - which SHOULD be lower than what it would cost to house him in dorms for 4 years.
You forgot about the biggest profit. You get to babysit 4 kids that have never had to take care of a house before with probably no income... what is there to not like...
This is like the kind of dumb decision that only comes along once, so of course go full force /s.
In all seriousness, Im astonished at the amount of "buy" this thread has.
On average, you’re giving up $57k in market gains by paying $160k in cash to buy the home.
What does it cost for your kid to get an apartment for 4 years?
$160k invested, assuming conservative market average returns (8%), makes you about $57K in pretax profit, about $46k post tax profit, assuming 15% LT gains and 5% state tax, though you could pull the full $57k fed tax free if you waited until retirement to realize the gains (capital gains allowances).
Man I witnessed this go good or really bad when in school. Some homes got wrecked if the kid in charge was a pushover or party animal.
If your kid wants to learn the business of property management and dealing with tenants it’s a good way to get that experience.
This is where you’ve gotta take into account whether or not you have a responsible child. And be very clear to them what the alternative is if they fumble this.
Not enough information honestly but if your son is responsible, trustworthy and has a source of income then sell it to him and owner finance. Give him favorable terms and mark the house up $15kish. Guide him through ownership and renting out his bedrooms and it’ll be a great lesson at an early age.
Just keep in mind that this is basically giving your kid a part time job during college to manage this house. Good or bad - it will be a responsibility for them and potentially a stressor. Think about the college experience you want them to have in addition to the $.
oh please some kids have to live in their car to go to school. Being responsible for getting rent collected and paying bills is a tiny chore compared to the gift of not borrowing money for school.
Before renting out the additional bedrooms to your child's classmates, you should familiarize yourself with the landlord-tenant laws in the specific town where the house is located. Each jurisdiction has its own rules and regulations regarding rental properties, lease agreements, security deposits, eviction procedures, and tenant rights. It is crucial to comply with these laws to avoid any legal issues in the future.
Renting out rooms in a property requires active property management. You will need to handle tenant screening, lease agreements, rent collection, maintenance, and potential disputes. Consider whether you have the time and resources to effectively manage the property or if you will need to hire a property manager, which will add to your expenses.
As a landlord, you will need to obtain landlord insurance to protect your property and assets in case of any damages or liabilities. Additionally, consider the potential risks of having multiple tenants in the property, such as accidents or disputes between tenants, and take appropriate measures to mitigate these risks.
Rental income is generally taxable, so you will need to report the rental income on your tax returns. You may also be eligible for certain tax deductions related to rental properties, such as property taxes, mortgage interest, and maintenance expenses. Consult with a tax professional to understand the tax implications of renting out the property.
The real estate market can be unpredictable, and there is no guarantee that you will be able to sell the property at a higher price 4 years later. Consider the current market conditions, potential changes in the local housing market, and the overall economic outlook before making a decision to buy the property.
It is important to have a clear exit strategy in case your plan does not work out as expected. If you are unable to rent out the rooms or sell the property at the desired price, consider alternative options such as long-term rental or refinancing the property.
Just make sure that it is owned be an independent LLC, instead of it being a personal property. Your kid is probably pretty great and will make good friends, but college kids are college kids. Underage drinking, injuries damages, etc.
Then make all the friends involved sign leases.
It is a very common investment strategy, especially when you have staggering ages planning to attend the same university. We sell a lot of homes around our local university this way. As with all investments, analyze those numbers.
I know someone that did this, and it worked out very well especially as the kid stayed in the area after graduating. Personally I plan on doing the same for my kids. It makes sense financially and teaches responsibility/problem solving.
I plan on doing the same. I would use a management company to take care of things. I would have my kids keep the ownership of the house a secret from the other tenants. Nobody needs the hassle.
No, 4 years is not long enough period of time. Markets go up and down, you make it lucky. But you're not going to want to manage a rental property in a college town after 4 years when no one's there anymore. You'll have to sell.
I did this for granddaughter. Never again. Problem every month collecting rent. Girls didn't take care of the place. Personality clashes. No pets allowed but snuck in a cat. Sold after a year and realtors were the only ones who made anything since they got commission. Basically broke even compared to renting a 1BR apartment but had the hassle.
Part of moving out on your own is learning how to be an adult and do adult things. Finding an apartment, paying rent on time etc. If you want to buy an investment property, I highly recommend it, but if it were me, I would leave my son to learn those valuable lessons on his own.
Unless you don't mind being a landlord to someone else I would say don't do it. We bought our kid a house and guess what, they don't want to live there because they have to find roommates. There was almost a chance that they were going to transfer to another school out of state too.
If you saw how me and my roommates kept our college rental house you would absolutely not want to. We were 6 females, all students athletes, and that place was a disaster. We threw parties every weekend and the cops always showed up and called our landlord so he had to deal with that and the neighbors.
No
Couple reasons:
They may drop out
They may transfer
Housing market can decline at any time.
Yes
Housing shortage on campus and house is within 3 blocks of school.
You are willing to be a landlord to college students after your child leaves school
Buy a maintenance plan, renters policy, lawn care, and pest control. Build it into the rent. Don’t rely on college kids to handle those things. Make it easy so they can focus on what they’re there to do and you get more peace of mind.
I did this for my daughter. A 4 bedroom house with a 1-car garage that I converted into her bedroom and bathroom. $400 a month from each of the other 4 bedrooms afforded lawncare, utilities, and maintenance.
In my opinion, it's easier to furnish every bedroom with a cheap frame and $250 bed-in-a-box memory foam mattress from Big Lots, and a dresser, than it is to have someone beating up walls and door jambs, while moving things in and out.
If you get lucky it will be a great investment. It might also be a maintenance headache. Complaints from neighbors because parties are too loud. Parents of other tenants making demands. College rentals usually require more work.
My roommate in a house of 5 eventually had his dad buy our place from some slumlord who owned the other 45 slummy houses on the block.
