Should You Invest in a Condo for Your College Student?

Instead of paying for rent for four (or five) years for your child, would it be more advantageous to invest in a condo for them instead?

It’s time to send your teenager off to college. They’ve chosen the school, have a major in mind, and are ready to take the leap. Now, you need to figure out where they will live. One cost that can quickly add up for students — and parents — is housing. Rental and college housing rates vary widely across the country; the average on-campus room and board for one year (nine months) at a public university is $10,440 for 2016-2017, according to CollegeBoard.

Considering the total, would it be better to invest that money by purchasing a condo for your child to live in while at college? Weigh the benefits and costs to decide what’s right for you.

Benefits of Purchasing a Condo for Your College Student

One benefit of purchasing instead of renting is that the money you would be spending on student housing will go towards an investment instead. In addition to saving on room and board, there are also tax benefits to purchasing a condo. You may be able to deduct mortgage interest rates and property taxes, and if you receive income from rent, you can claim some of the expenses as business deductions.

If the condo is large enough, you can rent out additional rooms to help defray the cost of the mortgage. Creating a lease agreement for your student and their roommate can help ensure that they take care of your investment property. Once your child graduates, you can sell the condo, keep it for a second child who plans to attend the same college, or use it as a rental property for future college students.

Costs of Purchasing a Condo for Your College Student

While the benefits may seem enticing, there are key considerations to take into account. First of all, purchasing an investment property can be expensive. Besides the down payment, closing costs or fees, and a mortgage, you need to also plan for taxes, property insurance, and maintenance costs.

If you plan to sell the condo when your student graduates, there’s no guarantee you’ll sell the property at a profit. Selling an investment property can be more work than selling your home and may include legal and tax implications as well.

If your soon-to-be college student decides they may not want to live off campus, and even if they decide they do, there will be the added responsibility of helping to care for your property.

Normal wear and tear happens, but “normal” can quickly become “excessive.” Unless your student is willing to take pristine care of the condo, be prepared for repairs and maintenance.

Do Your Homework

Even modest condos can cost hundreds of thousands of dollars, so the finances of such an arrangement won't work for everybody. But for those who are seeking to offset part of the ever-rising cost of sending a child to college, purchasing a condo might be a great idea.

Consult a tax or financial advisor before making any investment decisions. Other professionals like realtors, insurance agents, and lenders can also provide valuable information when weighing your options, such as the housing market expectations in the area.