Author Topic: Condo for my daughter while in college  (Read 1210 times)

CoffeeRoyal

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Condo for my daughter while in college
« on: December 01, 2017, 06:44:36 AM »
So, my daughter will start college soon in a nearby town I am (very) familiar with. I am currently seriously contemplating purchasing a specific condo for her to live in. The cost would be between $150K to $200K. I plan on paying cash.

I am *not* by natural inclination a land lord so the (likely) length of this purchase would only be for the duration she attends college. I am convinced the property value will hold should my daughter graduate or due to some other reason cease attending college. The idea is for her to get a roommate that does pays rent. I do not need the rent to make this work financially. I do not need to make a profit (though of course that would be nice). The term "profit" here needs to be adjusted for the fact that the alternative is to pay rent for her (which is an option).

My daughter is on board with the idea and would love for this work out.

I would like to have feedback from anyone on this matter. I grant you the information I provide is scarce, but I am looking for feedback from people who have tried something similar and/or are familiar with similar situations.

What issue did you encounter? What would you do differently? Would you do it again? Any feedback?

Cromacster

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Re: Condo for my daughter while in college
« Reply #1 on: December 01, 2017, 06:54:48 AM »
I guess the real question is why?  If you just plan on selling it after she's done it sounds like a big hassle and a waste of money.

Now if it's a college town that has a solid rental market, it might be interesting if you can get it for 150k and rent it for 2k or more a month after shes out. 

Either way I wouldn't pay cash for it.
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Another Reader

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Re: Condo for my daughter while in college
« Reply #2 on: December 01, 2017, 06:58:23 AM »
No guarantee she is going to like college or do well there.  First time away from home can be difficult.  I would rent or have her be the room mate in a similar situation.  Let her find her feet and then decide what is the best housing situation.

Livingthedream55

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Re: Condo for my daughter while in college
« Reply #3 on: December 01, 2017, 08:29:02 AM »
I guess the real question is why?  If you just plan on selling it after she's done it sounds like a big hassle and a waste of money.

Now if it's a college town that has a solid rental market, it might be interesting if you can get it for 150k and rent it for 2k or more a month after shes out. 

Either way I wouldn't pay cash for it.

Exactly.
You may hear from folks who have done this but still many of us who would like to be helpful may be feeling that this simply isn't enough information yet.

Is the intention to save on 4 years of dorm costs (which can be significant)?
If yes to the above, is daughter willing to commute from home (since college is in a nearby town)?
Were you looking to purchase a condo anyway?





PlainsWalker

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Re: Condo for my daughter while in college
« Reply #4 on: December 01, 2017, 09:39:35 AM »
There is a lot to be said for the experience of living in a dorm on campus. A lot of colleges have been moving towards requiring freshmen to live in the dorms. It tends to lead to higher completion rates since students find a support group of other students. Besides, who doesn't love random Thursday night puzzle and pizza in the dorm lobby? That sort of impromptu social interaction doesn't arise for students living off campus as much.
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CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #5 on: December 01, 2017, 09:52:12 AM »
Now if it's a college town that has a solid rental market, it might be interesting if you can get it for 150k and rent it for 2k or more a month after shes out. 
It is a solid rental market. It is a college town. If I wanted to make this a long term rental, I could. The type of home, location are ideal.

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #6 on: December 01, 2017, 09:56:10 AM »
I guess the real question is why?  If you just plan on selling it after she's done it sounds like a big hassle and a waste of money.

Now if it's a college town that has a solid rental market, it might be interesting if you can get it for 150k and rent it for 2k or more a month after shes out. 

Either way I wouldn't pay cash for it.

Exactly.
You may hear from folks who have done this but still many of us who would like to be helpful may be feeling that this simply isn't enough information yet.

Is the intention to save on 4 years of dorm costs (which can be significant)?
If yes to the above, is daughter willing to commute from home (since college is in a nearby town)?
Were you looking to purchase a condo anyway?
Well, most students do not finish in 4 years, but 4 years of dorm and/or rentals is significant.

Can she commute? Yes. She will actually commute the first semester. Both my wife and I believe it is better for her to a have a place of her own. That may not be mustacian, but we want to see her living on her own.

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #7 on: December 01, 2017, 10:01:01 AM »

Were you looking to purchase a condo anyway?
Maybe, however, it only makes sense to me (right now) if my daughter occupies it for 4+ years. It is possible that I will keep the condo many years after this date. It is (partially) a way of getting my feet wet on rental properties. There is also a diversification aspect to this purchase.

tralfamadorian

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Re: Condo for my daughter while in college
« Reply #8 on: December 01, 2017, 03:24:19 PM »
Maybe, however, it only makes sense to me (right now) if my daughter occupies it for 4+ years. It is possible that I will keep the condo many years after this date. It is (partially) a way of getting my feet wet on rental properties. There is also a diversification aspect to this purchase.

What are the rents like for a similar condo? And how does that imputed rent stack up compared to PITI, HOA, repairs and capex? And for potentially keeping it as a rental in the future- add in vacancy and management.

