Can You Profit From Your Kid's College Housing Costs?
Your child is off to college! They’re looking forward to expanding their horizons and meeting new people. You’re dreading four years of tuition payments. So maybe you’re looking at housing expense as a chance to make an investment instead of just another check you’re writing each month.
Before you dive in, what’s your plan?
Whose house is it?
Is this your investment property? Or is the plan for this to eventually be your child’s home? You can actually help your child buy the house while they’re in college using the FHA “Kiddie Condo” loan program. That program lets someone and their blood relative co-borrow for a mortgage as long as one of the borrowers is using it as their primary residence.
How long will you own it?
You’re probably hoping your child is going to graduate in four to five years. So what happens to the house after that? If you’re planning on selling it you might want to think about an adjustable-rate mortgage. They usually have a low, fixed-rate introductory period and if you plan on selling before that’s over, you can save yourself some money. But if you plan on renting it out after your child graduates, then you might want to consider a different type of mortgage.
There’s a lot that goes into being a landlord. Getting things fixed, making sure everyone pays rent on time, enforcing the house rules. It could be an opportunity for your child to become more responsible and see what it’s like being a homeowner/business owner. But even if you have the most responsible kid in the world, they’re still going to have a lot of other things on their plate. School work, internships, jobs, a social life. So do you want to rely on them to be a co-landlord? If you don’t think your child can handle the responsibility (or you just want them to focus on school) you’ll have to consider doing it yourself or hiring a property management company.
Location, location, location
Ok, so your child’s college choice narrows this one down for you a lot. But you still have some choices to make. Don’t just think about your child’s life right now, think what you plan on doing with the house long-term. If it’s always going to be a college rental, then close to campus is a definite plus. But if you’re in a big city and want to just rent it in general, you might choose a more up and coming neighborhood or one close to great amenities like parks, bus stops, or nightlife.
Fixed housing expenses
If you were planning on paying for your child’s housing expenses anyway, owning a house will give you some stability. You know what your mortgage payments are going to be every month. But if your child were living on campus or renting from someone else the payments might go up year-to-year.
If all the renters plan on going home (or traveling) during the summer that might have an effect on your homeowner's insurance. Some of them have rules about leaving the house empty for a certain period of time, so be sure to check.