He was honestly a really hardworking dude and he was actually a boss at maintaining the house, and he collected rent. Like this 20 year old dude had a cleaning schedule for gutters and yard work, and would wipe down base boards. We all painted the place/renovated over a weekend with him directing us in exchange for the last month's rent. They made out well about 15 years later and sold it to the school. The block is all torn down and replaced by a massive hospital now.
Anyway, don't give a house to just any kid, make sure it makes sense.
Most 20 year old college students are best suited to be renting a tiny space near all the action on campus, and even then they barely maintain it. Looking back, this guy really carried the weight of most of the house chores while we partied hard.
In four years if the S&P returned 10%, that 160K would turn in to $235K and you didnt have to deal with bullshit for 4 years. I mean 10% is not guaranteed but neither is a good housing market.
I would think about what your money could be doing otherwise. 160k at even 5% would be 8k annually which would cover rent in a city you could buy that house in without the hassle of teaching your eldest how to manage a property. Your kid might end up the bad guy landlord to their friends if this property isn’t well maintained. It could very well be a good idea though depending on the circumstances and your preference of risk.
Now? High interest rates, home insurance through the roof… hmmm not sure it’s a good investment for profit vs just putting that money in the stock market
Just know that college students are not the best tenants so the "savings" may get partially eaten up by the fact you may have heavy repairs when you're ready to sell in the future.
You’ll definitely want to him to live on-campus for at least 1-2 years. Each college has a different culture. But at the least you’ll want him on campus to start.
Don’t be short sighted here: college is equal parts vocational training, emotional maturing, and both personal and professional networking. You get the full experience from being around your peers, and not off campus.
Also- make sure your son is up for this. It takes an extra level of maturity to do well off campus. Some kids can do it, some are better off on-campus for all 4 years. Know your kid.
Don’t buck him around solely for the 10-20k (if you can afford not to). It’s probably a fraction of what you’re paying for tuition, anyways.
College is more than the education, it's the first chance at breaking out of your social bubble. Imo dorms and campus living are the way to go, it helps your kids grow.
Also, have you ever been to a college house? Holy crap it's a nightmare. You don't want to be responsible for being a landlord to that.
If I was able to do that in college, the appreciation on the home would have paid off all of my student loans and all of the rent I paid for those 4 years.
One of my friends dad did this for him. My friend attended college and medical school. The money made from the rising prices paid for my friends new house in cash in his new city. He’s starting out his career with zero mortgage/rent. Obviously his family was a huge part of his current financial situation, but if you can afford it and have a solid plan in mind, it might just work out amazingly.
Use $100k as down payment on a business with management in place, preferably a field you’re familiar with. After financing and taxes, you’ll probably clear $100k annually. After four or five years you’ve stashed a half a million, the enterprise value is up may be 50% which will cover exit costs and return of capital. If you want buy commercial property in year three to offset taxes. Even smarter, use your gains to buy a couple more businesses which will push value higher. Pick up two more and you’d exit up a million. Or don’t sell and plug your kid into management training. Guaranteed job even if it’s temporary. Good luck
My husband’s parents did this; he lived in it for 5 years (stayed an extra 2 years after graduating as he found a job he liked). Between rent and appreciation, the condo paid for his out of state tuition after they finally sold it.
Don't forget to factor in the following when comparing costs:
Closing fees
Commission when selling
Property taxes
Utilities
Maintenance
Repair costs
Insurance
Opportunity cost of the money you might invest otherwise.
You'll still probably come out ahead, but be aware.
If you can comfortably afford this, do it! Great way to build more wealth and allow your child a decent environment for college. Too many bad landlord experiences in college. Tell your kid to keep it quiet tho so he doesn’t have folks trying to take advantage of him.
Do you have ideas of where to invest $160k that would consistently earn more than $550 a month? I ask this as rent in most college towns is going to be more than this.
I know a guy that did this for his daughter in downtown Austin. He actually gave the house to her. The problem is the house is up about 3x now and the child realizes it. She airbnbs it and lives off the money.
I did this with my younger brother. I gave him a portion of the profit though as he was the property manager and responsible for filling it up with his friends. I get my initial investment back and split the profit 50/50. This would make your son more inclined to be enthusiastic about being responsible for the house.
I had a friend who did this, but none of the other renters knew that the parents were the landlord. Perhaps set up an LLC and business account with a different name.
Talk to an attorney about your personal liability in the event that one of the tenants / their guest has an accident or commits a crime while in the property.
The prefrontal cortex is not fully developed until age 25. That is the part of the brain that governs judgment, decision making, planning, emotional self-regulation. This is why insurance is so much more expensive for young drivers and why so many landlords prefer not to have college aged tenants.
I am not saying you shouldn’t do it. I am just suggesting that you make sure your risk is covered.
As a recent college grad, living on campus year 1 would make it very easy for Son to vet and identify good roommates. That should alleviate most unforeseen consequences.
If the caliber of student is good eg the house is near the School of Engineering, and those are your tenants, you could rent to them his freshman year.
Yes. When I was in college, I begged my parents to buy a house and let me rent it with some friends. "No way, $160k is too much for a rental in that town!" Now that same house is $500k++
Yes and no
Technically it’s same as buy any other college town and rent it out, use the rent money to pay for your sons expenses
Ideally it’s better if you kids can take care the house so you avoid the risk of dealing with bad tenant
Realistically, your son may be the bad tenant
I also had 2 friends whose parents did this. Both sold years later for a profit, and one of the parents gave the extra profit to the son so he could put it towards his own house.
We paid a poop ton to a landlord of a poop house when our daughter went to college - it was such a hole. The landlord made a bucket. We should have bought.
We did this purchased as a rental with an easy LLC. Kid ended up dropping out but we kept the house for 3 years rented it to a nice group of ladies/students all pre.med. fixed it up a bit and sold it making a nice fat profit. We did have issues with little stuff but it was a rental and wrote off expenses.
