The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: CoffeeR on December 01, 2017, 06:44:36 AM
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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?
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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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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.
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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?
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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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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.
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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.
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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.
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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.
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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.
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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.
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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.
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... 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.
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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?
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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.
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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.
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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.
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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.
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... 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.
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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.
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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.
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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.
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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.
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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.
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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
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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?
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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
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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.
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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
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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.
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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.
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... 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.
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Four months ago he sold it for $985,000. You might say, "Wow. Smart real estate investment."
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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.
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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.
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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.
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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?
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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.
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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.
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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.
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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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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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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.
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.
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.
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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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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.
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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.
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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?
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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.
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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.
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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.
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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.
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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
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In case any of you are speaking without knowing what dorms cost these days...at the state university where I teach (and older son goes to school), on-campus housing ranges from $900 per month to over $1500. PER PERSON, to share an old room with no dividers and one bathroom for four people. Plus a requirement to put $1000 into the "eat on campus" fund which is all chain restaurants instead of cafeterias. It is MUCH cheaper for my son to rent an apartment a few blocks from campus with a friend and ride the free campus bus in or bike/walk. If I had a daughter I would not want her in those overpriced dorms either because parking is far away and we have had several sexual assaults over the years of girls walking from cars to dorms. I think some people have a nostalgic and out-of-date view of what dorms are like based on their college experience. We are toying with the idea of a condo too, especially since we will have two in college at the same time for 2 years. They don't want to live together, so we're trying to decide how much to push the issue. They are VERY different.
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Most sexual assaults of young women in college take place indoors in their own living spaces, their friends' spaces, or in the living spaces of men they know. Vastly fewer assaults happen because of some boogeyman jumping out at you in the parking lot. Having your own apartment is not protecting your daughter from sexual assault. At all. All of us are far more likely to be raped and murdered by someone we know / are acquainted with than a stranger. (If you really want to do something about this, you could perhaps work to educate young men on how not to rape their college classmates.)
The idea that "dorms are dangerous" also seems rather wacky to me too; I never heard of that idea before. If anything, in many schools they keep extra close eye on kids in the dorms; you often have the institution looking over your shoulder. Heavy drinking/weed use can frequently occur there, however, and your kid might be more exposed to that sort of thing than she otherwise might.
To the OP: I also suggest having your daughter live on campus for the first year at least, then think about the condo. I agree with others that it could be weird socially when people find out that her parents bought her an apartment.
It could also just depend on the demographics of the school and what her own social scene is like. Is it a big state university where many kids are barely hanging on financially? Or is it a situation where many kids come from families rich enough to pay $150K cash for an apartment? Does she like to hang out with artsy bohemian types or business majors? This could all have an impact one way or the other (and I can see situations where it could go either way for both groups!).
I knew plenty of folks as an undergrad who rolled their eyes at the rich kids whose parents bought them condos and cars -- we thought of them as sheltered and naive, which they usually were. On the other hand, this was back when state tuition cost $1200 a semester and you could work low-wage jobs and actually have enough to pay rent and live decently. You'd graduate with $8000 in student loans, not $80,000. Those days are long gone. If I had the means I might not say no to the chance to buy my kid an apt either.
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In college, my roommate’s family was quite wealthy. We were required to live in dorms first year, but after that her parents bought her a condo and she did just what you described. Except......she decided to transfer to another school. So that was a waste. I think her parents just rented it out to random kids. They probably didn’t lose money.
But I wouldn’t have wanted to live there anyway, it was in a part of the town where it was hard to walk to class. My friends and I paid out the nose for an apartment that was walkable and safe to downtown with the bars and concert hall, and to class. I wouldn’t have had it any other way :) if your daughter is the one with the apartment, there is a lot less flexibility in her roommates. What if her best friends don’t want to live there? Then she’ll be more isolated.
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Most sexual assaults of young women in college take place indoors in their own living spaces, their friends' spaces, or in the living spaces of men they know. Vastly fewer assaults happen because of some boogeyman jumping out at you in the parking lot. Having your own apartment is not protecting your daughter from sexual assault. At all. All of us are far more likely to be raped and murdered by someone we know / are acquainted with than a stranger. (If you really want to do something about this, you could perhaps work to educate young men on how not to rape their college classmates.)
