08 Sep 4 Reasons Not To Buy a Home For Your College Student
With children off to college, financial matters for parents can get pretty tricky. In addition to books and tuition, parents and their students have to figure out a living arrangement that is cost effective and easy on the student who needs to focus on school work. When faced with this prospect, many parents who are experienced and interested in real estate investing often consider buying a home for their child and either paying the expenses outright or charging rent to a few other students.
While many feel this is a great investment opportunity, owning a student rental can be quite a bit of work with not much coming back in return. If you are considering purchasing a rental property for your college student, here are a few words from the wise against it.
Smart Real Estate Investments Are Long Term
Any savvy real estate investor knows that big returns aren’t made from just a few years of ownership. In order to make a decent amount of money on your investment, it is important to let that investment age a few years, much like a fine wine. The typical amount of time your child will be in school is about four to five years, which is not enough to guarantee that you will make money on the sale. In fact, at a turnover rate like that, you stand to lose money. If you don’t plan on managing and renting out the property for many years after your own student graduates and moves out, its best to just sit out from the purchase market in your child’s college town.
Good Deals Are Tough to Come By
Finding a good deal in a student rental can be quite the feat. With so many people finding interest in these types of property as an investment, prices have gone way up. Getting a good deal, one that is cash-flow positive and offers a fair rate of return on invested capital, is becoming increasingly hard to come by. If the home is not a good deal from the start, it is not likely that it will eventually become one.
Property Management is a Hassle
With your child living in the property you might think of them as a property manager, however it is far more important that they focus on school than making sure their property is in order. Like any home, rental properties have lots of issues that can range from small to large and can come up at a moment’s notice. Save yourself the hassle of having to travel out to deal with these problems or the cost of hiring someone to take care of them.
Summer Insurance Can Be Costly
With classes being let out for a few months, college towns tend to deflate in population during the summer. Chances are your students won’t be hanging around either meaning your property will be vacant for some time. Many insurance policies expire if a property is left vacant for more than 30 to 60 days. Save yourself the expense of having to add on to the policy to compensate for these policies and opt out of buying for your college student.