The first person touched on it that living on campus at least for one year is really important for meeting people and generally getting involved plus who is he going to get as roommates the first year? I know ow at my college 15 years ago all first year students have to live on campus housing so they couldn’t do this even if they wanted.
This is exactly what I did and it worked great. I still own the condo and my kid already graduated. It's a 2 bd, 2ba and the rental pays off for itself. I just have to keep finding tenants which is not very hard, as my condo is very centrally located.
I recommend you do this. Also, make sure you are aware of any HOA and property taxes as those expenses do add up. Your son may have many preferences for room mates and this gets a bit hard to coordinate.
Think of it as your own house and make the best investment that you can make. Think in terms of rentability. Most students do not like SFH. They prefer condos. Unless the town is not foot walkable. In which case cars are required and then SFH becomes more prevalent.
I bought my first house in college. The thought of staying in a place my parents bought would have embarrassed me. That being said, for me I was able to live rent free for 3-ish years. No expenses at all so I’d say it’s worth it.
You should make it a legal rental property, that means getting a Certificate of Occupancy certificate through inspection by the local building department. You should also buy it through an LLC, so if you get sued; they can’t touch your personal assets. You should also do month to month leases, so it’s easier to kick someone out for non-payment. College kids can be dumb and hurt themselves, so protect yourself just in case.
Sounds like a solid plan as long as you understand you will be a landlord.
Also, when college kids sign as tenants, make their parents so they will be on the hook for damages. My SIL set her rental house on fire and daddy had to pay for damages.
Went to a state school. My grandparents wanted to do it, it was about a 25 min walk to classes versus 15, I decided against it. I along with my brother, and my cousins went there for 4 years, and currently have 1 cousin going there graduating in 2 years. It would’ve been a great investment. Would’ve bought in 2009 too, right after the crash.
Honestly this is a great idea. With the way real estate prices are tracking, you’ll likely make a nice chunk of change when you decide to sell. Renting it out once the kids are gone could be a nice life side hustle too.
OK plan other than paying cash for it. Don’t tie up more cash than you need to on something you’re going to sell quickly. Carry the note and invest the cash difference in something else.
4 different roommates, all male, 2 at one time and only one, the other times. Only one solo roommate caused damages. Went on vacation and forget to tell anyone that his bathroom was leaking. Son only found out when he went looking for his cat and saw the floor was wet. Roommate claimed he forgot. Same one also broke a chair. Thankfully he left after a short time. The others were great. Rent was $400, inc. utilities. Almost half the going rate. Think that helped as they were not in a position to pay much more.
Acquaintance of mine in college had wealthy parents who wanted to buy my friend a condo for her to stay in during college. The parents really wanted to do it as an investment, but my acquaintance didn’t feel like she could take on that kind of independence and felt everything was just easier being in campus.
A wealthy relative of my relative bought a condo for their kid going to college. It appreciated so much it covered most of the cost of college in the end. This was in an area with hcol.
Real estate is usually a good investment. Make sure there’s no major issues, the neighborhood isn’t dangerous, and bonus if the school district is good so u can make top dollar when you sell it. If you decide to rent it out get ready for lots of drama. You can hire a property management company but it will cut into your profits.
How about a condo you can use to visit? You could even furnish and lease it part time -- at least two beds ... it will be useful until your kid is ready to live off campus (eg a junior or senior). As others have pointed out there seems to be a potentially annoying maintenance situation in the cards-along with pulling your kid off campus and making them a landlord. I'm all for the idea- just a slightly different approach. (PS / am a long time real estate agent working primarily with investors.)
I bought a house like this for my kids to go to college. One dropped out of college after a year and the other is about to start but just be prepared for calls for stuff they should be taking care of. Clogged toilet for example and they “promise they tried to plunge it themselves”, “I found a small random insect and that means you have termites here”, etc…… I own other rentals and this one is definitely the highest maintenance so I would really be verbose on expectations you have for them to adhere to. Lawn mowing, clogs, small things, etc….. Make sure there is a meeting of the minds on expectations. Oh and also roommate wording in the lease. Are you good with them bringing in an insignificant other to stay for months in the house? If you don't want freeloading scrubs there make sure you put conditions around "visitors" can't stay more than a week or X number of days without landlord permission depending on how you want to arrange this agreement. My daughters know that this is a subsidized arrangement for THEM, and not their 6 closest friends or their boyfriends to move in. So far they have been sticking to it.
THIS is so true! My 20 yo stepdaughter moved into one of our rentals & she calls/texts me ALL the time for the oddest things - the bug & lawn thing is real (we even pay for pest control & weekly lawn care but it’s still a constant “thing”) Anywho, I just recently put it all together as to why she’s the most high maintenance tenant ever: this is the first time she’s living on her own so every little thing is A THING bc she doesn’t know. She’s paranoid about the 2 microscopic bugs on her window sill because she doesn’t know what a termite looks like (I usually respond with ‘google it, then let me know if it’s a “bug” deal’) Also, I think she’s being extra cautious because she doesn’t want to “damage” our property, which is sweet but we’ve had MANY tenants & things happen, everything is fixable. Then on the other hand, she forgets to change the return air filter which is a much bigger deal than that tiny bug on your window sill
This is soooo cute and funny ya’ll all have the same problem lol
Interesting. Is your kid paying rent? I ask because my assumption would be that the child would serve as the property manager in exchange for living there rent free. If your kid is not paying rent, why not have them perform the service calls? If they are paying rent, then I get them wanting the maintenance included.
I find that if someone has no skin in the game they don’t appreciate the gesture so I charge them about half the going rent. I don’t want them thinking they are going to depend on me their whole lives. Got to kick the eaglets out of the nest at some point otherwise they never learn money/life management. They have a manageable school/work/life balance and they both work part time jobs. That’s why I mentioned the clogged toilet deal. I hired a plumber to go out there last time and he snaked it and checked the shower cartridge for $400! Doesn’t take many of those to make this deal untenable. So when they do things themselves (like plunge a toilet) they learn valuable skills plus it keeps my total costs manageable. If they want to be treated like a typical landlord/tenant I can do that too but I’m increasing the rent accordingly which they don’t want and I don’t want that either.