Student rentals can be a lucrative rental niche but IMO they take more work if you manage yourself vs vanilla SFH.

Gin1984

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Re: Condo for my daughter while in college
« Reply #9 on: December 01, 2017, 03:32:45 PM »
There is a lot to be said for the experience of living in a dorm on campus. A lot of colleges have been moving towards requiring freshmen to live in the dorms. It tends to lead to higher completion rates since students find a support group of other students. Besides, who doesn't love random Thursday night puzzle and pizza in the dorm lobby? That sort of impromptu social interaction doesn't arise for students living off campus as much.
As a woman, I would not live in a dorm on campus.  There are serious safety issues.  Almost all schools will capitulate if a parent calls and says they won't send their daughter if the child has to be in the dorms.

ManlyFather

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Re: Condo for my daughter while in college
« Reply #10 on: December 01, 2017, 04:35:59 PM »
There is a lot to be said for the experience of living in a dorm on campus. A lot of colleges have been moving towards requiring freshmen to live in the dorms. It tends to lead to higher completion rates since students find a support group of other students. Besides, who doesn't love random Thursday night puzzle and pizza in the dorm lobby? That sort of impromptu social interaction doesn't arise for students living off campus as much.
As a woman, I would not live in a dorm on campus.  There are serious safety issues.  Almost all schools will capitulate if a parent calls and says they won't send their daughter if the child has to be in the dorms.

I lived in a dorm on campus.  So did my wife.  Living in the dorms is a great way to meet other students, living off campus is a great way to stay isolated.

If you want your daughter to remain socially isolated, then getting her a condo is a great way to do this.  If you want to make sure there is a weird, uneven power dynamic with her roommate, go ahead and buy that condo.

Sometimes doing what is best for your kids is NOT doing what is easy for your kids.

tralfamadorian

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Re: Condo for my daughter while in college
« Reply #11 on: December 01, 2017, 05:25:57 PM »
I lived in a dorm on campus.  So did my wife.  Living in the dorms is a great way to meet other students, living off campus is a great way to stay isolated.

If you want your daughter to remain socially isolated, then getting her a condo is a great way to do this.  If you want to make sure there is a weird, uneven power dynamic with her roommate, go ahead and buy that condo.

Sometimes doing what is best for your kids is NOT doing what is easy for your kids.

Depends on the school. At my college, everyone lived in a dorm the first year. It was considered weird and socially isolating to stay in university housing for the next three. Why would you want to live without a kitchen and only be able to shower with flip flops for four whole years- that was the attitude. A parent buying a house for their child then renting out the other rooms was also very common.
   

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #12 on: December 02, 2017, 05:25:35 AM »
... A parent buying a house for their child then renting out the other rooms was also very common.
It is very common in my area as well. That is one of the reasons I am considering doing this. By all accounts, when I look at the numbers, the cost of college housing goes down for me when I do this (that includes dorm options) and I do not even need to rent out a room for this to be true. Renting a room would make the entire scenario even more advantageous.


CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #13 on: December 02, 2017, 05:28:13 AM »
Either way I wouldn't pay cash for it.
Why not? What is the alternative for me? I've heard that getting mortgages on rental properties can be difficult without management experience, but maybe I am wrong. Assuming I go through with this, what would you suggest?
« Last Edit: December 02, 2017, 07:35:46 AM by CoffeeRoyal »

tralfamadorian

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Re: Condo for my daughter while in college
« Reply #14 on: December 02, 2017, 06:57:52 AM »
Either way I wouldn't pay cash for it.
Why not? What the the alternative for me? I've heard that getting mortgages on rental properties can be difficult without management experience, but maybe I am wrong. Assuming I go through with this, what would you suggest?

Not at all. Obtaining a residential investment mortgage is a very similar process to getting an owner occupied mortgage- lots of paperwork. Lack of management experience becomes an issue if you were buying an apartment building as your first investment purchase. Since you have the ability to pay in cash, doing the initial purchase in cash to get a better price, then a delayed financing mortgage within six months of close would be ideal-
https://www.fanniemae.com/content/guide/selling/b2/1.2/03.html#Delayed.20Financing.20Exception

Real estate can become more lucrative than stocks through the use of leverage. Play around with a calculator like this one
http://www.calculator.net/rental-property-calculator.html
To see how your CoC changes with loan vs no loan.

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #15 on: December 02, 2017, 07:40:28 AM »
Not at all. Obtaining a residential investment mortgage is a very similar process to getting an owner occupied mortgage- lots of paperwork. Lack of management experience becomes an issue if you were buying an apartment building as your first investment purchase. Since you have the ability to pay in cash, doing the initial purchase in cash to get a better price, then a delayed financing mortgage within six months of close would be ideal-
https://www.fanniemae.com/content/guide/selling/b2/1.2/03.html#Delayed.20Financing.20Exception

Real estate can become more lucrative than stocks through the use of leverage. Play around with a calculator like this one
http://www.calculator.net/rental-property-calculator.html
To see how your CoC changes with loan vs no loan.
Thank you for this info. I am learning new things every day on this forum.

