My wife and I are very interested on purchasing our first investment property. We are thinking of buying a town home or condo for our college student to stay at and renting out the rest of the bedrooms to other students. To anyone who has or had done this, please share your pro's and cons. I have read many horror stories of college rentals. But I am sure there are plenty of positive stories as well. We are planning on hiring a managing company for this property.
Thank you all!!!
You attain your goal of getting a rental property.
You provide housing for your son, and there is direct eyes/boots on the ground.
You may be able to buy at a discount given the limited interest in student housing at the moment.
Usually parents will cosign for the kids.
They're college aged kids.
Do you have a plan for once your son graduates? Do you hold it?
Unknowns regarding COVID - what's your timeline here?
@Pete Silan My clients have told me things usually run very smoothly when their child is living in the property for the first 1-3 years. It is after that they sometimes run into issues. I'd advise trying to work with your son to find underclassmen from your hometown or surrounding neighborhoods after he graduates. This gives you an added layer of protection since Mom and Dad (co-signers) know you are local.
I am curious to know why you are planning to hire a property management company to manage it when your son will actually be living there. Is he that irresponsible or incompetent? If that is the case, I would not even consider it. I actually began my real estate investment adventure by buying a 3 bedroom condo when I was in college. I did it on my own initiative. I borrowed $5k from my mom and she signed for the mortgage. I advertised for and screened the tenants (who were other students). I had very strict rules. If I got complaints from the neighbours, I dealt with it quickly and evicted the perpetrators. Once I graduated college, and I landed my first job, I finally had the place to myself. I sold it shortly thereafter and invested the proceeds in my first triplex. The moral of this story is, if your son wants to do this and is willing to take on the responsibility while open to learning what he does not know, go for it. It will be a great practical education for him. OTH, if you are going to impose this on him with little interest on his part, don't do it.
Thank you for your response. My time line is in the next 6 months. Although my college student will be freshmen next year and has to stay in the campus for the first year. We would like to get everything started as soon as we find out which school she gets accepted. We have a choice of two cities within a couple of hours from our main residency. Everyone talks about housing market crashing next year but we just have to see.
Thank you for your response. That is good to hear, we are hoping that our younger kids wants to be in the same school as their older sibling. Wishful thinking. But since the school is only a couple of hours from our main residence, we feel that the finding college tenants may be slightly easier from word of the mouth or just in the neighborhood. What is your take on condo vs townhome? Some condo fees are to the roof.
Thank you for your response. We are actually super lucky that we have a great daughter who is responsible and smart. I pitched the idea to my wife because I don’t want any issues while our daughter is in school. But listening to you and more people in this forum makes us realize that we may just co signed for her if it is possible and like you said make her do the managing. I need to talk to a broker and lender how can we do this. Thanks
(1) Premium Yields
(2) Parents as Guarantors
(3) High Occupancy
(1) Higher Wear and Tear / More CapEx Requirements
(2) Shorter Term Tenancies
@Alexander Szikla thank you
@Pete Silan My wife and I did it while our oldest son was in college. He acted as the property manager. It worked well. It was a very nice investment while he was in school. Yes, college boys are rough on a property, but not too bad. We made them put down security deposits. We didn’t have a good plan once he graduated. We did AirBNB for a year and then sold it for a nice profit just before COVID hit. Very fortunate timing on our part.
@Todd Flippo thank you for your input. I am leaning towards my daughter being in charge now rather than MC. Thanks
In my city, home of a few colleges, you would still need a rental license to do this type of arrangement. The local paper here highlighted homes this exact setup (parent owned, child lives thee with friends and splitting the cost) getting shut down and everyone had to find a new place to live mid-school year. Not sure what other fees or penalties were involved. I would consider doing it if the terms were clear with your student and they had some level of skin in the game either financial or other type of responsibility.
@Jeff Rogers thanks for your input. I will check with a local realtor if this set up breaks any law.
Don't buy a condo. If the market crashes, getting loans for a condo is impossible so the value of the place crashes - the only offers to buy will be lowball cash offers. I had a friend whose parents did this with a townhouse in 2001 sold in 2006. Saved them 6k/year in apartment rent, minus the townhouse fees. Worked out well and they sold for 40k more. If they sold in 2008 it would have been a different story.
