Are you sending your college age kid off to Northern Arizona University soon?

While your bright eyed young one is preparing to head off, you are probably most concerned with the financial burden. Like most parents, you’re getting ready to cough up hundreds if not thousands of dollars every month toward dorm fees or an apartment rental. If the thought of burning money makes your head spin, you might want to consider an alternative solution. Get in touch with David Anderson, and purchase a property for your college student.

Are you seriously telling me to buy a property for my college kid?

While most people see the insight of buying instead of renting their own homes, applying the same rule to a student usually goes by the wayside. The same theory is true in both situations. As long as there is a more than moderate chance that the value of the property will rise in the next few years, then it is perfectly logical to buy a condo or small home than it does to throw away money on overpriced dorms or apartments.

If you choose to look at the future realistically, and understand that your child is most likely to spend an average of four to six years working toward their degree, like most students. In most situations, homeowners stay in one place for close to the same length of time. Homeownership and personal finance can become a part of your child’s journey out of the nest.

Are there Benefits to Buying a House for Your College Student?

There are three main paybacks to purchasing a condo or house instead of renting a dorm or apartment for your college-age kid; tax write-offs, rental income, and value increases.

Tax Write-Offs. There are tax laws that might help you recover some of your capital. Specific conditions allow you to deduct losses that you may incur from renting out a home to a family member who chooses to make it his or her primary residence. You can even give your child up to $14,000 per year or $28,000 if you’re married for rent, which they can then pay right back to you, without blowback from Uncle Sam.

There are other tax goodies and breaks that you can take advantage of when buying, renting out, and then selling a property. To compute how much money you might save on your taxes, tell your CPA about your plan and get some expert advice.

Rental Income. If you purchase a condo or small house for your not-so-little one, chances are it will be big enough to house more than one person. That means that in addition to renting the property out to your offspring, you or your child might be able to sublet rooms to other people’s children. Depending on the deal you work out, that money could go toward helping your kid pay you back, or it could be over and above the rent your son or daughter pays. Either way, you have more options than you would if you simply rented the normal way.

Value Increases. Of course, the biggest argument for buying is the potential for profit. If you can sell the property for more than it cost you, then the decision is simple. To keep the risk to a minimum, it’s recommended that you purchase a relatively cheap property—less than $200,000 is a good rule of thumb. Anything more, and you might regret ever sending your kid to college.

 

Is It Worth It?

In order to determine whether buying makes sense, you’ll first need to do some simple math and then practice a little guesstimating. First, research college dorm fees and rental rates for the area surrounding the school. Then calculate the total cost of renting over the course of four or five years.

To compare renting versus buying, contact David Anderson, Realtor. Then estimate the money you stand to make from renting out part of the property, and then the amount you’ll earn on the final sale of the home. Only then will you be ready to make an informed decision.

In the end, the biggest factor leading your considerations should be whether or not the home will increase in value. If it doesn’t, then you will probably come out on the losing end no matter what peripheral benefits you may enjoy. If you can sell the house for more than you bought it for, on the other hand, then you can’t lose.