JustGettingStarted1980

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Re: Condo for my daughter while in college
« Reply #16 on: December 02, 2017, 09:09:34 AM »
Do you have a 529 plan? You can use this to pay your daughter's share of housing, even if she lives in a property you own.

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #17 on: December 02, 2017, 09:40:02 AM »
Do you have a 529 plan? You can use this to pay your daughter's share of housing, even if she lives in a property you own.
Nope. I do have an ESA for her though and I might pay her share of the rent from that. I believe the same applies to ESA as 529. I do need to double check on this. Also, I have found (in general) these type of transactions need the proper type of paperwork backup, so I need to check on that as well.

FINate

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Re: Condo for my daughter while in college
« Reply #18 on: December 02, 2017, 10:10:24 AM »
... A parent buying a house for their child then renting out the other rooms was also very common.
It is very common in my area as well. That is one of the reasons I am considering doing this. By all accounts, when I look at the numbers, the cost of college housing goes down for me when I do this (that includes dorm options) and I do not even need to rent out a room for this to be true. Renting a room would make the entire scenario even more advantageous.

The the amount you come out ahead buying the condo vs. renting is not risk free. Buying means assuming a certain amount of risk, prices can fluctuate (they may dip at the point you're ready to sell), RE transfer costs are expensive, tying up a large chunk of capital for an indefinite period, and so on. You need to ask yourself if the difference is enough compensation for the risk. Are you okay with, if necessary, holding onto it long term or eating a loss if prices decline?

I get that you want her to experience living on her own, but something else to consider: If she commutes from home for undergraduate she'll save a large chunk of money (~$50k over 4 years?) that can be used to fund graduate studies elsewhere later on. Could be motivation for her to excel in undergrad to get into her prefered graduate program.

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #19 on: December 02, 2017, 10:23:18 AM »
The the amount you come out ahead buying the condo vs. renting is not risk free. Buying means assuming a certain amount of risk, prices can fluctuate (they may dip at the point you're ready to sell), RE transfer costs are expensive, tying up a large chunk of capital for an indefinite period, and so on. You need to ask yourself if the difference is enough compensation for the risk. Are you okay with, if necessary, holding onto it long term or eating a loss if prices decline?
You are absolutely correct that it is not risk free. If it were truly where risk free (capital, time, etc.) I would not have posted the question. There is risk in transactions like this. Yet real estate is a risk many people are willing to take and for some it works out well.

Thank you FINate. I am asking myself the question "if the difference is enough compensation for the risk." I will come to an answer, but I am still pondering the question.

As to "Are you okay with, if necessary, holding onto it long term or eating a loss if prices decline?". Yes.

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #20 on: December 02, 2017, 10:40:53 AM »
I get that you want her to experience living on her own, but something else to consider: If she commutes from home for undergraduate she'll save a large chunk of money (~$50k over 4 years?) that can be used to fund graduate studies elsewhere later on. Could be motivation for her to excel in undergrad to get into her preferred graduate program.
Hypothetically speaking, if I offer her the rent saved to live at home she would say no. I could of-course force it and she knows it and she has acknowledged that she is still financially depended on us. My son, on the other hand, would *jump* (cartwheels) at that opportunity. These question need to be conditioned on many factors and money is not the only one of many considerations here.

I do not want to derail the conversation because it might give the wrong impression of my daughter though I fear nothing I say will change certain opinions by some where the bottom line is what matters most. Compared to her peers, she works (e.g. earns a paycheck) more then most and she already has a [good] job lined up when in college (for her age). She knows if she wants things she needs to earn the money so she is actively saving a lot because she knows college will be expensive and she is seeking experiences beyond basic college (as an example oversees programs). Interestingly she volunteered, without me prompting, to pay for rent or help pay for rent.

Now, once she had lived by herself for a year or two, would she be willing to live at home and commute and save money? Hmm... I am curious to find out.

FINate

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Re: Condo for my daughter while in college
« Reply #21 on: December 02, 2017, 02:30:42 PM »
I get that you want her to experience living on her own, but something else to consider: If she commutes from home for undergraduate she'll save a large chunk of money (~$50k over 4 years?) that can be used to fund graduate studies elsewhere later on. Could be motivation for her to excel in undergrad to get into her preferred graduate program.
Hypothetically speaking, if I offer her the rent saved to live at home she would say no. I could of-course force it and she knows it and she has acknowledged that she is still financially depended on us. My son, on the other hand, would *jump* (cartwheels) at that opportunity. These question need to be conditioned on many factors and money is not the only one of many considerations here.

I do not want to derail the conversation because it might give the wrong impression of my daughter though I fear nothing I say will change certain opinions by some where the bottom line is what matters most. Compared to her peers, she works (e.g. earns a paycheck) more then most and she already has a [good] job lined up when in college (for her age). She knows if she wants things she needs to earn the money so she is actively saving a lot because she knows college will be expensive and she is seeking experiences beyond basic college (as an example oversees programs). Interestingly she volunteered, without me prompting, to pay for rent or help pay for rent.

Now, once she had lived by herself for a year or two, would she be willing to live at home and commute and save money? Hmm... I am curious to find out.