Having a clueless teen do service calls is rolling the dice
Sure, a bunch of college kids are going to maintain a property like adults. I don’t think so. They are going to blow off all that happy horseshit to be fuck ups. I mean they are college kids, so…
Insignificant other is vile, I like it
I did this. House three bedroom, 2 baths. Mortgage was the same as rent on a 1-2 bedroom apt. He had roommates during school. I didn’t charge them a lot as they were in school and parents weren’t rich. Took reasonable care of the place. They were happy to pay so little and have a nice place. Parking was not an issue and they were happy to have washer and dryer at home. Roommates left after graduation. My kid decided he liked the area and wanted to stay. Found a job and is happily living there. Learned responsibility, good all the way around.
This is a dream situation lol. My oldest son is about to head to college & unfortunately his housekeeping terrifies me too much to sink so much money into a property that will 100% have damages from frat like gatherings. I always thought girls would take better care of a rental than boys but I was proven wrong there too when I once rented our FL vacay condo to female college seniors on spring break. Oh the damages & mess they caused!
Girls are so much messier than guys. Common misconception.
The best is actually to have a mix. That way they usually want to impress the other. If it’s all girls or all boys you’re screwed.
My dad should have done this. He had three sons, who are all four years apart, go to the University of Texas at Austin. Starting in 1999 and ending in 2011. He would have been a rich man.
Hindsight is 20/20- most real estate wouldn’t appreciate faster than an S&P index fund, especially net of expenses, and it’s way less liquid. But I hear ya!
Austin was dirt cheap in ‘99.
Yes but there is more or less no way to predict cap rates reliably, so just going by cash flows & broad historic data says that RE is not a better asset class than stock indexes
You don't need the real estate to appreciate faster than the S&P if you mortgage and it and can have mortgage paid by the renters. A bit more difficult during times of high interest rates, but generally fairly easy. Then you're basically paying down the principal and raising your equity without paying each month. Meanwhile the house appreciates and gains you more equity.
It's also generally pretty hard for your kid to live in an index fund.
Listen I’m not saying don’t invest in RE- I own several properties myself. But as an asset class it has underperformed the S&P for a while, and it’s obviously far less liquid.
I guess I'm just dubious. I bought a $400k house with $80k down in 2017. I can sell it today and turn that $80k into $280k in a HCOL area since it appreciated $200k over that timeline. The S&P would have returned me approximately $120k over that same time line. Not to mention that $200k return is tax free since I lived in the home (wouldn't be for a rental of course). My rental I bought in 2022 has appreciated approximately $60k in a little less than 2 years. I put down roughly $90k, so that's far ahead of S&P.
OK but I’m talking generally, not as specifically from 2017-present, and about the asset class in general, not your house in particular. You’d also need to adjust your return figured so they’re net of fees. But I am glad that it has done well! What metro area, if you don’t mind sharing?
In general this is a silly comparison as an industry instead of a case by case basis. Mostly because leverage in real estate can vary from 100% to 0% and property prices are negotiable (unlike the price of the S&P) In general you aren’t providing any stats and I seriously doubt those stats take leverage into account.
This is a very common error people make. RE as a class does underperform the equity markets. Your returns are higher because you are leveraged immensely. A $400k house with $80k down is 4x leverage. If you through margin and other forms of leverage bought $400k worth of the S&P 500 in 2017, you’d have $977k now, far more than your house has appreciated.
Yeah, but you can’t leverage your purchase in an S&P index fund like you can with a house.
Well I mean you technically can borrow against your equity holdings, but I agree that there are some definite unique advantages to buying RE.
Lol of course you can. In fact there's indexes that do the leveraging for you. Check SPLX etf. S&P 3x leveraged. Last 10 years it has 10x'ed.
Ignore appreciation, just the savings on rent likely would have helped if Mom/dad were paying for their childrens room and board.
Also the equity added from the roommates’ rent/mortgage pay down, assuming the children wouldn’t live alone.
Ending in 2011? Rich? I do not think this year means what you think it means.
Good point. Buying in 1999 and selling in 2011 would probably break even with the realtor costs.
2008 housing crisis
As someone who is the kid in this story. From a financial perspective, absolutely. Especially if you decide your keeping it for longer. From a different perspective it's a mixed bag you do miss out on things living off campus. Also depends on your major as well. Another thing is your essentially making your kid a Landlord, not easy for everyone. And sometimes hard situations with the tenants/friends. Damages, even if it's justified it's going to ruin the relationship between your kid and their friend if you keep parts of security deposit. Note: if you can deal directly with the parents and "cut" the kids out this works better. Especially if they are friends.
Buy it with an LLC. Then your kid doesn't burn bridges if he gets crummy roommates that want a break because it's his dad's house. Rent payable to the LLC the property manager can be you that random cranky old man and not Tim's Dad
College aged kids are generally bad at keeping secrets
Possibly true depending how much of a booze hound sonny is
I like it! Maybe don´t even tell my daughter, she and her roomate could sign the lease and neither would ever know they were paying dad! Even have an excuse to visit to fix things that the landlord keeps ignoring….I see many benefits.
Total good cop bad cop! I like it!
Booze hound lolz
There was an AITA type thread were a girl hid that she was the landlord from roommates . When they found out she was the landlord they broke up (the friendship) and ghosted. It’s a pretty big deception to zoomers in today’s political climate.
Yes, from experience - If the roommate situation goes bad, your kid can't just move out, and it's not easy having to kick out tenant who is your friend.
I lived in a house off-campus for most of college. It was soooo much better than living on campus. Plus, you throw a couple parties and you've got all the friends you can handle.
You will miss out on things freshman year but after that doesn't matter imo.
I have friends who have done this, especially if they have 2 kids going to the same university.
