Campus Cribs: Buying Real Estate Property for Your College Student
Buying a space for your student could turn out to be a great investment.
HGTV Magazine Study Room Makeover: Sturdy Pine Desk Fit for a Student
By: Shannon Petrie and Duane Duggan
So you didn't buy a rental home as part of your child's college savings
plan? No problem. Buy a property for your teenager to live in now while
they're attending college. It can be a worthwhile investment financially
as well as an excellent learning experience.
In Boulder, Colo., if a parent bought a condo in the 1980s and held on
to it for four years, they most likely would have sold it for about what
they paid for it. If a parent bought a condo in the 1990s and sold it in
four years, they most likely would have made enough profit to pay for
their child’s education at the University of Colorado.
Owning the property your student lives in while he or she attends
college can be beneficial in several ways:
Stability. The student won’t need to look for a different apartment to
live in each year. In addition, you can pick the lifestyle that will
help your student succeed in school by choosing the location and the
quality of housing that best fits their needs.
Fixed housing expenses. In the past, apartment rents in Boulder have
typically increased on an annual basis. By purchasing a property with a
fixed rate mortgage, your student's housing expense will be fixed. In
addition, you won’t have to deal with paying security deposits or going through the hassle of getting the deposit back.
Storage space. Having a single place to live in that you own means your
student will not have to worry about storing furniture over the summer
Life lessons. By purchasing a home for your student, you'll be providing him/her an excellent learning experience. Your student will not only
learn about the process of investing in real estate, but will also learn
about the responsibilities that go along with property ownership.
Financial benefits. Potential financial benefits include possible
appreciation in value, possible tax benefits, and debt reduction on an amortized loan which increases equity build-up.
However, also consider the potential drawbacks of buying for your student:
Unpredictability. Staying put for four or five years can be difficult
for a college student. He or she may decide to transfer to another
school, spend a year abroad or (heaven forbid) drop out and move back
home. Investing in one place for your student to spend his or her entire college career could be a bad move.
Responsibility. If you rent out extra rooms in the home, your student
will have to act as a landlord. He or she needs to be mature enough to
collect rent, pay bills on time and possibly deal with irresponsible
roommates. If the roommates won’t cough up the rent, your student will
be in a very awkward situation.
Insufficient appreciation. If you plan to sell the home shortly after
your student graduates in four to five years, you may not get enough appreciation to make up for the costs of buying and selling the
property. In addition, college towns often have lower-than-average
Additional costs. Parents typically spend between $5,000 and $10,000 for
room and board or rent for their student, so a monthly mortgage payment
is often not much more expensive. But don’t forget to factor in the additional costs of homeownership besides the mortgage, like maintenance expenses, homeowners association fees, insurance and taxes. You may find
that buying a home doesn’t make as much financial sense as you think.
Before deciding to buy a home for your student, crunch the numbers to
make sure the investment makes sense. Even if buying a home is more
costly than you expected, you might decide to go through with the
purchase anyway so your child has a nicer place to live with more amenities.
I have two sons who attend the University of Colorado. I bought them
each a condo using owner occupied FHA financing. Each lives in the unit
and has a roommate paying rent to help pay the monthly mortgage. At the
end of their college careers, they most likely will have built up some significant real estate equity to use in the next phase of their lives.
I've had some clients buy a piece of real estate in which they had all
two, three or more of their children live in while attending college, in
some cases, spanning a 10-year time frame. Rather than throwing money
down the rent drain, they've built equity in a real estate investment
over this period of time.
Owning and Financing the Student Property
Talk to your accountant and attorney to determine the ownership method
that works best for you. Some parents will buy as owner occupied
property; others will treat it 100 percent as a rental property for
additional tax benefits. There are many ways of holding title, including creating a Family Limited Liability Company (LLC).
Several options are available for financing your student property.
