Do College Condos Make The Grade? What To Consider When Buying Real Estate For Your Collegian
As students head back to campus, RE/MAX agents share strategies for parents looking to invest in a college town.
It was the best of times, it was the worst of times. For many of us, it was freshman year in the dorms.
While many have fond memories of Taco Bar Tuesday and late-night conversations with their philosophy major roommate, the dormitories also likely featured rowdy late-night parties and a shared room barely bigger than a yoga mat. Add in an annual room and board cost of $10,000 (or more), and it’s no wonder many parents are helping their students graduate from campus housing as soon as possible – and calling a real estate agent to help them do it.
“My clients had a daughter entering medical school, and they didn’t want anything to stand in her way,” says Jeffrey Decatur, a real estate agent with RE/MAX Capital in Latham, New York. “They were looking for a place that was walking distance to campus, well-lit for safety, and offered a quiet space for studying.”
It’s a common request of clients of Decatur, who has helped families purchase condos for students of Albany Medical College, Albany Law and the State University of New York. There was even one home he sold three different times to three different families, each time for a new student after the previous occupant earned their white coat and moved on.
“If it’s done properly, parents can make money off the property while saving on tuition and room and board costs,” Decatur says.
Here are the top lessons RE/MAX agents have learned through helping parents purchase college condos and homes.
Study your strategy
There are multiple ways for parents to approach a college condo. They may simply want to purchase a property and sell it for a profit (potentially even renting it out to another student for a few years while it appreciates). Another common strategy Decatur has seen is to purchase a home with two or more bedrooms and rent the spare rooms.
Decatur had one client whose daughter was able to cover their mortgage and utilities, plus make an additional income, by living in a three-bedroom home.
“She made about $700 a month in profit, plus the appreciation once it was sold. Not only was her monthly room and board cheaper than if she stayed in on-campus housing, she was also able to offer the rooms at a lower cost for two other students, helping to make their rent more affordable.”
Another perk – students avoid playing roommate roulette through the dorms at the university.
“Because the student can choose their roommate, they can find someone who is in the same program and also serious about studying – and not be stuck with a party person who is out every night,” Decatur says. “Plus, they don’t have the distraction of living in a building with 200 other people.”
Stay focused, and think about life post-grad
Sometimes purchasing a college condo lines up perfectly with the parents’ plan for an empty nest. That was the case with recent clients of the Elevated Team with RE/MAX of Cherry Creek in Denver, Colorado, made up of sister real estate duo Erin Whitmire and Kate Baldwin. In this case, their clients were travel enthusiasts looking to invest in condos they could revisit after their daughters graduated from schools in Arizona and Colorado. They connected with the Elevated Team when one of their daughters enrolled in graduate school in Denver.
“We had to balance the needs of the daughter [attending school in downtown Denver] with the long-term plans of the parents,” Whitmire says.
While the student was interested in a “hip” unit within biking distance of Denver’s famous breweries (and campus), the parents were looking for signs of a good investment, such as:
• Historical appreciation of the area
• Average rental rate
• HOA fees (and what they cover)
• Proximity to public transportation
• Nearby development that could enhance (or detract) from the property in the future.
“The parents were looking at the bigger picture of, ‘When she’s not living there, is this still going to be a good investment for us?’” Baldwin says.
Ultimately the family found a unit with several amenities, including a private patio, composting and storage, that Baldwin and Whitmire agree wouldn’t be found in a dorm. Plus, there was one feature that was most important: a spare room for when mom and dad come to town.
Give your student a real-world education
Potential financial benefits aside, Decatur, Whitmire and Baldwin all agree that purchasing a condo for a university student can offer important lessons in life and finance.
According to Whitmire: “My clients’ daughter is responsible for the upkeep of the unit and was very involved in the home-buying process. She was on emails about the inspection and everything else every step of the way – she’s getting a glimpse into what the process looks like. It’s learning how to become a homeowner before becoming a homeowner on her own.”
Baldwin adds that the parents still planned to charge their daughter rent, encouraging her to get a part-time job and providing a lesson in managing money.
“They are doing an incredibly generous act, but they still wanted to teach their daughter about work ethic,” she says.
Decatur says living in a condo helps prepare students for the real world.
“I had one client that bought their child a condo when she was 20, and when she graduated she was light years ahead of everyone in understanding the value of a dollar and work ethic because of the added responsibility. She had a whole different attitude toward life.”
And although the real estate market is currently seeing one of its most competitive summers in decades, there are still opportunities out there for parents looking to invest in a college town.
“Even though the market is still really hot, homes can be more affordable than they were a year ago because of [low] interest rates,” Whitmire says. “Condos are also different, they are not going for the same percentage over asking as single-family homes.”
Decatur says parents should run the numbers and compare how much they would be spending on campus housing versus the cost of investing in a condo for their student.
“It’s definitely more difficult to compete, but in the long haul you may be making money compared to how much you would spend on room and board,” he says.
Article originally appeared on RE/MAX.com.