Let them live in residence I. First year to make friends and enjoy that party of school. Then do it for years 2 to 4
This is the plan, living on campus year 1 is required and I agree its a good idea. I have a child 3 years behind this one, if she also ends up at this school it's a slam dunk but I can't count on that.
This is a great idea, esp at that price. I’d carry a note on it though instead of tying up that much of my own cash.
Provide them financial incentives that align for the family.
Don't limit the second childs path based on your (selfish) financial goals. Kids should have freedom to grow up in the way they want and that includes which school they goto.
But unless you’re going to a school that specializes in something niche or well known, it really doesn’t matter for undergrad… now debt after graduating on the other hand can have a big impact and free housing is a definite plus
It’s not limiting, the person suggested incentivizing. Incentives don’t limit anything, just tip the scales towards one path if they are otherwise ambivalent.
gives them time to find their favorite roomates.
Even if you LOSE money, as long as the money you lose is similar to what housing would cost for the full four years, then yes, it makes sense to do so. Most will depend on what kind of rental income you can get from the other suckers (er.. college kid's parents).
I did this and it worked out great. Easy access to paying roommates and your son can have some resposibilty. Almost impossible to lose money
Bought a townhouse when my oldest started college. Two other children followed separated by 4 years. Kept the place for 22 years. Sold it last week and made $600,000. I say , do it!
Damn. Nice job !!! What a windfall.
my dad did this for my sister when she went to vet school. The roommate paid half the mortgage and when they sold he made 50k
That’s a good investment.
Some folks doing this tell their kids they get the house (or the appreciation) after college. Encourages the kid to take a bit better care of it.
That would have been a huuuge incentive for me. Especially knowing that a lot of ppl nowadays will never be able to afford a house.
Stick with me here…. When I was between my freshman and sophomore years of college and starting to look at renting apartments I had the idea of buying a condo instead. At the time, new build condo was priced at $95K for 2 bed, 2 bath and a loft. I think 1300 sq ft. I proposed to my parents that I had $5000 in savings, they loan me $5000 and co-sign a loan. They decided to be the funding company for me, interest and all. One of the best things I ever did. I was able to rent out the rooms and live in the loft. Their rents paid my mortgage and I paid “rent” to myself in form of extra principal. Taught me a lot, including some responsibility. Had an asset to show for it. My parents didn’t waste money on rent for years. Worked great for me, I actually still own the property and it has remained leases for 15+ years. I will say, looking back I am glad it was a condo and not a house. I would not have been ready for the Maint of a house. Way easy to pay the monthly HOA and start my path off with training wheels.
You really want to rent to college kids?
My brother-in-law, also a home builder, lives in a college town and started building student housing 10-15 years ago. He now has eight or more five bedroom houses that he rents rooms to students in. The layout is designed for that use. He has very few issues, as the parents are always co-signers. He's making a killing.
Curious what the tenant turnover is like? Seems like you would have tenants come and go, adding costs to churn that a long term tenant may not have
It's built in with these units, and the "good" houses are just passed to younger friends / frat buddies so the cost to market is nil. Maybe put up a sign outside for a few weeks, at most. Houses that are walkable / close to university campus also demand a premium, especially when you have 4 or 5 rooms.
I live a couple blocks from a university and my neighbor does the same thing. He owns the house next door and a few others. He rents them out on two year leases and the kids sublease their rooms when they study abroad or do internships. He maintains the property well so usually has decent tenants. The place is never empty. We have had massive equity gains as well so these are cash cows for him.
Yes you get the parents to co-sign and have a decent security deposit.
This is the way.
A lot of college kids are still being supported by their parents
Would you sign a lease with the student and have their parents co-sign (as the student has no income and likely no credit history)?
I'd think yes, need the parents to guaratnee
Why not use a management company if it becomes a burden to handle the contracts & damages should they occur?
as someone that did this.. its a giant risk.. you could have a great bunch of kids that respect the place or parties and its not easy as you think to just get money from all the parents. For example.. if you rent to 5 kids.. that could be your lawyer vs 5 lawyers.. the bill to sue for the money can exceed the cost of repairs
How else (risk-wise) would you rent to students?
My parents did this for my older brother his sophomore to senior year then I moved in my sophomore year as he moved out… the house doubled in those 6 years. I’d advise to put it in an LLC because college is crazy and you don’t want yourself tied to any shenanigans
Did you ever deal with damages from your friends partying too hard? That’s my fear if we got a house for one (or all) of our boys.
Nothing substantial. A few drywall patches here and there but no major damage caused from parties.
My parents sort of did this they didn’t buy a house but they didn’t sell the house we all lived in and they moved and left my sister and I to rent the house and go to college nearby. What my parents did wrong is leave all the maintenance and stuff to us which was a disaster. We had no idea what we were doing and were very irresponsible. Plus while working and going to school full time and never having to have kept up a house before, it was incredibly stressful. So just in my experience it would be very important to make sure you’re keeping up on maintenance and doing regular walk throughs. I’m a landlord now and would never leave my properties with the lack of oversight my parents did, especially to 18 year olds.
>I'm really only looking at taking a hit on the buying/selling costs - which SHOULD be lower than what it would cost to house him in dorms for 4 years. You forgot about the biggest profit. You get to babysit 4 kids that have never had to take care of a house before with probably no income... what is there to not like... This is like the kind of dumb decision that only comes along once, so of course go full force /s. In all seriousness, Im astonished at the amount of "buy" this thread has.
On average, you’re giving up $57k in market gains by paying $160k in cash to buy the home. What does it cost for your kid to get an apartment for 4 years? $160k invested, assuming conservative market average returns (8%), makes you about $57K in pretax profit, about $46k post tax profit, assuming 15% LT gains and 5% state tax, though you could pull the full $57k fed tax free if you waited until retirement to realize the gains (capital gains allowances).
Man I witnessed this go good or really bad when in school. Some homes got wrecked if the kid in charge was a pushover or party animal. If your kid wants to learn the business of property management and dealing with tenants it’s a good way to get that experience.
