College Housing Crunch
Coldwell Banker Offers Tips to Parents Considering Second-Home Ownership in a College Town
With thousands of families sending their children to college for the start of the school year, many are facing increased housing costs, both on and off campus, as well as an overall shortage of housing options. While most students choose to stay on-campus or rent off-campus apartments near their schools, historically low interest rates are influencing an increasing number of parents to purchase homes for their children's stay at college and, as an investment thereafter. Coldwell Banker Real Estate Corporation (Coldwell Banker®) offers a few tips to parents who are considering purchasing properties in college towns.
Parents purchasing a home for their children to live in while they attend college can realize many benefits including: possible tax advantages and possible lower monthly housing costs, a start to good credit history for their child and, at the very least, less moving mania in between school terms since the student wouldn't have to completely vacate his or her own property. Here are a few questions that parents need to consider before making a college-area home purchase for their child:
Is the area around the college appreciating?
Research the city or town where the school is located to see if it has suitable housing at a reasonable price and check up on other properties in the area to see if they are appreciating and gauge whether or not this is a good investment. A local real estate professional can give you a clearer understanding of rental demand and home-price appreciation in that market.
How many family members and friends are planning to go to the same college?
If a family has several children bound for the same college within a certain period of time, it may make economic sense to buy a home for them to live in instead of paying rent.
How can owning a home help with tuition fees?
Some out-of-state students can establish residence by having their parents purchase a home for them to live in, which may enable them to avoid paying out-of-state tuition fees.
Will there be a steady supply of tenants?
A home with several bedrooms makes it possible for a student to have friends move in and pay rent. This can generate income above the mortgage payments, which can make a nice return on the purchase price.
How can this affect my child's credit history?
One option is for parents to include their child's name on the contract and loan. There are many first-time homebuyer assistance programs that make it easy for students to qualify. This will also help the student establish his/her credit and enable the parents to get a lower loan rate for the home than the rate they would have had to pay on a loan for a comparable investment.
How can I educate my child to be a responsible homeowner?
If parents elect to add their child's name on the mortgage, they should make sure that the child can handle the responsibility of homeownership by involving them in the family's own home obligations on a monthly basis before sending them off to school.
These tips are for general information purposes only. Coldwell Banker® recommends consultation with your financial and real estate advisor before acting.
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