Uhhhh, my point was that IN ADDITION to all of those other (more likely) areas that can be unsafe, having to take a long, creepy walk in the dark 1/4 mile from your car in the middle of the night is YET ANOTHER situation that can lead to both actual danger and (more likely) the stress of the perception of danger. Also, I don't need you to tell me to educate young men not to rape their classmates. I'm a university professor and the mother of two boys, I think I've got this covered without your judgment-laden finger-wagging snippypants tone. You may not have intended for this to come off that way, but it sure as hell did. Send me your Paypal information and I'll give you a nickel for charm school. Sheesh.
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Most sexual assaults of young women in college take place indoors in their own living spaces, their friends' spaces, or in the living spaces of men they know. Vastly fewer assaults happen because of some boogeyman jumping out at you in the parking lot. Having your own apartment is not protecting your daughter from sexual assault. At all. All of us are far more likely to be raped and murdered by someone we know / are acquainted with than a stranger. (If you really want to do something about this, you could perhaps work to educate young men on how not to rape their college classmates.)
Uhhhh, my point was that IN ADDITION to all of those other (more likely) areas that can be unsafe, having to take a long, creepy walk in the dark 1/4 mile from your car in the middle of the night is YET ANOTHER situation that can lead to both actual danger and (more likely) the stress of the perception of danger. Also, I don't need you to tell me to educate young men not to rape their classmates. I'm a university professor and the mother of two boys, I think I've got this covered without your judgment-laden finger-wagging snippypants tone. You may not have intended for this to come off that way, but it sure as hell did. Send me your Paypal information and I'll give you a nickel for charm school. Sheesh.
So you are turning your daughter into a car clown, and indoctrinating her into being paranoid about being alone? Maybe you could benefit from a stint at "charm school" Sheesh.
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Most sexual assaults of young women in college take place indoors in their own living spaces, their friends' spaces, or in the living spaces of men they know. Vastly fewer assaults happen because of some boogeyman jumping out at you in the parking lot. Having your own apartment is not protecting your daughter from sexual assault. At all. All of us are far more likely to be raped and murdered by someone we know / are acquainted with than a stranger. (If you really want to do something about this, you could perhaps work to educate young men on how not to rape their college classmates.)
Uhhhh, my point was that IN ADDITION to all of those other (more likely) areas that can be unsafe, having to take a long, creepy walk in the dark 1/4 mile from your car in the middle of the night is YET ANOTHER situation that can lead to both actual danger and (more likely) the stress of the perception of danger. Also, I don't need you to tell me to educate young men not to rape their classmates. I'm a university professor and the mother of two boys, I think I've got this covered without your judgment-laden finger-wagging snippypants tone. You may not have intended for this to come off that way, but it sure as hell did. Send me your Paypal information and I'll give you a nickel for charm school. Sheesh.
So you are turning your daughter into a car clown, and indoctrinating her into being paranoid about being alone? Maybe you could benefit from a stint at "charm school" Sheesh.
Can you mansplain that some more please?
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Most sexual assaults of young women in college take place indoors in their own living spaces, their friends' spaces, or in the living spaces of men they know. Vastly fewer assaults happen because of some boogeyman jumping out at you in the parking lot. Having your own apartment is not protecting your daughter from sexual assault. At all. All of us are far more likely to be raped and murdered by someone we know / are acquainted with than a stranger. (If you really want to do something about this, you could perhaps work to educate young men on how not to rape their college classmates.)
Uhhhh, my point was that IN ADDITION to all of those other (more likely) areas that can be unsafe, having to take a long, creepy walk in the dark 1/4 mile from your car in the middle of the night is YET ANOTHER situation that can lead to both actual danger and (more likely) the stress of the perception of danger. Also, I don't need you to tell me to educate young men not to rape their classmates. I'm a university professor and the mother of two boys, I think I've got this covered without your judgment-laden finger-wagging snippypants tone. You may not have intended for this to come off that way, but it sure as hell did. Send me your Paypal information and I'll give you a nickel for charm school. Sheesh.
So you are turning your daughter into a car clown, and indoctrinating her into being paranoid about being alone? Maybe you could benefit from a stint at "charm school" Sheesh.
Can you mansplain that some more please?
Sure thing, boss!
The poster was sharing that while in the dorm, the daughter would also have a car. She did not mention bikes, which are usually parked in things called "racks" and these "racks" are typically located RIGHT NEXT TO THE ENTRANCE OF THE DORMS!!! If you read this one guy's blog (it's called "www.mrmoneymustache.com") you'll noticed that he thinks driving everywhere is stupid, especially if you can bike. Given that college campuses are designed to be walkable, using a bike is even more convenient!