FHA "Kiddie Condo" loans. If you want your student to be in title to the property and you want to pay the minimum amount down, using FHA
financing is the easiest way to purchase a property. The FHA “Kiddie
Condo” loan program helps students qualify for loans by allowing them to co-borrow with a blood relative. Down payments for this type of loan can
be as little as 3 percent of the total purchase price, and interest
rates are lower than those on investment properties. Maximum FHA loan
limits vary by location so check to see what they are for your county. Non-owner occupied loans. Some parents will choose to own the property
as investment property by putting 20 percent down and using non-owner
occupied conventional financing. The Chase Family Opportunity Mortgage
allows parents to classify the property as a second or vacation home,
therefore allowing them to pay less in points than on a rental property mortgage.
Interest-only loans. An interest-only loan, rather than a fully
amortized loan, is another option. The advantage of using an
interest-only loan is that it reduces the monthly payment.
If you're buying a condo, check the owner-occupancy ratio of the
complex. This may affect the type of financing you can secure.
Help Your Child Establish Credit
If you decide to have your child on the mortgage and deed, help your
child establish credit before you apply for a mortgage. Obtain a credit
card in the student’s name, preferably a year prior to your purchase.
Also, if the student has a car, it's a good idea to have a small loan on
the car in the student’s name which can also help their credit rating.
Rental Roommate Income
You can buy a one-bedroom condo for your student to live in by
themselves. However, a two-bedroom unit will allow for a roommate and
the rent from the roommate can supplement the mortgage payment. If you
find a three-bedroom unit or home, the rental income from two roommates
can help the monthly cash flow even more.
Check the local ordinances for occupancy limits in the community where
you want to buy. You may find that five students cannot live in one
property. In Boulder, zoning rules allow three unrelated people in an
LRE zone and four unrelated people in an MRE zone.
Roommate Lease or Rental Agreement
Even though the potential roommates are typically close friends, have
each roommate sign a written rental agreement. Consult with an attorney
for specific format and wording. The agreement should cover all the
items found in a residential lease such as:
Rental Rate and Due Date
Notice to Vacate
Utility Payment Agreement
Is it Better to Purchase a House or a Condo/Townhome?
It depends on whether or not you think your student will be able to
handle homeownership responsibilities like exterior maintenance, snow
removal, lawn care, etc.
Often a condo suits the student life better since most college students
won’t be interested in mowing the lawn in their free time. You'll have
to pay a homeowners association (HOA) fee for a condo or townhome, which
covers these maintenance items. This increases your cost but ensures
that maintenance is taken care of. Read more about HOAs.
No lawn care, snow shoveling or exterior maintenance
Easier to just leave for the summer
Owner occupancy ratio of the complex could affect ability to purchase,
sell or refinance
Homeowners association fee may be high and out of your control
Loud stereos might bother nearby neighbors
SINGLE FAMILY HOMES
No concern over occupancy ratios
A single family home might be easier to resell than a condo since you
tend to have more competing properties when selling a condo or townhome
No homeowners association fee (unless you buy a house in a planned unit development)
Student needs to mow and water the lawn and shovel snow
Neighborhood may be less friendly to a group of students living there
Disposing of Your Rental Property When Your Student is Ready to Move On
When your child has moved on (hopefully graduated), he or she can
continue to live in the property, you can keep it as an investment
rental or for your next child, or you can exchange it for a piece of
investment real estate somewhere else.
For example, one family I worked with purchased a property for their
first child who attended and graduated college. They did a 1031 exchange
for a property in a different college town where their next child was
going to attend school.
Use this worksheet to help you calculate your expenses and determine the monthly cash flow.
Purchase Price _______________
Down Payment _______________
Loan Amount _______________
Monthly Principal and Interest Payment _______________
Mortgage Insurance (if any) _______________
HOA Fee (if any) _______________
Total Monthly Payment _______________
Roommate Rental Income +______________
Net Monthly Expense Before Utilities _______________
Tax Benefit (if any) _______________
Duane Duggan is a broker associate with RE/MAX of Boulder, Inc. For more
real estate tips, visit Duane Duggan and the Boulder Property Network.
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Home Design Real Estate
Real Estate Survival Guide: Buyer's Checklist
Refer to this 10-step checklist to get you through the homebuying process. Pinterest
Homeowners with Sold Sign
1. Figure out how much house you can afford.
Calculate your monthly income and debt.
Check your credit report and FICO score.
Use FrontDoor's mortgage calculator.
Figure out your down payment.