I don't think poorly of your daughter, nor have you given a bad impression, she seems quite responsible. But young adults are getting confusing and sometimes conflicting messages from culture when it comes to college. When questioned about how expensive it is, the response is often "it's an investment, don't worry about it." Yet when questioning the ROI this is often considered vulgar or shortsighted -- college is about the experience, broadening horizons, and such. For the sums we're talking about here, I think it's important to be clear about what it is, exactly. If the long term ROI works out, then yeah, put in the investment. But I have a hard time plunking down an extra $40-50k, or whatever it happens to be, for an experience. Take 1/10 of that and travel, or do Peace Corps or something.

During my college days in the late '90s I was embarrassed about attending the local community college, and after that commuting to the local state university. Most of my friends moved to far flung universities, which carried a certain cachet. However, looking back on it, this was one of the best decisions of my life. Graduating debt free was a big part of getting established on my own, being able to buy a house in the SF Bay Area, and then FIRE at 38. Many of my peers, instead of becoming more independent actually ended up more dependant on their parents after graduating, due to their debts, and had a slow start getting established.

If you have the money and you don't mind spending it then all this is moot. If, however, loans are involved, or you're not okay with the cost to rent/own vs. commuting from home, then I think it's worth challenging assumptions about what college is really about.

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #22 on: December 02, 2017, 02:57:53 PM »
I don't think poorly of your daughter, nor have you given a bad impression, she seems quite responsible. But young adults are getting confusing and sometimes conflicting messages from culture when it comes to college.
...
If you have the money and you don't mind spending it then all this is moot. If, however, loans are involved, or you're not okay with the cost to rent/own vs. commuting from home, then I think it's worth challenging assumptions about what college is really about.
Thank you and I agree with you that we need to challenge assumption. I do and I will. The goal is to get both my children through college with no debt. I will not go into debt for my children's college and If she ends up going into debt and I find out (after all she is 18+), then everything from my perspective changes, but I think this is unlikely. I could pay for her entire college "experience", but I don't want to... she has to make choices. I want her to make choices. The issue of purchasing the condo goes way beyond her "experience"... I am looking at cash flow, total expenses, risk, reducing my college expenses, diversification, etc.

waltworks

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Re: Condo for my daughter while in college
« Reply #23 on: December 02, 2017, 04:59:27 PM »
Did you run the numbers on costs? Or are you just comparing the P&I to the cost of the dorm/renting a room?

Run the actual numbers (including closing costs to buy, commissions/fees/taxes when you sell, HOA dues, ongoing maintenance costs, insurance, etc, etc) and then you can subsequently decide if this is a good idea for your daughter/your relationship with some solid financial information as a foundation.

It doesn't sound like you've done this, so go do it and come back.

-W

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #24 on: December 02, 2017, 05:32:37 PM »
Did you run the numbers on costs? Or are you just comparing the P&I to the cost of the dorm/renting a room?

Run the actual numbers (including closing costs to buy, commissions/fees/taxes when you sell, HOA dues, ongoing maintenance costs, insurance, etc, etc) and then you can subsequently decide if this is a good idea for your daughter/your relationship with some solid financial information as a foundation.

It doesn't sound like you've done this, so go do it and come back.
I'm working on this. Part of the reason for posting is that I *know* I am not ready to make a decision.

Of the items mentioned above I have a good idea on all them (some hard numbers and some estimates I am trying to verify) except "ongoing maintenance cost". That is one I am still trying to get more information. Any ideas on how to calculate this one?

waltworks

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Re: Condo for my daughter while in college
« Reply #25 on: December 02, 2017, 06:18:47 PM »
First step would be to find the most recent reserve study for the HOA and take some time to go through it carefully. If it's been done decently, you'll be able to see up front what major exterior maintenance is expected, and what it's expected to cost - as well as the reserves that are/will be available. If those numbers don't match up well, that's a red flag that special assessments are coming down the pike. If there's no reserve study at all... run away.

So that covers exterior stuff. Next up you have to decide how well your daughter and/or tenants will treat the place, and how nice you want to keep it for future rental use or sale. College kids (even female ones) are not easy on plumbing, HVAC, paint, carpet, or anything else. If it's a small place, well maintained, and not too fancy, I'd expect keeping things working right and looking decent to cost $500-1000 a year. You might spend a ton less than that, or a ton more than that, in any given year, of course. Busted furnace because the college kids forgot to change the filter? Big bill. But it might work fine the whole time too.

The exterior stuff is more predictable, and if the HOA has their shit together, HOA dues should cover that completely. Remember that their idea of a reasonable expenditure on something like new striping for the parking spots or a fancier pool might not jive with your own, and that's just life.

The rest is much harder given the unknowns but be conservative (say $1000 a year) and you can always be pleasantly surprised.

-W

LiveLean

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Re: Condo for my daughter while in college
« Reply #26 on: December 03, 2017, 07:41:09 PM »
Back in 2003, my dad didn't like the idea that my then 26-year-old sister was living in a rough part of NYC.

So he bought a $340K condo in midtown Manhattan and let her live there for basically the cost of condo fees and taxes.