As for being paranoid, the poster shared that the chance of being raped while walking away from the care is exceedingly rare, and is actually worried about her daughter feeling worried (instead of being worried about something useful).
Let me know if you need other explanations!
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Sure thing, boss!
The poster was sharing that while in the dorm, the daughter would also have a car. She did not mention bikes, which are usually parked in things called "racks" and these "racks" are typically located RIGHT NEXT TO THE ENTRANCE OF THE DORMS!!! If you read this one guy's blog (it's called "www.mrmoneymustache.com") you'll noticed that he thinks driving everywhere is stupid, especially if you can bike. Given that college campuses are designed to be walkable, using a bike is even more convenient!
As for being paranoid, the poster shared that the chance of being raped while walking away from the care is exceedingly rare, and is actually worried about her daughter feeling worried (instead of being worried about something useful).
Let me know if you need other explanations!
Maybe you can listen more rather than being so quick to explain the obvious :)
pegleglolita, the one you're responding to (not the OP) does indeed talk about biking and walking, and riding the free campus bus elsewhere in this thread.
Also, pegleglolita does not say that the danger is only perceived ("a long, creepy walk in the dark 1/4 mile from your car in the middle of the night is YET ANOTHER situation that can lead to both actual danger and (more likely) the stress of the perception of danger.") In another post pegleglolita mentions that at their college there have been past cases of sexual assault on going from cars to dorms. I know, I know, it's difficult to pay attention to details on internet forums, but try to keep up.
Perceived or actual, as a ManlyFather you don't have the perspective that a woman does w.r.t. sexual assault and the fear of it. You're just don't, so please stop trying to belittle people if, in their best judgement, they consider it a valid concern.
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... and (more likely) the stress of the perception of danger.")
...I know, I know, it's difficult to pay attention to details on internet forums, but try to keep up.
I'm not the one ignoring details... Good luck!
/unsubscribed
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The worst roommate situation I ever had was a girl whose father had bought her a condo while she was going to school. It was a two bedroom. She was living there with her boyfriend (her parents didn't know about him), and I took the other room. Found the place on Craigslist. I wasn't in school; I was working full time in my first job.
She and the boyfriend got a puppy. Then they broke up but the boyfriend kept living there for free. The puppy crapped everywhere and nobody ever took him out. The place stank. I would take the puppy on walks and they'd get mad at me for interfering. Random people were constantly coming over. Lots of fighting. I mostly camped out in my room and moved out and let them keep the deposit after two months. It sucked.
IMHO it just seemed like an entitlement situation on the girl's part. She was living on her own, rent free. You have to navigate a lot of tough decisions when you're starting out in adulthood. Seemed to me like the condo was just enabling her to take the easy way out on a lot of things.
Dorms are expensive and maybe even over-priced, but they somehow have this feeling to them that makes them unappealing, even though you might be living there on your parents' dime. Like...this is my schoolprison. Gotta work hard and get out of here. Haven't made it yet. This is a stepping stone.
Philosophically, I kinda prefer that over the homey feeling of having your own place. I don't want my kids to get too comfortable in college, you know? They might decide they never want to get out.
I know that's not the question OP was asking. Sounds like a question purely based on mathematics. Well, in that case: Personally, I own a condo, and in my real estate market and for our financial picture, it's the best of a lot of bad options. But condos kind of suck to own in a lot of ways. The biggest problem is that you have to own the property communally and condo boards aren't awesome. They make decisions much differently than I would do with my own property.
Just my two cents.
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OP, if you can parse through all the silliness that has swirled around my original answer to your post, I simply wanted to offer you my perspective as someone who 1) teaches at a university and lives in a university town, 2) has a child in college currently. I was really only trying to give a counterpoint to the "dorms are cheap and good for them!" chorus. Every university and town is different, and of course you and your daughter know that situation better than anyone here. As I pointed out, in our smallish town dominated by the large state school, for instance, dorm rooms with no kitchen (=eating expensive meals out a lot) go for 2x the price of rent with a roommate. Add to that the other things I mentioned, such as having to put a large chunk of money into the food fund that can only be used for eating at the many chain restaurants and few overpriced cafeterias on campus, and it's quite un-mustachian. In our town as well, thanks to suburban sprawl and poor city planning it would be difficult and frankly unsafe to bike to any of the major grocery stores, and although some would like to think that biking everywhere is the penultimate answer to everything, it simply isn't practical in some instances. Since you have said that you are interested in paying for your child's expenses, I am not sure why some here would so quickly poo-poo the thought of buying a condo and selling it (which MANY parents do in our town, it's not at all uncommon) and therefore saving a significant amount of money on room and board over 4 years. I definitely understand the appeal of flexibility that comes with renting, and of being on campus if they are far from home and not familiar with the town.
