Author Topic: College housing hack?  (Read 1194 times)

Sugaree

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College housing hack?
« on: February 21, 2020, 10:30:03 AM »
I was talking to my oldest goddaughter and she was telling me about how one of her friends got a townhouse for her 18th birthday.  At first I was shocked, but then goddaughter explained that it wasn't actually the friend's.  It is located in the town where she's going to college.  She was given a budget and got to pick it out, but after she graduates/moves away from that town it will be sold or used as a rental. 

The more I think about it, the more sense it makes.  Housing, not including the expensive required meal plan, runs about $7800/year at this school.  So as long as you're not taking a $30k loss on selling the property after 4 years, the math says that it's a better deal.  Plus it's possibly a way to avoid the rule about freshman having to live in the dorms.  And it's a two-bedroom so she can get a roommate to help out with the bills.

I'm intrigued by this.  Is this something that you would consider for your kid(s), assuming that you plan on covering these costs anyway?   I can see it having an even better ROI for more than one kid if they could agree to go to the same school. 
« Last Edit: February 21, 2020, 10:32:13 AM by Sugaree »

ixtap

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Re: College housing hack?
« Reply #1 on: February 21, 2020, 11:12:26 AM »
It is pretty common amongst the upper class/ upper middle class. Near the University of Miami, most of the market was taken up this way at one point.

DH's parents bought a house for one of his sisters, so she had two roommates. In their case, it allowed them to provide a paid off house with sporadic rent payments to another family member after her graduation, so it may not have been the economic boon they originally expected, but they still seemed happy with their choice.

wellactually

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Re: College housing hack?
« Reply #2 on: February 21, 2020, 11:35:03 AM »
My parents did this. My dad sold his company my freshman year of college and the way that compensation came in (I don't know), it was beneficial for them to put some money straight away into an income property.

It had 3br/2ba. My sister and I went to the same school and had one year of living there as overlap. I found a third roommate the first year, and had it filled with two roommates the next two years. They offered a free spot to my cousin the year after I graduated, but I still found additional roommates to fill the other two rooms for the next couple years. I handled much of the general maintenance and lived there year round. Then my cousin handled things.

They bought it in cash May 2008 for 132k and sold it in June 2016 (after 10 months on the market) for 139k. Our market didn't get massively hit by the mortgage crisis, but they definitely bought a little high IMO.

I doubt that they made too much during the 7 years it was rented out. But avoided costs for my sister and I were probably 350-600/month for 48 months (3 years me 1 year her). So that's 17-28k avoided. Plus the gift to my cousin for three years which I know they derived significant personal value from. Our town has a lot of lower cost rental options, but those typically have restrictions against students.

If they'd put that money into the market in May 2008 instead... I'm not sure what it would have looked like 8 years later.

Sugaree

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Re: College housing hack?
« Reply #3 on: February 21, 2020, 12:09:10 PM »
My parents did this. My dad sold his company my freshman year of college and the way that compensation came in (I don't know), it was beneficial for them to put some money straight away into an income property.

It had 3br/2ba. My sister and I went to the same school and had one year of living there as overlap. I found a third roommate the first year, and had it filled with two roommates the next two years. They offered a free spot to my cousin the year after I graduated, but I still found additional roommates to fill the other two rooms for the next couple years. I handled much of the general maintenance and lived there year round. Then my cousin handled things.

They bought it in cash May 2008 for 132k and sold it in June 2016 (after 10 months on the market) for 139k. Our market didn't get massively hit by the mortgage crisis, but they definitely bought a little high IMO.

I doubt that they made too much during the 7 years it was rented out. But avoided costs for my sister and I were probably 350-600/month for 48 months (3 years me 1 year her). So that's 17-28k avoided. Plus the gift to my cousin for three years which I know they derived significant personal value from. Our town has a lot of lower cost rental options, but those typically have restrictions against students.

If they'd put that money into the market in May 2008 instead... I'm not sure what it would have looked like 8 years later.

