News Columns & Blogs

Now may be a good time to consider condo for your kids

For parents looking for good deals on housing for their college-bound kids, now might be a good time to consider investing in a condo or single-family home for housing during their college years, and potential tax breaks and investment appreciation later on for the parents.

Today, with home prices depressed, there could be some great deals out there, which could beat the cost of traditional campus housing. But as with most investments, there are pros and cons to evaluate beforehand.

If your kid thinks you’re buying them a “party palace,” you’re already in trouble. The student must be responsible enough to act as an “onsite landlord,” making sure the property stays in a livable and salable condition. Not every child can do this, so unless you can also afford maintenance help, any doubts about this should dissuade you from such a purchase. You would want this to be a multi-year investment, so if you think your child may transfer schools or drop out during his/her college career, you should pass on this idea unless you plan to hire a rental/property manager to keep the rents coming in.

Consider this as a rental property with your child making the “rent” payments from his/her college housing fund. Perhaps he/she can get roommates to pay rent, offsetting the costs of ownership. Otherwise, be sure you have sufficient cash flow to cover the mortgage payments, taxes, insurance, homeowners association dues, etc.

Keep in mind these costs are going to be much higher in a metro area. And it could cost more to insure the property if it’s viewed as a rental property versus owner-occupied.

Until the housing markets recover, it may take considerably longer to sell the property at a profit, given the necessary investments in maintenance along the way, and sales commissions at the time of sale.

Buying a property in the immediate vicinity of campus might be great for a child with no car, but bad for you if you’re expecting the property to appreciate.

In most markets, on-campus real estate appreciates at a notoriously low rate.

This is why investors do better buying in established, off-campus residential areas near but not on campus.

Your child may miss the “campus experience” of living with his/her peers, though, and that’s a big consideration.

You don’t see many parents crashing in their kids’ dorm rooms for the weekend, but if you have regular travel plans to the city where your child goes to school, having the property as a place to stay when visiting might be one more incentive to invest.

If your child is planning to stay in the city where they’ve graduated, parents might consider selling the property to their kids at graduation.

This could give the grad a great start on their finances during their first earning years.

Karin Grablin, a financial planner with Dictor & Martin in Sarasota, can be reached at (941) 906-7222.