Four months ago he sold it for $985,000. You might say, "Wow. Smart real estate investment."

No doubt. But he didn't do my sister any favors. She lived in 70-percent (at least) discounted housing for 14 years, spent the extra money on lifestyle creep and never made any investments or took steps toward financial independence. Now she's married, 41, with an 16-month old living nearby and she and husband are looking to move to Brooklyn, where they'll continue renting.

When you provide your adult children housing - whether they're 19-year-old college students or 20somethings, you're not doing them any favors. Let them live in the dorm or in a shitty apartment with roommates. That will motivate them.
Living lean at www.tolivelean.com

ManlyFather

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Re: Condo for my daughter while in college
« Reply #27 on: December 04, 2017, 12:36:27 PM »
When you provide your adult children housing - whether they're 19-year-old college students or 20somethings, you're not doing them any favors. Let them live in the dorm or in a shitty apartment with roommates. That will motivate them.

+1

tralfamadorian

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Re: Condo for my daughter while in college
« Reply #28 on: December 04, 2017, 02:04:26 PM »
I have to disagree with the above two. To me, there is a huge difference between providing housing for a dependent during their undergraduate education and lifestyle subsidization for an adult child. If while providing that housing, the parent(s) provide their offspring with an important lesson in realities of real estate investment, all the better.

sokoloff

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Re: Condo for my daughter while in college
« Reply #29 on: December 04, 2017, 07:18:55 PM »
I went to a top engineering school. I learned more important things (in quality and quantity) in my college residence than I did in the lecture halls and labs. Don't let your kid miss that.

I'd seriously try to give your daughter the most "normal" college experience possible. That means living in the dorms with the other freshmen unless it's a 100% commuter college. If the norm for the school is staying in the dorm 4 years, I'd have her do at least 3. I'd rather my kids graduate $10K in debt with a dorm experience than with $50K in equity on a rental that I bought for them and made them live in with a roommate who always looked at them sideways because the condo was obviously bought with "daddy's money".

All just the opinion of some dude on the internet, of course.

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #30 on: December 05, 2017, 06:06:38 AM »
... All just the opinion of some dude on the internet, of course.
I think a lot of dude's on the internet would agree with you. As for me, I will continue pondering if I will use the opportunity to learn about real estate, being a land lord, etc.

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #31 on: December 05, 2017, 06:25:04 AM »
...
Four months ago he sold it for $985,000. You might say, "Wow. Smart real estate investment."
...
When you provide your adult children housing - whether they're 19-year-old college students or 20somethings, you're not doing them any favors. Let them live in the dorm or in a shitty apartment with roommates. That will motivate them.
Folks are going to draw a line in different areas here. After all, I could not pay for her college at all, maybe that will "motivate her". I've committed, if possible, to helping my children through college with the no debt. The commitment is not absolute nor indefinite and it depends on my ability to pay, their willingness to commit to college and their behavior and actions while in college. I am not concerned about me subsidizing their adult life (post college), because I have no intention of doing so.

As for selling the condo for 3X what I paid for it. That would be awesome.

ManlyFather

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Re: Condo for my daughter while in college
« Reply #32 on: December 05, 2017, 08:55:38 AM »
I have to disagree with the above two. To me, there is a huge difference between providing housing for a dependent during their undergraduate education and lifestyle subsidization for an adult child. If while providing that housing, the parent(s) provide their offspring with an important lesson in realities of real estate investment, all the better.

Providing housing IS lifestyle subsidization.

marielle

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Re: Condo for my daughter while in college
« Reply #33 on: December 05, 2017, 09:26:43 AM »
When you provide your adult children housing - whether they're 19-year-old college students or 20somethings, you're not doing them any favors. Let them live in the dorm or in a shitty apartment with roommates. That will motivate them.

+1

+2 Coming from the perspective of a recent college grad. I did get help with rent money, but I took out loans for tuition. Figuring out where to live, how to live with roommates, how security deposits work, how pet restrictions work, etc was a huge part of the experience of learning what it takes to live on your own. If it were not for this I would have been completely lost about how to get an apartment for my first real job.

I lived in a dorm the first year too but it's not really necessary, you can live within walking distance of campus and still be very involved in campus activities. If I had to live in a condo my parents bought for me that would just have been weird and awkward. I would have felt like I had to lie to people to fit in. I've also made friends with roommates before which is not uncommon but not sure that will happen in a situation like this. With the whole dynamic of her parents owning the condo I probably would have felt weird as the other roommate as well. I was pretty much the "broke college student" since I didn't get money monthly for food and extras, so I don't know how well I would have related to someone from a much different background than me. She might have no problems blasting the AC because it's not her money, whereas I would want to set it to 76-78 to not be wasteful and to save money (if utilities were split). That's just one example of a potential issue. It could be a flat rate for rent with utilities included, but that just further reinforces the weird power dynamic.

I struggled being friends with students who were obviously well off because I felt like I couldn't relate to them. Most people were in a situation similar to mine, though. Or they at least are still living with roommates even if their parents are well off, not in a condo their parents bought for them.