This is true.  But on the flip side, they could have put the money in the market in December of 2007.  It probably would have taken a bit longer than 8 years to build back up.   You just never know.  I'm looking at this more as a way to save on an expense that I know I'm going to have. 

wellactually

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Re: College housing hack?
« Reply #4 on: February 21, 2020, 12:35:46 PM »
Oh yeah, you can't time the market. Just a curious timing for the particular situation I described! And also relevant because they didn't get completely screwed by the housing market either. The market didn't bottom out until March 2009 though, so Dec. 07 vs. April 08 doesn't really matter either.

My parents came out of it glad that they had done it, and that was during a tumultuous time in the financial world.

mm1970

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Re: College housing hack?
« Reply #5 on: February 24, 2020, 04:47:00 PM »
One of our former volleyball buddy's parents did that - bought a 2BR condo near the school, sold it 5 years later when he finished his PhD.

Other possible hacks are living off campus as soon as possible. 

When I was in college in the dark ages, a one-room apartment (14'x15' with a kitchen, bath, and closet) was $460/month per person, times two.

However, there was a 3BR house two doors up, so just outside campus - they were renting a room with its own bathroom for $200/month per person.  I could NOT get my roommate to do it - her parents would not allow it because the other 3 roommates were male.  But, our own bathroom!  Ugh.  (The following year I moved into a 16 person sorority house, so my costs went down).

Many many of my classmates (mostly men) rented homes near campus for half the cost in rent as student housing.

ixtap

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Re: College housing hack?
« Reply #6 on: February 24, 2020, 04:54:20 PM »
One of our former volleyball buddy's parents did that - bought a 2BR condo near the school, sold it 5 years later when he finished his PhD.

Other possible hacks are living off campus as soon as possible. 

When I was in college in the dark ages, a one-room apartment (14'x15' with a kitchen, bath, and closet) was $460/month per person, times two.

However, there was a 3BR house two doors up, so just outside campus - they were renting a room with its own bathroom for $200/month per person.  I could NOT get my roommate to do it - her parents would not allow it because the other 3 roommates were male.  But, our own bathroom!  Ugh.  (The following year I moved into a 16 person sorority house, so my costs went down).

Many many of my classmates (mostly men) rented homes near campus for half the cost in rent as student housing.

When I was working on my PhD, they opened up new "family" housing and couldn't figure out why no one was renting. When we pointed out that none of us were paying that much, they claimed that they were using market rates. Maybe compared to the other new builds just outside of a comfortable radius of campus, but not compared to the older complexes right around campus!

bogart

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Re: College housing hack?
« Reply #7 on: February 24, 2020, 09:43:38 PM »
This might have been a reasonable strategy for us to use with either of my stepkids, both of whom went to in-state schools and had pretty routine college experiences (4.5 years each, no missed semesters, no travel).  I went to a public school but out-of-state and was happy to be in a dorm year 1, to meet other people (I didn't really know anyone).  I rented apartments years 2-4 and didn't pay rent the 1 semester I studied abroad -- I forget whether someone else rented, or this was just worked out in advance with my roomies, we were 3 in a 2 br and I was one of the doubles, so my other double roomie may just have picked up the extra cost.  My sister went to an expensive out-of-state school in a big city with a particular focus (the school, not the city) and decided after one year it wasn't right for her and transferred back to our state flagship (but then spent 1 out of 3 of the remaining 3 years, studying abroad).  A good friend whose daughter's just gone off to school out of state decided she was homesick and is now taking classes in the community college in her hometown.  So ... yes, but depending on the kid, the situation, and your flexibility / willingness to be an absentee landlord to non-family, might or might not be a good idea.

waltworks

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Re: College housing hack?
« Reply #8 on: February 25, 2020, 08:29:35 AM »
Compare to the cost of a similar rental home/condo, not to the cost of the on-campus housing/meal plan.

Also remember the old landlording 50% rule. There will be significant costs both up front (closing costs to buy), during ownership (maintaining the interior of the unit, paying HOA dues, taxes, insurance, etc), and to sell (agent commissions, closing costs).

It's not a terrible plan, but it's also not a slam dunk. You need to look carefully at the actual numbers for the location involved, and consider the risk that your kid(s) decide they don't like that college, don't like college at all, or have roommates who sell drugs and get the house seized from you.

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