2. Get pre-approved for a mortgage.
Choose a type of mortgage.
Speak to at least five lenders and mortgage brokers.
Shop for the best interest rates and programs.
3. Determine what you want and need in a home.
Choose a location (downtown, urban, suburban, rural).
Choose a type (single family, townhouse, condo, loft).
Choose a price range.
Choose a size.
Choose an architectural style.
4. Research your target neighborhoods.
Look online for information on schools, crime rate, traffic and zoning. Determine your work commute.
Scout local amenities, such as parks, shops and restaurants.
5. Work with a buyer's agent who knows the neighborhood.
Consider working with an exclusive buyer's agent.
Interview at least three agents.
Look for experience and good chemistry.
6. Search for homes in the MLS and For Sale By Owner (FSBO).
Browse listings online, including FrontDoor.com.
Ask your agent to set up tours of homes that fit your criteria.
Check local newspapers.
Pick up flyers and attend open houses.
7. Research each home you want to buy.
Ask your agent for comps to estimate the property's fair market value.
Ask the seller's reason for selling.
Review all property disclosures.
Find out about liens, easements or other restrictions.
8. Make an offer and negotiate.
Determine the purchase price.
Include contingencies, such as financial, inspection or purchase.
Spell out any special requests and repairs you want included in the sale. Determine an earnest money amount.
Define a move-in date.
Once both parties agree to the terms, sign the Purchase and Sale Agreement.
9. Finalize the deal.
Get the house appraised.
Get a professional home inspection.
Consider getting specific inspections for structural engineering, roof
Use the appraisal and inspection reports to re-negotiate if necessary.
Choose a home insurance company.
Complete the loan process with the lender.
Do a walk-through inspection prior to closing.
Set aside cash for the closing costs and down payment.
10. Close the purchase.
Review the settlement document at least 2 days before closing to see how
funds will be collected and distributed.
Get a cashier's check for the amount you need to bring to closing,
including the down payment and closing costs.
Home Design Real Estate
Real Estate Survival Guide: Seller's Checklist
Refer to this 10-step checklist to get you through the home-selling process. Pinterest
Real EstateHome Staging
Neutral Home Exterior With "For Sale" Sign
1. Gauge your need to sell.
Define your goals for the next 5-10 years.
Weigh the pros and cons of selling your house.
Figure out if you can afford to sell, move and buy a new home.
Calculate your home equity.
Research the local housing market.
Consider remodeling the home to fit your needs.
Weigh the pros and cons of renting out your home.
2. Calculate your selling expenses.
List the repairs and projects you'll have to do to get your home in
selling condition and estimate the costs of hiring supplies and contractors. See what projects you can afford and adjust how much you expect to get
for selling your home.
To get top dollar, consider remodeling projects and green upgrades that increase your home value.
Expect to pay about 7 percent to 10 percent of the home's sale price in
closing costs, including real estate agent commissions, transfer taxes
and prorated property taxes.
And factor in these costs:
Professional home inspection
Capital gains tax
Mortgage payoff penalties
Staging and marketing expenses
Cost of living in new city or neighborhood
Costs related to getting a mortgage for new home
3. Plan your selling strategy.
Determine how fast you need to sell your house and how much money you
want to get from the sale.
Interview at least three reputable real estate brokers and list your
home on the multiple listing service (MLS).
Weigh the pros and cons of selling the home yourself.
Learn how to go about selling your home yourself.
Consider a physical or online auction for a quick sale in a slow market.
Look into home-swapping opportunities online.
Plan your sale during the spring or fall peak homebuying seasons.
If you go FSBO (For Sale By Owner), hire a real estate agent or attorney.
If you hire a listing agent, negotiate terms of your listing contract,
such as commissions and termination date.
Determine your home's strengths and unique features and promote them in
4. Determine your home's fair market value (FMV) and set a price.
Research public records and collect information on comps -- comparable
homes in your area with similar square footage, construction, age and
condition that sold within the past six months and are currently on the
Browse listings for homes for sale in your area to get a sense of what
is on the market and current home prices.
Ask your agent to prepare a Comparative Market Analysis (CMA) report.
Find out about new construction and foreclosures in your area.