Would she be driving from the condo or walking? It might be cheaper for her to live within walking distance with some roommates (or even on campus) than to have a car and the condo. I had my car the last three years but rarely drove and didn't buy a parking pass (which was $450) so it wasn't too bad.

tralfamadorian

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Re: Condo for my daughter while in college
« Reply #34 on: December 05, 2017, 09:28:47 AM »
I have to disagree with the above two. To me, there is a huge difference between providing housing for a dependent during their undergraduate education and lifestyle subsidization for an adult child. If while providing that housing, the parent(s) provide their offspring with an important lesson in realities of real estate investment, all the better.

Providing housing IS lifestyle subsidization.

See the rest of the phrase for appropriate context. I'm not sure where the resistance to this idea is coming from. Do you all really think that it's inappropriate for parents to support their children during their undergraduate education?

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #35 on: December 05, 2017, 09:51:14 AM »
I'm not sure where the resistance to this idea is coming from. Do you all really think that it's inappropriate for parents to support their children during their undergraduate education?
Neither you or I will change any minds on this issue. I should have phrased my original question as a real estate question near a college town without mentioned the context. Still, some posters gave me valuable feedback. For that I am grateful.

Marley09

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Re: Condo for my daughter while in college
« Reply #36 on: December 05, 2017, 09:57:41 AM »
OP- I don't have any specific advice about if you buy a condo for your daughter during her college years.  I had a friend in college who's father did the same thing, but I had plenty of other friends who stayed in college housing the entire four years.  It's really about personal preference...

My off topic comment:  If you do decide to buy this condo for your daughter and a roommate, please make sure that you look into a personal umbrella policy for your liability.  One of the biggest problems with a house that is occupied by college kids is that they are college kids.  Even if your daughter is the most well-behaved, mild mannered child, her roommate may not be or if the roommate decides to throw a party/have people over when your daughter is not around, injuries can occur.  Protect yourself.  I would personally even go as far as looking into an LLC to divest personal liability for this property, since it seems like to would have assets to lose if something bad happens.

FINate

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Re: Condo for my daughter while in college
« Reply #37 on: December 05, 2017, 10:07:31 AM »
When you provide your adult children housing - whether they're 19-year-old college students or 20somethings, you're not doing them any favors. Let them live in the dorm or in a shitty apartment with roommates. That will motivate them.

+1
+2 Coming from the perspective of a recent college grad. I did get help with rent money, but I took out loans for tuition. Figuring out where to live, how to live with roommates, how security deposits work, how pet restrictions work, etc was a huge part of the experience of learning what it takes to live on your own. If it were not for this I would have been completely lost about how to get an apartment for my first real job.

I lived at home while commuting to college, yet had no difficulty whatsoever figuring out the process of finding an apartment after graduating. It's not rocket science, and compared to completing a comp. sci. degree it's a cake walk. IMHO college as means to adult preparedness is vastly overrated. YMMV I guess.

therethere

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Re: Condo for my daughter while in college
« Reply #38 on: December 05, 2017, 10:10:46 AM »
When I went to school, a decent amount of the "rich kids" parents did this. Bought a house with 2-3 apartments, let their kid live there rent free, and then rented out the rest. It definitely drew the line in the sand of the well-off kids versus the regular middle or low class kids. It was obvious the kids that paying their way versus those being subsidized by their parents. At least for me it created a big us versus them class mindset. I don't think it was specifically the housing, but in general the financial support and mingling of parents at a time when you have to start figuring out life for yourself. It was also quite annoying because the kids parents were just making money off less well off students rent money and driving up rental prices.

I know you are looking at it from a money/convenience perspective. But unfortunately there could be a lot of social implications. I definitely would not advise it for freshman year.
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Cromacster

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Re: Condo for my daughter while in college
« Reply #39 on: December 05, 2017, 10:16:11 AM »
When I went to school, a decent amount of the "rich kids" parents did this. Bought a house with 2-3 apartments, let their kid live there rent free, and then rented out the rest. It definitely drew the line in the sand of the well-off kids versus the regular middle or low class kids. It was obvious the kids that paying their way versus those being subsidized by their parents. At least for me it created a big us versus them class mindset. I don't think it was specifically the housing, but in general the financial support and mingling of parents at a time when you have to start figuring out life for yourself. It was also quite annoying because the kids parents were just making money off less well off students rent money and driving up rental prices.

I know you are looking at it from a money/convenience perspective. But unfortunately there could be a lot of social implications. I definitely would not advise it for freshman year.

I'm not discounting your experience, but that sentiment is a bit ridiculous.  People need housing and someone rents to them.  Why does it matter who owns it?  Rental markets in college towns will be hot as long as there are students looking to rent.
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Cwadda

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Re: Condo for my daughter while in college
« Reply #40 on: December 05, 2017, 10:16:55 AM »
Walt's advice is really good.  There are a TON of variables.  It's not just comparing the cost of dorm living vs. rent.

Buying a condo?  What is the HOA like? Is it a healthy association with reserves?  What are their rules for rental ratios (how many of the units have to be occupied by the owner)?  Do they allow college students to live there?  What are the town rules about students living in residential housing?  In the college town near me, only 3 unrelated adults can live in any given single family residence or condo.