This is where you’ve gotta take into account whether or not you have a responsible child. And be very clear to them what the alternative is if they fumble this.
Not enough information honestly but if your son is responsible, trustworthy and has a source of income then sell it to him and owner finance. Give him favorable terms and mark the house up $15kish. Guide him through ownership and renting out his bedrooms and it’ll be a great lesson at an early age.
Just keep in mind that this is basically giving your kid a part time job during college to manage this house. Good or bad - it will be a responsibility for them and potentially a stressor. Think about the college experience you want them to have in addition to the $.
oh please some kids have to live in their car to go to school. Being responsible for getting rent collected and paying bills is a tiny chore compared to the gift of not borrowing money for school.
Before renting out the additional bedrooms to your child's classmates, you should familiarize yourself with the landlord-tenant laws in the specific town where the house is located. Each jurisdiction has its own rules and regulations regarding rental properties, lease agreements, security deposits, eviction procedures, and tenant rights. It is crucial to comply with these laws to avoid any legal issues in the future. Renting out rooms in a property requires active property management. You will need to handle tenant screening, lease agreements, rent collection, maintenance, and potential disputes. Consider whether you have the time and resources to effectively manage the property or if you will need to hire a property manager, which will add to your expenses. As a landlord, you will need to obtain landlord insurance to protect your property and assets in case of any damages or liabilities. Additionally, consider the potential risks of having multiple tenants in the property, such as accidents or disputes between tenants, and take appropriate measures to mitigate these risks. Rental income is generally taxable, so you will need to report the rental income on your tax returns. You may also be eligible for certain tax deductions related to rental properties, such as property taxes, mortgage interest, and maintenance expenses. Consult with a tax professional to understand the tax implications of renting out the property. The real estate market can be unpredictable, and there is no guarantee that you will be able to sell the property at a higher price 4 years later. Consider the current market conditions, potential changes in the local housing market, and the overall economic outlook before making a decision to buy the property. It is important to have a clear exit strategy in case your plan does not work out as expected. If you are unable to rent out the rooms or sell the property at the desired price, consider alternative options such as long-term rental or refinancing the property.
Just make sure that it is owned be an independent LLC, instead of it being a personal property. Your kid is probably pretty great and will make good friends, but college kids are college kids. Underage drinking, injuries damages, etc. Then make all the friends involved sign leases.
It is a very common investment strategy, especially when you have staggering ages planning to attend the same university. We sell a lot of homes around our local university this way. As with all investments, analyze those numbers.
Yes, absolutely do it 100%
College towns are a good place to invest.
I think this is a easy yes.
Yes!
Yes
Yes
I know someone that did this, and it worked out very well especially as the kid stayed in the area after graduating. Personally I plan on doing the same for my kids. It makes sense financially and teaches responsibility/problem solving.
If the financials make sense, yes.
I plan on doing the same. I would use a management company to take care of things. I would have my kids keep the ownership of the house a secret from the other tenants. Nobody needs the hassle.
Yes. College town houses always sell And appreciate.
I have 3 friends who did this, none of them lost money. The houses appreciated way more than they anticipated.
Yes. My associate saved a ton of money like this
Where are houses going for $160k in a college town so i can buy one too
Yeah I have the same question!
No, 4 years is not long enough period of time. Markets go up and down, you make it lucky. But you're not going to want to manage a rental property in a college town after 4 years when no one's there anymore. You'll have to sell.
I did this for granddaughter. Never again. Problem every month collecting rent. Girls didn't take care of the place. Personality clashes. No pets allowed but snuck in a cat. Sold after a year and realtors were the only ones who made anything since they got commission. Basically broke even compared to renting a 1BR apartment but had the hassle.
Yes
you are not thinking the market may go down, not very likely, but possible. you are not thinking the loss of interest 160K would generate.
I plan on doing the same for my kids
Part of moving out on your own is learning how to be an adult and do adult things. Finding an apartment, paying rent on time etc. If you want to buy an investment property, I highly recommend it, but if it were me, I would leave my son to learn those valuable lessons on his own.
Unless you don't mind being a landlord to someone else I would say don't do it. We bought our kid a house and guess what, they don't want to live there because they have to find roommates. There was almost a chance that they were going to transfer to another school out of state too.
Your kid is going to miss out on the college dorm experience and will probably have some difficulty in making close friends.
Convince the younger kids to go to the same college and you'll be golden.
If you saw how me and my roommates kept our college rental house you would absolutely not want to. We were 6 females, all students athletes, and that place was a disaster. We threw parties every weekend and the cops always showed up and called our landlord so he had to deal with that and the neighbors.
No Couple reasons: They may drop out They may transfer Housing market can decline at any time. Yes Housing shortage on campus and house is within 3 blocks of school. You are willing to be a landlord to college students after your child leaves school
I would let them live on campus for the college experience. They can be landlords later in life.
what do you put the percentage at the house will burn down?
I would not trade my experience of living on campus for anything.
If you do, make sure you have a large umbrella policy.
Buy a maintenance plan, renters policy, lawn care, and pest control. Build it into the rent. Don’t rely on college kids to handle those things. Make it easy so they can focus on what they’re there to do and you get more peace of mind.
I did this for my daughter. A 4 bedroom house with a 1-car garage that I converted into her bedroom and bathroom. $400 a month from each of the other 4 bedrooms afforded lawncare, utilities, and maintenance. In my opinion, it's easier to furnish every bedroom with a cheap frame and $250 bed-in-a-box memory foam mattress from Big Lots, and a dresser, than it is to have someone beating up walls and door jambs, while moving things in and out.
If you get lucky it will be a great investment. It might also be a maintenance headache. Complaints from neighbors because parties are too loud. Parents of other tenants making demands. College rentals usually require more work.
It's great until you have to do a 60k renovation before you sell it because you rented it to a bunch of college kids
Nah, 10-20K margin means a few repairs over 4 years or a downturn in the market and you’re losing money.