Figure out the average cost per square foot for your area, and make sure
your home is in line with it.
Evaluate market trends, including whether it's a buyer's or seller's market. Use your FMV to determine your asking price. Consider pricing strategies
such as pricing low to urge a bidding war or Value Range Marketing.
5. Advertise and market the home.
"For Sale" signs
Classified sections of local newspapers
Real estate publications
Put ads on free Web sites like craigslist.com.
Create your own Web site to promote your home.
Email notices or flyers about your home to real estate agents, friends,
family, coworkers, everyone.
Use photos to showcase your home. Hire a professional real estate
photographer or learn how to take great pictures yourself.
Use a handheld video camera to give online buyers a virtual tour of your
home, by walking through each room and talking about its features.
6. Prepare and stage the home.
Have a yard sale. Sell, donate or trash everything you don't need.
Make necessary repairs.
Make improvements to increase your curb appeal, i.e. the home's external attractiveness when viewed from the street.
Hire a professional home stager or research staging tips.
Declutter, depersonalize and decorate every room and outdoor areas so
buyers can imagine themselves living in the home.
Paint interior rooms neutral colors.
Replace outdated lighting fixtures and window treatments.
7. Set up showings and open houses.
Keep the home in show-ready condition at all times.
Take appointments or set up a lockbox so agents can show the home when
you're not available.
Hold an exclusive open house for local real estate agents to introduce
them to the home and get feedback. Include food and refreshments.
Hold an open house for potential buyers. Advertise in local publications
and put up signage in the area.
8. Review purchase offers.
For each offer, note the proposed offer price, preapproval letter, contingencies, earnest money amount, proposed closing date and offer
Have a process in place if you expect to get multiple offers.
Keep emotions in check when receiving lowball offers.
9. Make counteroffers and negotiate.
Approach each offer as an opportunity to negotiate.
If the buyer's offer is contingent on selling a home, counter with a
Removal of Sale Contingency.
If you won't budge on price, offer financial incentives that don’t
require cash out of your pocket, such as paying for part or all of the
buyer's closing costs, repairs found during the property inspections or
Offer to include furniture, appliances, window treatments or lighting
If you're worried you won't be able to buy a home after you sell,
include a "rent back" clause which lets you rent back your home from the
buyers after escrow closes.
Make a full-price counteroffer, if your comps can back it up.
Make the sale contingent on your buying a home.
Don't forget to set a closing date and move-in date.
If you find a serious buyer who is having trouble qualifying for a
mortgage, consider offering seller financing, a mortgage assumption or a lease-to-own deal.
10. Get through escrow.
Create a formal plan for handling home repairs, including when they
should be made and who pays for them.
Clean and prepare the home for the appraisal and home inspections.
Choose an escrow officer who will order a title search, request payoff information for your mortgage and other liens on the home, prepare and
record documents, hold and disburse funds and prepare closing statements. Prepare for the final walk-through inspection.
Sign the closing documents and move out of your home.
Keep copies of your documents for reporting the sale on federal and
state tax forms.
Home Design Real Estate
Adapt Your Home to Its Selling Season
Play up your home's amenities for the season in which you choose to sell. Pinterest
Snow-Covered Home Exterior
Real EstateHome Staging
There's a selling myth that you should wait till springtime to sell your
home. While spring is the busiest season for real estate sales, people
buy homes 365 days a year. If you decide you need to sell your home in
the off-peak season, emphasize its seasonal amenities.
Choose Your Selling Season
Because many buyers prefer to move in the spring or summer, the market
starts to heat up as early as February. Families with children are eager
to buy so they can move during summer vacation, before the new school
The market slows down in late summer before picking up again briefly in
the fall. November and December are traditionally slow months, although
some astute buyers look for bargains during this period.
Despite these trends, not everyone's situation will be the same. Ask
yourself questions like these:
How quickly do I need to move? If you need to relocate quickly for a new
job or family emergency, you'll need to sell as quickly as possible. If
your moving dates are more flexible, you may be able to get a higher
sale price in the spring or summer.
What season will your home be most desirable? If you're selling a lake
or beach home, for sale homes will be most in-demand in the early spring
and summer months. A ski chalet in Aspen would make more buyers bite
Once you've chosen your selling season, play up its perks!