@Sarah Langley I am also on a fence with condo because of the high hoa/ condo fees but it seems that condo is more common around the area. A little cheaper and nicer than buying a single older house. Townhome is more like what we would like to purchase but we have been looking and watching the market in the area. My mom bought a condo back in the 90’s and everyone discouraged her from buying it. She sold it early 2003 for nearly triple the price. Luck and timing 😀. Thanks for the input I appreciate it.
Both of our rental properties we have came about as a result of our children going out of state for college, and knowing there was no way for us to cover the cost of tuition and living/dorm expenses for them. We have a 4/2 + 2/1 duplex + studio addition in Arizona and another 4/2 (+1) SFR in Oregon. 3 of my 4 children lived there during their time in college (after freshman year) and it's been a great investment overall with very few headaches or damage over the last 6 years, even after COVID happened. We still have one living there who will graduate in the spring, and it has been a good life and "work" experience for them as well. We have done both individual room leases as well as one lease per dwelling unit.
We intend to keep them for a little while, even after our remaining child graduates, as it has worked out well for us!
At the very start we did 1 yr individual room leases, though we had some as school year leases from August 15 to May 15th from time to time. Even then (at least up until this past year with COVID and schools going online) we literally had times where one student was moving out the day after graduation, while the very next day we had another student waiting to move in after moving out of their dorms. So very little vacancy! Even this year we have been very fortunate as we have had responsible students that know our expectations and the leasing terms. And in most cases we also have the parents signing a financial responsibility form or sign as co-signer on the lease. From the very start we have required payments be done electronically (Zelle), or by direct deposit into our bank account—but during the last 3 years we now require all payments to be done via Cozy, which makes record keeping so much easier. Our children while they live there act as the “resident” property manager, but they do not handle any of the rent collection or security deposits. But they are responsible for showing the property, doing some “pre-screening”, relaying maintenance/repair requests, yardwork, cleaning, and doing some simple maintenance/repairs.
We actually purchased both properties from thousands of miles away, while my son went to view the properties with my realtor, and was also there in my place for the property inspections/walk through before closing.
So you really do not need property management, even if they aren’t moving in yet they can be your “boots on the ground”. Plus it will give them a good learning experience in being a good tenant or a good landlord in the future! :)
I knew there’s good story out there 🤗. Some investors are advising for me to co signed and let my daughter purchase the property. I am not sure if there is any advantages by doing it this way. Did you purchased the property or you consigned for your kids? I truly appreciate the time and input. Thank you very much
I think you should check with your CPA and see which would be more advantageous for you, as well as which is best for your family.
Personally I think it’s better to keep ownership of property, and that was the better option for us.
Another word of caution is make sure that your daughter knows the landlord tenant code for your state as well as fair housing laws. My daughter who lives in one of the units has high “expectations” of tenants and roommates which is good, but I’ve had to stress to her there were certain things we could not do, regardless of her personal feelings or annoyances.
I probably should mention some of the “cons” we have experienced although I would say the vast majority of our college student tenants have been great, there were several who had a shorter term lease (thankfully) that were a little problematic. :)
Among those, we have dealt with a couple of “helicopter moms”, a few roommate incompatibility “issues”, tenants leaving furniture behind (this can be good or bad) burst pipes (!) and one tenant (not a college student) in the studio who got a little behind in rent during Covid and developed some annoying habits and caused a little “drama” before moving out (we took rent owed out of security deposit) But over time we added clauses to our lease and we learned to deal effectively with the other situations to avoid repeats in the future. We now require all tenants to have rental insurance, including our own daughter. There is a higher turnover, but we also have had students who stay for 2-3 years as well.
@Joni Chin those are really good information. Thank you !!!
Don't do student rental in an HOA controlled property. That seems like a recipe for disaster. There are likely to be complaints, and the HOA has too much power to cause problems for you.
This thread should answer a lot of questions
I would never do a student rental in an HOA controlled property, too many busy-body neighbors will cause problems for you. Make sure the property is very close to campus, students are lazy and want to be as close as possible.
@Tim S. Thank you for your input. We currently living on an hoa neighborhood. I could see that if the property is condo. 👍
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