Are you close enough to manage it?  Do you have to find a PM company? What happens if a tenant calls at 10:00 pm on a Sunday night saying the water isn't running?  What happens when a student punches a hole through a wall and lives in filth for a year?  What do you do if a tenant withdrawals from the school, leaves during the middle of night, and doesn't pay rent?

These aren't questions you necessarily have to answer, but are good to think about.

Quote
When I went to school, a decent amount of the "rich kids" parents did this. Bought a house with 2-3 apartments, let their kid live there rent free, and then rented out the rest.
Quote
I know you are looking at it from a money/convenience perspective. But unfortunately there could be a lot of social implications. I definitely would not advise it for freshman year.
Why would other students even have to know OP's daughter is the owner's daughter?  It's not necessary by any means.

I agree, that sentiment is a bit ridiculous.

therethere

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Re: Condo for my daughter while in college
« Reply #41 on: December 05, 2017, 10:27:33 AM »
I'm not saying the idea of isn't ridiculous looking back at it now. But it was my experience and could very likely be someone else's (I know it was for some of my peers in college too). You think 17-20 year old's think rationally?! You think they keep private things like their parents owning their apartment or helping them in other monetary ways? No way. So sure you can shoot down my point as irrational, but that doesn't mean it doesn't happen. All I'm saying is that there are other effects to this than just monetary I'm just bringing them up.
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hoping2retire35

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Re: Condo for my daughter while in college
« Reply #42 on: December 05, 2017, 10:39:36 AM »
I have considered this a lot since I own an apartment in a nearby college town, which my kids are likely to attend.

Have them stay on campus 1 year (assuming you feel it is safe), then find roommates three years after. Don't buy unless you plan to keep.


Cwadda

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Re: Condo for my daughter while in college
« Reply #43 on: December 05, 2017, 10:40:46 AM »
I'm not saying the idea of isn't ridiculous looking back at it now. But it was my experience and could very likely be someone else's (I know it was for some of my peers in college too). You think 17-20 year old's think rationally?! You think they keep private things like their parents owning their apartment or helping them in other monetary ways? No way. So sure you can shoot down my point as irrational, but that doesn't mean it doesn't happen. All I'm saying is that there are other effects to this than just monetary I'm just bringing them up.

They are good points to bring up.  I think the easy way around it is to just never tell other tenants that the daughter is related. Or say that a relative used to live there.  Or just have an LLC and they have no idea who the owner is.  Or they never even meet the owner, just the property manager.  Lots of possibilities.

CoffeeRoyal

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Re: Condo for my daughter while in college
« Reply #44 on: December 05, 2017, 11:30:19 AM »
My off topic comment:  If you do decide to buy this condo for your daughter and a roommate, please make sure that you look into a personal umbrella policy for your liability.  One of the biggest problems with a house that is occupied by college kids is that they are college kids.  Even if your daughter is the most well-behaved, mild mannered child, her roommate may not be or if the roommate decides to throw a party/have people over when your daughter is not around, injuries can occur.  Protect yourself.  I would personally even go as far as looking into an LLC to divest personal liability for this property, since it seems like to would have assets to lose if something bad happens.
I have an umbrella and without an umbrella or an LLC or both, this is not an option. I have a business LLC, but it is have never been used for real estate so the most likely cause of action is a new LLC to hold the condo.

Two questions for those who own real estate. Would anyone recommend *against* an LLC to hold the real estate? If so, why?

Some real estate people place every dwelling they own into a separate LLC. That is not an issue yet, but would that be advisable course of action?





marielle

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Re: Condo for my daughter while in college
« Reply #45 on: December 05, 2017, 11:47:11 AM »
I'm not saying the idea of isn't ridiculous looking back at it now. But it was my experience and could very likely be someone else's (I know it was for some of my peers in college too). You think 17-20 year old's think rationally?! You think they keep private things like their parents owning their apartment or helping them in other monetary ways? No way. So sure you can shoot down my point as irrational, but that doesn't mean it doesn't happen. All I'm saying is that there are other effects to this than just monetary I'm just bringing them up.

They are good points to bring up.  I think the easy way around it is to just never tell other tenants that the daughter is related. Or say that a relative used to live there.  Or just have an LLC and they have no idea who the owner is.  Or they never even meet the owner, just the property manager.  Lots of possibilities.

Yeah...I really can't imagine her keeping this secret without lying. Her friends will ask how much rent she pays (very common topic of discussion with college students), questions about utilities, questions about roommates, etc. She either has to say she doesn't pay rent because her parents own it or lie. There is a very good chance that her roommates will be her friends or will hang out with her groups when they're over. Unless you rent to non-college students or older adults.

sokoloff

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Re: Condo for my daughter while in college
« Reply #46 on: December 05, 2017, 12:00:39 PM »
My closest college friends knew that we had rental property 5 states away and I'm not a particularly blabbermouthed type.

I can't imagine that DD is going to live secretly in the house of a mysterious LLC and no one is going to find out.