Master these tips for a successful home sale no matter what season it is:
Winter Selling Tips
Clear snow and ice away from walkways and stairs. If you live in an area
with lots of snow and ice, keep walking areas salted and shoveled.
Buyers and agents want to see that your home is well maintained, and, of course, you're not likely to wow a house hunter if they fall on the way
in and break a leg. Learn more about boosting your winter curb appeal.
Stage it outside. Even if the grass is brown and the patio is
snow-covered, you can still do some outdoor staging. Tasteful winter
wreaths and garlands can make your home seem welcoming. Just like inside
the house, pick decorations that will appeal to a wide variety of buyers
-- blow-up snow globes and giant plastic Santas are probably no-nos.
Learn more about staging for the holidays.
Make it cozy.
Clean up your windows.
Fall Selling Tips
Keep your lawn in shape. Just because summer is over doesn't mean you
should abandon your lawn. Patch up any brown spots in the grass, and
keep falling leaves at bay with frequent raking.
Get a fall garden. As your summer plants start to fade, replace them
with vibrant mums or other colorful plants. Tasteful fall decorations,
like pumpkins or tri-colored corn, can also add to your home's curb appeal.
Get indoor fall decorations, too. Without breaking the bank, get a few fall-colored decorations, like inexpensive window treatments or seasonal dinnerware. Fresh decor will make your space seem current and
Repair outside lights. As the days get shorter, you may end up showing
your home in the dark. Make sure your outdoor lights are clean and
working -- if they're dirty or broken, buyers will get a bad feeling
before they even come inside.
Keep exterior photos of your home up-to-date. If you listed your home in
the summer, update your online photos with brand new fall shots.
Pictures from the previous season make your listing seem dated.
Spring Selling Tips
Whip your yard into shape. When you're selling in the spring, you need
to get your yard in shape as quickly as possible. Clear winter yard
debris, and get frost-resistant plants that won't be affected if a late
cold spell hits. Or, invest in silk flowers for a touch of color that
you don't have to worry about watering.
Do some spring cleaning. It's natural to want to spruce up your space in
the spring, so scrub away! A sparkling home will impress buyers and make
your home seem even more appealing.
Box up your winter wardrobe. Bulky winter clothes take up lots of space,
so move them out as you de-clutter your closets. You'll impress buyers
with all that space.
Spruce up the entryway. If your welcome mat is covered with winter dirt,
pick up a new one. A clean, pretty doorway will help set the tone for
the entire showing.
Bring spring aromas indoors. Spring is not only a colorful season, but a fragrant one, too. Bring the aroma indoors. Scents have a profound
effect on mood, so infusing scent into your decor with diffusers,
candles, fresh cut plants/flowers, or incense can change the overall
feeling of a space.
Bring out the bright colors. Tuck away the heavy, winter flannel
comforter and pull out crisp linens with coverlets for color. Bring in
the spring with floral-designed spreads or colorful solids. Don't forget
accent pillows for added style and comfort.
Summer Selling Tips
Highlight your outdoor areas. This is your outdoor space's chance to
shine. Clean your deck, porch, patio or outdoor kitchen, and repaint or
make repairs if necessary. No deck? Arrange chairs or outdoor furniture
in your yard to create the illusion of an outdoor room. Make necessary
repairs to your home's exterior, including your siding and windows.
Play up the pool. A pool is a huge selling point during the sweltering
days of summer. Keep yours clean and debris-free, and create a seating
area near the pool where buyers can imagine themselves floating through
the cool water.
Spruce up your landscaping. Make sure your lawn and flower beds aren't languishing in the summer heat. Add pops of color to your entryway with
Add value and security with lighting. Frame your walkways and driveways
with lights for a stylish touch.
Don't skimp on the air conditioning. House hunters will want to escape
the heat so make sure your home is nice and cool. Set the thermostat at
a comfortable level, so it doesn't feel like an ice box either.
Provide refreshments. Even though you likely won't be home for a
showing, greet buyers like you would party guests. During the dog days
of summer, set out a cool pitcher of lemonade for buyers. Anything you
can do to make them linger a little longer can only help you sell.