Also, contrary to the insinuations of some posters, I don't think that having some degree of apprehension about regularly walking long distances across campus alone at night as a woman means you are being "paranoid" or have been "indoctrinated". This is the reality that every woman you know lives with their entire life. Just ask them! #metoo I'm not saying we should live in plastic bubbles or walk around terrified all the time, but it is something to reasonably consider when selecting housing.
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OP, if you can parse through all the silliness that has swirled around my original answer to your post, I simply wanted to offer you my perspective as someone who 1) teaches at a university and lives in a university town, 2) has a child in college currently. I was really only trying to give a counterpoint to the "dorms are cheap and good for them!" chorus. Every university and town is different, and of course you and your daughter know that situation better than anyone here. As I pointed out, in our smallish town dominated by the large state school, for instance, dorm rooms with no kitchen (=eating expensive meals out a lot) go for 2x the price of rent with a roommate. Add to that the other things I mentioned, such as having to put a large chunk of money into the food fund that can only be used for eating at the many chain restaurants and few overpriced cafeterias on campus, and it's quite un-mustachian. In our town as well, thanks to suburban sprawl and poor city planning it would be difficult and frankly unsafe to bike to any of the major grocery stores, and although some would like to think that biking everywhere is the penultimate answer to everything, it simply isn't practical in some instances. Since you have said that you are interested in paying for your child's expenses, I am not sure why some here would so quickly poo-poo the thought of buying a condo and selling it (which MANY parents do in our town, it's not at all uncommon) and therefore saving a significant amount of money on room and board over 4 years. I definitely understand the appeal of flexibility that comes with renting, and of being on campus if they are far from home and not familiar with the town.
Also, contrary to the insinuations of some posters, I don't think that having some degree of apprehension about regularly walking long distances across campus alone at night as a woman means you are being "paranoid" or have been "indoctrinated". This is the reality that every woman you know lives with their entire life. Just ask them! #metoo I'm not saying we should live in plastic bubbles or walk around terrified all the time, but it is something to reasonably consider when selecting housing.
Thank you pegleglolita! I appreciate your comments and thoughts on the matter. As I have mentioned elsewhere, it has become clear to me that a large contingent of Mustacian strongly believe that providing too much help to anyone actually hurts them. Obviously there is some truth to that, however, I suspect many of the respondents (not all) are simply reflecting on their own path in life, on their own hardship(s) and believe that the appropriate way forward is one that is similar to what they experienced and lived through. Interestingly enough in some ways my desire for my children is based out of life experience as well. My parents paid for my college and I graduated with an advanced degree with no debt. I cannot tell you how grateful I am to my parents for this gift. My desire is to give my children the same gift. Again, as stated elsewhere, the desire is not absolute and depends on behavior and many other factors.
As for the financial aspects of purchasing a condo, it is clear to me that financially it is the least expensive way to pay for her housing (except her living at home). Dorms are expensive and so are apartments! Maybe you can save money by moving into a house with 4+ roommates, but most of these are in not-the-nicest-neighborhoods. Can things go wrong? Of course! For me the money works out even if there is no roommate, she decides the needs a different place to live (unlikely, this is a nice place and she knows it), she decides she must attend another college, etc. Many things can happen, the truth is the condo would also be a diversification investment for me. The only way I can see loosing money is the housing market collapses and for some reason my finances have changed and I have to sell. Could that happen? Yes. Could something happen I did not consider? Yes. Finally (as you mentioned yourself), it is not that unusual a move for parents in this town.
Of course, the other issue is that if I purchase a place for my daughter to live in I will have scarred her by not letting her character developed properly (she will be spoiled, etc.). We will have to make the judgement call as parents based on what we observe. I can assure you though she has taken some hard knocks in this world already and I am not a helicopter dad. Not that anyone should misunderstand... she does at times drive me up the wall and I most definitely do not agree with all her choices. The joys and anxieties of being a parent.