PoutineLover

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Re: Condo for my daughter while in college
« Reply #47 on: December 05, 2017, 12:07:43 PM »
I can see the value of getting a condo if you were going to pay her rent anyway. Very few college students are fully self sufficient, usually they use some combination of savings, work, parents, loans and scholarships to cover the costs. I knew lots of students whose parents paid their tuition and rent and living expenses so they wouldn't have to work and they could focus fully on their studies and I don't think that causes "class divisions". However, I think that the younger you are forced to fend for yourself, the better you get at it, and lots of those kids who never worked ended up back at home after graduation. If you buy the condo and are able to make some money from renting out another room and sell it after for the same or more, you'd probably save over paying her rent the whole time, if that's what you'd be doing otherwise.
Some parents don't believe in helping their kids at all, some think that both should contribute equally, and others believe that if you can you should, none of those options are more right or wrong, but they are dictated by family values and financial means. If you've decided that you will contribute, you just have to determine what is the most efficient way for your family.
That being said, I think living in a dorm in first year if you are from out of town is a great idea because it is a really good place to make friends and start building relationships, and a place to find potential roommates for the next year, an easier move back home if this college doesn't work out, and less pressure (I have this condo already I have to stay even though I hate it kind of pressure). So I think holding off until second year for the condo might be a better option.

tralfamadorian

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Re: Condo for my daughter while in college
« Reply #48 on: December 05, 2017, 12:54:36 PM »
Two questions for those who own real estate. Would anyone recommend *against* an LLC to hold the real estate? If so, why?

Some real estate people place every dwelling they own into a separate LLC. That is not an issue yet, but would that be advisable course of action?

*Raising hand* When you purchase with a LLC, your loan is a portfolio loan aka commercial loan. Amortization is 15-30 years, rates are 1-3% above residential and they are short-term (so in 3-10 years, you have to go back and renegotiate these terms with the bank again). Many banks are also not anxious to loan small amounts such as the cost of a single condo. It's not ideal and most investors max out their Fannie/Freddie loans before moving onto these.

The 10 fixed-rate 30 year mortgages that the government subsidizes are a gift. Use them. Your best shields against liability are land trusts (for privacy) and LLC management separated from the ownership of the property- either 3rd party management or your own- combined with a healthy umbrella policy. Now some people do purchase their properties in their own name to get the good mortgage, then move the property to a LLC. But this does break the terms of their loan and can have serious consequences if the bank decides to move on that. 

This is your first investment property. Purchase in your own name and hold a good umbrella policy. If you decide that real estate is for you and you purchase many more properties, you can go back later and create a more elaborate structure if you wish.
« Last Edit: December 05, 2017, 01:10:54 PM by tralfamadorian »

Marley09

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Re: Condo for my daughter while in college
« Reply #49 on: December 05, 2017, 12:57:31 PM »
My off topic comment:  If you do decide to buy this condo for your daughter and a roommate, please make sure that you look into a personal umbrella policy for your liability.  One of the biggest problems with a house that is occupied by college kids is that they are college kids.  Even if your daughter is the most well-behaved, mild mannered child, her roommate may not be or if the roommate decides to throw a party/have people over when your daughter is not around, injuries can occur.  Protect yourself.  I would personally even go as far as looking into an LLC to divest personal liability for this property, since it seems like to would have assets to lose if something bad happens.
I have an umbrella and without an umbrella or an LLC or both, this is not an option. I have a business LLC, but it is have never been used for real estate so the most likely cause of action is a new LLC to hold the condo.

Two questions for those who own real estate. Would anyone recommend *against* an LLC to hold the real estate? If so, why?

Some real estate people place every dwelling they own into a separate LLC. That is not an issue yet, but would that be advisable course of action?

In regards to the two questions posed above:  Since you already have an LLC, I assume that these items are not issues for you; In some states the annual fee for LLC's is very high (like over $500/year) and then you have the annual cost to file a separate tax return for the LLC and there are the fees to set up the LLC at the beginning, etc. If the LLC fees would negate any profits, then one would have to consider if it is worth the money.

I am personally in the separate LLC for every rental dwelling and on top of that a separate insurance policy for each LLC.  This is because:
1. The LLC will protect your personal assets from liability litigation
2. A separate LLC for every rental property will protect the assets within one LLC from litigation against another LLC
3. Each LLC having a separate insurance policy will give each dwelling a separate liability limits 

For example, say that you have all of your 3 separate LLC's (rental properties) insured under one insurance policy with $1M occurence / $2M aggregate limits.  One night, in house 1 the students are partying and someone falls off the second story balcony and they are injured to the tune of $1M, then the next night at house 2 another party causes another injury for $1M, at that point if any other injuries occur within the policy term, the $2M aggregate limit was met and you no longer have liability coverage for your rental properties for the rest of the policy term.  If the dwellings were on separate policies, with separate $1M/$2M limits there would still be coverage.  It would be rare that this situation would occur, but personally, separate LLC's and separate insurance policies helps me sleep at night :)

 
*Edited for spelling and grammar
« Last Edit: December 05, 2017, 01:01:53 PM by Marley09 »