Across the country, the average cost for a college student to live in a dorm is $10,000 to $13,000 per year (assuming room and board based on a shared room and 19 meals per week). In our area, costs are much higher. Let’s look at some of the 22 colleges in Westchester County. At nearby Iona College in New Rochelle, the cost for room and board and other fees is $13,980. At Pace University in Pleasantville, room and board runs $18,312. Over at SUNY Purchase, room and board will cost your student $12,952. And, as every college student can attest, they simply don’t eat every meal on the meal plan.
Now consider that a lot of parents are faced with the daunting financial task of putting multiple children through college and the costs are mind boggling. If you have children who will be going off to college, we would like you to consider a different strategy. Would buying a condo or small house for your college student to live in make financial sense for you? For many parents, the answer has been a resounding “Yes!”. You could avoid paying through the nose for half of a tiny dorm room with no chance of any profit. And, if your property has some extra space, you could rent it out to other students and offset some of the ownership cost.
Here are a few questions to ask before you buy a house or condo for your college student to live in:
What’s your strategy? Four years is a short time to expect to make a big profit on a real estate investment. Are property values in the area rising? Are you considering a condo, small house, or multi-family property? Are you planning on holding on to the property after your student graduates and keeping it in your portfolio?
Will you charge your student rent? The tax laws get a bit complicated when it comes to deducting expenses and depreciation for these properties, and some of it depends on whether you charge your child market-rate rent. If you need advice from an experienced real estate tax professional, we can give you a few names.
Will the property affect your student’s financial aid? Financial Aid is based on your entire family’s financial picture. Will your child’s financial aid be jeopardized if there are no room and board expenses? If you pay your student to manage the property, will that affect any grants?
What happens if your student transfers to another school? Some students enroll in their dream school only to realize that it’s not a great fit. What will you do with the property if your student transfers to another college? Perhaps it makes sense to wait until after their first year before purchasing real estate.
If you’re considering this real estate strategy, you probably have a lot more questions. We at the Michael Edmond Team are also rental property experts and can guide you through every step of the process.