Would she do better in a dorm academically? Obviously I do not know and will likely never know, but I doubt it for many reasons. Interestingly I know of parents who purchased a place for their son because he was struggling academically in the dorms and moving him into his "own" place helped enormously. The exception does not make the rule, but I am not convinced it is the exception. I know of at least one person (son of a good friend of mine) that is thriving in a dorm environment.
I must thank you for bringing up the safety aspect of all this. Franky, I confess, I did not think of that much (my ignorance as a guy). The condo is in a gated community and even though there are no guarantees in life and nothing is completely safe, every bit helps.
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There are so many variables here. OP knows the details of the area where the school is. I teach at a small university where there is close in parking for commuting students, and many nearby condos and apartments, but almost everyone lives on campus the first year so most friendships are formed there. At this school her daughter would miss out on becoming friends with many others in her class by not living in the dorm. To me, meeting people very different from this I had grown up with was an important part of college. I wouldn't base this solely on financial considerations, although those also vary from one of institution to another. (My daughter attends a private college where a room and 21 (healthy; not fast food) meals a week costs $9000/year with free laundry, a fabulous work out center, etc. The large state university in my city has all the fast food vendors and charges significantly more) I also think living in a dorm is a great rite of passage. Since my freshman year of college I have always appreciated the luxury of choosing the people with whom I live. :).
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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.
I have two SFH that are rentals in two different college towns for the past 10 years. I love it. Cash flow and appreciation has been great.
For a condo, if you hold for 4 years, you will break even at best. I would consider it a waste of money and time.
The main reason I am against condo's near campus is because there are typically lots of them and many other parents try to do the same thing. With a typical hold period of 3 years, there are typically tons of them for sale. When you go to re-sell you it will be very difficult to see any appreciation.
If you buy a large single family home (4 or 5 bedrooms) near campus and hold for 10+ years, you can make some good money.
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For a condo, if you hold for 4 years, you will break even at best. I would consider it a waste of money and time.
I can see that if the rental is viewed as a stand-alone decision. Once I add the fact that the alternative is to pay rent, the numbers work out differently every which way I look at them.
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I understand the argument of dorms vs. renting an apartment. Dorms can be expensive and if someone thinks their kid can rent an apartment cheaper, go for it. Some parents buy their kid a $2,000 meal plan and the kid mostly eats cold cereal. I was an athlete and a big eater my freshman year, so the meal plan was very much worth it to my parents.
However, going one step further and buying a condo with a 3-4 year hold period is much different. I really don't see that as an investment. I see that as gift to my kid with a financial cost.
Do you think your kid could get roommates to sign a one-year lease? I have one-year leases on my properties but they are single family homes very close to campus. One college requires students to take 9 units of summer school as a graduation requirement. This particular college has more students that live there during the summer than most.
If you think the numbers work in favor of buying, share some numbers. I promise to be kind and realistic.
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Something else worth noting....
Most college landlords are assholes. And absent of that they might be legit companies, but they have all the leverage and they know it. Sure you might find a unicorn, but it's doubtful. This is my personal experience in a few different college towns so YMMV.
You might be buying a place further out so you might not have this problem, however then she is just another commuter and won't get the 'college experience' that some of the others have mentioned.
Where I am there are TONS of doubles, I would pick one of these rent one side to your daughter and her friends, then rent out the other side as well. However that is just what I would do. I do have some experience in this, but it's not terriblely difficult. I've found that college students are usually very good tenants.
Lots of folks on here make a great living in real estate, and we almost all started with a single property......
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For those who replied to my question. Thanks.
We ended up not buying the condo and my daughter is renting in a gated community, going to college, having a good time. At the end we decided we did not want to be landlords. Also, having my daughter deal with "management" at a rental unit is a real good learning experience, one she would not have if I was her landlord. I know that the "management" of the unit she is in is decidedly average (with a lot worse available), it is her first experience in such matters and she has already told me she is thinking of moving out and finding a home to lease with a couple of friends. If that is a good idea is another question for another day (it could go either way).
Thanks again.
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I think that's probably a good choice. I'm all for rental property in the right situations, but if you have a set timeline to buy and then sell, you might be stuck buying high and selling low. Plus it limits your options. I rented a room in a condo in college that the parents had bought in a similar situation. They unfortunately bought at a peak and when their son finished, prices had gone down quite a bit.
If you do the math and plan to hold long term, then you can get through those downturns, but it's tougher if you have a timeline that's not flexible.
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Thanks for coming back and letting us know what you decided @CoffeeR !