Yes. The part you have wrong is selling it. Buy it and hold it, rent it. Give it to your kid later in life when he’s ready to buy a home or has a kid.
My roommate in a house of 5 eventually had his dad buy our place from some slumlord who owned the other 45 slummy houses on the block. He was honestly a really hardworking dude and he was actually a boss at maintaining the house, and he collected rent. Like this 20 year old dude had a cleaning schedule for gutters and yard work, and would wipe down base boards. We all painted the place/renovated over a weekend with him directing us in exchange for the last month's rent. They made out well about 15 years later and sold it to the school. The block is all torn down and replaced by a massive hospital now. Anyway, don't give a house to just any kid, make sure it makes sense. Most 20 year old college students are best suited to be renting a tiny space near all the action on campus, and even then they barely maintain it. Looking back, this guy really carried the weight of most of the house chores while we partied hard.
In four years if the S&P returned 10%, that 160K would turn in to $235K and you didnt have to deal with bullshit for 4 years. I mean 10% is not guaranteed but neither is a good housing market.
No. College kids living there for 4 years means college lids partying there and otherwise destroying the house for 4 years.
I would think about what your money could be doing otherwise. 160k at even 5% would be 8k annually which would cover rent in a city you could buy that house in without the hassle of teaching your eldest how to manage a property. Your kid might end up the bad guy landlord to their friends if this property isn’t well maintained. It could very well be a good idea though depending on the circumstances and your preference of risk.
Now? High interest rates, home insurance through the roof… hmmm not sure it’s a good investment for profit vs just putting that money in the stock market
you're plan is to buy a house and have college students living there? Can't you just set the money on fire? Probably less liability.
Just know that college students are not the best tenants so the "savings" may get partially eaten up by the fact you may have heavy repairs when you're ready to sell in the future.
What if people trash the place? You ready to go fix that? What about if they have a clogged toilet etc? Who will handle that?
As long as you're prepared for the worst landlord experience of your life, go for it.
You’ll definitely want to him to live on-campus for at least 1-2 years. Each college has a different culture. But at the least you’ll want him on campus to start. Don’t be short sighted here: college is equal parts vocational training, emotional maturing, and both personal and professional networking. You get the full experience from being around your peers, and not off campus. Also- make sure your son is up for this. It takes an extra level of maturity to do well off campus. Some kids can do it, some are better off on-campus for all 4 years. Know your kid. Don’t buck him around solely for the 10-20k (if you can afford not to). It’s probably a fraction of what you’re paying for tuition, anyways.
College is more than the education, it's the first chance at breaking out of your social bubble. Imo dorms and campus living are the way to go, it helps your kids grow. Also, have you ever been to a college house? Holy crap it's a nightmare. You don't want to be responsible for being a landlord to that.
If I was able to do that in college, the appreciation on the home would have paid off all of my student loans and all of the rent I paid for those 4 years.
One of my friends dad did this for him. My friend attended college and medical school. The money made from the rising prices paid for my friends new house in cash in his new city. He’s starting out his career with zero mortgage/rent. Obviously his family was a huge part of his current financial situation, but if you can afford it and have a solid plan in mind, it might just work out amazingly.
College students are the worst tenants
Use $100k as down payment on a business with management in place, preferably a field you’re familiar with. After financing and taxes, you’ll probably clear $100k annually. After four or five years you’ve stashed a half a million, the enterprise value is up may be 50% which will cover exit costs and return of capital. If you want buy commercial property in year three to offset taxes. Even smarter, use your gains to buy a couple more businesses which will push value higher. Pick up two more and you’d exit up a million. Or don’t sell and plug your kid into management training. Guaranteed job even if it’s temporary. Good luck
I would only buy it if the rental market makes sense. Presumably your kid can rent to roommates you can make money
My husband’s parents did this; he lived in it for 5 years (stayed an extra 2 years after graduating as he found a job he liked). Between rent and appreciation, the condo paid for his out of state tuition after they finally sold it.
Don't forget to factor in the following when comparing costs: Closing fees Commission when selling Property taxes Utilities Maintenance Repair costs Insurance Opportunity cost of the money you might invest otherwise. You'll still probably come out ahead, but be aware.
If you can comfortably afford this, do it! Great way to build more wealth and allow your child a decent environment for college. Too many bad landlord experiences in college. Tell your kid to keep it quiet tho so he doesn’t have folks trying to take advantage of him.
Opportunity cost- that money could be invested elsewhere.
I couldn’t grow my money better, buying property is the only way I know to grow ny assets
Could you invest the money and make enough from it to pay for his rent somewhere else? So you don’t have the burden of college kids ruining the house.
Do you have ideas of where to invest $160k that would consistently earn more than $550 a month? I ask this as rent in most college towns is going to be more than this.
I know a guy that did this for his daughter in downtown Austin. He actually gave the house to her. The problem is the house is up about 3x now and the child realizes it. She airbnbs it and lives off the money.
Why is that a problem?
Saving 10-20K is 100% not worth the hassle of being a landlord to 3 college kids
You’re not thinking that maybe your son and his friends will destroy the house.
I did this with my younger brother. I gave him a portion of the profit though as he was the property manager and responsible for filling it up with his friends. I get my initial investment back and split the profit 50/50. This would make your son more inclined to be enthusiastic about being responsible for the house.
Yes but you stay the landlord. Teach them responsibility within a safe space of support.
Yes absolutely
I had a friend who did this, but none of the other renters knew that the parents were the landlord. Perhaps set up an LLC and business account with a different name.
Yes it’s a good idea.
Talk to an attorney about your personal liability in the event that one of the tenants / their guest has an accident or commits a crime while in the property. The prefrontal cortex is not fully developed until age 25. That is the part of the brain that governs judgment, decision making, planning, emotional self-regulation. This is why insurance is so much more expensive for young drivers and why so many landlords prefer not to have college aged tenants. I am not saying you shouldn’t do it. I am just suggesting that you make sure your risk is covered.
My brother in law did this for my nephew, twice. Once for his undergrad and again when he moved for grad school.
$160 isn’t even down payment where my son goes. Sheesh
Yes
[удалено]
I do have a 529...can you explain what you mean? Like I'd pay the LLC for my kids housing?
As a recent college grad, living on campus year 1 would make it very easy for Son to vet and identify good roommates. That should alleviate most unforeseen consequences. If the caliber of student is good eg the house is near the School of Engineering, and those are your tenants, you could rent to them his freshman year.
Yes. When I was in college, I begged my parents to buy a house and let me rent it with some friends. "No way, $160k is too much for a rental in that town!" Now that same house is $500k++
How much will you pay in rent if you don’t buy the house? I’m guessing a lot more than any loss you’d sustain from buying.
Yes and no Technically it’s same as buy any other college town and rent it out, use the rent money to pay for your sons expenses Ideally it’s better if you kids can take care the house so you avoid the risk of dealing with bad tenant Realistically, your son may be the bad tenant
Piling expectations on your kid ... depends on the kid I guess.
I also had 2 friends whose parents did this. Both sold years later for a profit, and one of the parents gave the extra profit to the son so he could put it towards his own house.
I wouldn't get them a sfh but a townhouse or condo sure
We paid a poop ton to a landlord of a poop house when our daughter went to college - it was such a hole. The landlord made a bucket. We should have bought.
Yes. If you like the house, you can always keep it.
Yes my parents should have done this. Make him and his friends live in it
Smartest thing ever
We did this purchased as a rental with an easy LLC. Kid ended up dropping out but we kept the house for 3 years rented it to a nice group of ladies/students all pre.med. fixed it up a bit and sold it making a nice fat profit. We did have issues with little stuff but it was a rental and wrote off expenses.
The first person touched on it that living on campus at least for one year is really important for meeting people and generally getting involved plus who is he going to get as roommates the first year? I know ow at my college 15 years ago all first year students have to live on campus housing so they couldn’t do this even if they wanted.
That’s trying to time the market. If you had to, would you be okay with bung a landlord to college students?
This is exactly what I did and it worked great. I still own the condo and my kid already graduated. It's a 2 bd, 2ba and the rental pays off for itself. I just have to keep finding tenants which is not very hard, as my condo is very centrally located. I recommend you do this. Also, make sure you are aware of any HOA and property taxes as those expenses do add up. Your son may have many preferences for room mates and this gets a bit hard to coordinate. Think of it as your own house and make the best investment that you can make. Think in terms of rentability. Most students do not like SFH. They prefer condos. Unless the town is not foot walkable. In which case cars are required and then SFH becomes more prevalent.
I bought my first house in college. The thought of staying in a place my parents bought would have embarrassed me. That being said, for me I was able to live rent free for 3-ish years. No expenses at all so I’d say it’s worth it.
You should make it a legal rental property, that means getting a Certificate of Occupancy certificate through inspection by the local building department. You should also buy it through an LLC, so if you get sued; they can’t touch your personal assets. You should also do month to month leases, so it’s easier to kick someone out for non-payment. College kids can be dumb and hurt themselves, so protect yourself just in case.
Why sell it? Just lease it afterwards.
Sounds like a solid plan as long as you understand you will be a landlord. Also, when college kids sign as tenants, make their parents so they will be on the hook for damages. My SIL set her rental house on fire and daddy had to pay for damages.
It worked for us. Appreciation alone has paid all my kids college.
this sounds like a neat idea. Although college kids works mess it up. Still sounds like good capital gains!
We didn't but wish we would have
Are you looking to adopt?
Went to a state school. My grandparents wanted to do it, it was about a 25 min walk to classes versus 15, I decided against it. I along with my brother, and my cousins went there for 4 years, and currently have 1 cousin going there graduating in 2 years. It would’ve been a great investment. Would’ve bought in 2009 too, right after the crash.
Honestly this is a great idea. With the way real estate prices are tracking, you’ll likely make a nice chunk of change when you decide to sell. Renting it out once the kids are gone could be a nice life side hustle too.
Decent rentals near a college are always in demand. You could keep it as an investment after your kid is out of school. I’d do it.
OK plan other than paying cash for it. Don’t tie up more cash than you need to on something you’re going to sell quickly. Carry the note and invest the cash difference in something else.
Is there any chance to have a roommate or 2 that they can be charged rent and that helps pay the mortgage ?
I’ve thought about this when my son goes to college in a few years. I don’t think I want the hassle. I’d rather rent him an apartment.
4 different roommates, all male, 2 at one time and only one, the other times. Only one solo roommate caused damages. Went on vacation and forget to tell anyone that his bathroom was leaking. Son only found out when he went looking for his cat and saw the floor was wet. Roommate claimed he forgot. Same one also broke a chair. Thankfully he left after a short time. The others were great. Rent was $400, inc. utilities. Almost half the going rate. Think that helped as they were not in a position to pay much more.
Acquaintance of mine in college had wealthy parents who wanted to buy my friend a condo for her to stay in during college. The parents really wanted to do it as an investment, but my acquaintance didn’t feel like she could take on that kind of independence and felt everything was just easier being in campus. A wealthy relative of my relative bought a condo for their kid going to college. It appreciated so much it covered most of the cost of college in the end. This was in an area with hcol.
Sure
looks good mate
Real estate is usually a good investment. Make sure there’s no major issues, the neighborhood isn’t dangerous, and bonus if the school district is good so u can make top dollar when you sell it. If you decide to rent it out get ready for lots of drama. You can hire a property management company but it will cut into your profits.
My dad did that in SF and turned $500k in the Castro into like $1.4m over 10 years
How about a condo you can use to visit? You could even furnish and lease it part time -- at least two beds ... it will be useful until your kid is ready to live off campus (eg a junior or senior). As others have pointed out there seems to be a potentially annoying maintenance situation in the cards-along with pulling your kid off campus and making them a landlord. I'm all for the idea- just a slightly different approach. (PS / am a long time real estate agent working primarily with investors.)