Wealth Insights

College housing: Should parents consider buying instead of renting?

Key takeaways

• Housing can be a significant college expense with on-campus room and board averaging more than $14,000 per year at public universities, while off-campus rents vary by market.
• Purchasing property in a college town may allow families to build equity instead of paying rent.
• Ownership may have potential tax advantages, including potential deductions for mortgage interest, property taxes, and certain rental-related expenses under current tax laws.
• Renting extra bedrooms to roommates could help offset mortgage payments and property ownership costs.
• After graduation the property could be converted into a long-term rental investment.

Rather than paying rent for your college student, would it be more advantageous to invest in a college town property?

It’s time to send your student 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. Some universities require students to live on campus, at least for part of their time in college. Others encourage off campus living due to limited offerings on campus. And housing costs – on or off campus can add up quickly. Rental and college housing rates vary widely across the country, but the average on-campus room and board for one year (nine months) at a public university is $14,034 per year (or $54,760 for four years ending in the 2025-2026 academic year) according to Education Data Initiative research.

Living off campus can bring an even higher housing cost. According to Zillow’s data on college town rent costs, that average monthly bill can be anywhere from $986 in Monroe, Louisiana to $2,713 in Naples, Florida. But, as expected, the housing prices in college hot spots could also come in higher as well. Redfin noted the most and least expensive housing costs in college towns, with the second highest (the highest can be found in California) in the nation located in Boca Raton with close proximity to Florida Atlantic University. Some of the least expensive housing markets are in Southern college towns as well and include Greenville, NC, home of East Carolina University, Tuscaloosa, Alabama, home of the University of Alabama, and Lubbock, Texas, home of Texas Tech University. According to the site, each of these markets has an average home price hovering around $250,000.

Considering the total, for some, it might make more sense to purchase an apartment, condo, or townhome for your child to live in while at college. If you have a college student now or will in the future, you may want to weigh the benefits and costs to decide what’s right for you and your family’s financial picture.

Benefits of purchasing real estate for college housing

One of the benefits of purchasing rather than renting is similar to one of the benefits of buying rather than renting for your own living situation. The money you would be spending on student housing could go towards an investment instead. In addition to saving on room and board, there may also be tax benefits to purchasing real estate. You may be able to deduct mortgage interest and property taxes, and if you receive income from rent, you may be able to claim some of the expenses as business deductions, under current tax laws.

If the property is large enough, you could rent out additional rooms to help defray the cost of the mortgage and other property ownership expenses. Creating a lease agreement for your student and their roommate(s) may help ensure that they take care of your investment property. Once your student graduates, you could sell the property, keep it for a second child who plans to attend the same college, or use it as an income-generating rental property to future college students.

Costs of purchasing real estate for college housing

While the benefits may seem enticing, there are key considerations to consider. First, purchasing an investment property, much like purchasing a primary home, can come with additional costs. Besides the down payment, closing costs or fees, and a mortgage, you will need to plan for taxes, property insurance, and ongoing maintenance costs.

Second, if you plan to sell the property 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 primary home and may come with additional legal and tax implications.

Third, if your student decides they may not want to live off campus, and even if they decide they do, there is the expectation of added responsibility to take care of the property.

And of course, normal wear and tear from everyday living will happen. Normal can quickly become excessive, and there may be more potential for this to happen with teenagers and young adults involved. Even if your student (and any roommates or guests) is willing to take pristine care of the property, you should be prepared for repairs and maintenance.

Do your homework

Even modest properties in lower cost markets can cost hundreds of thousands of dollars, so the finances of making such an investment may not work for everyone. But for those who are seeking to offset part of the ever-rising cost of sending a child to college, purchasing property may be an option.

Always consult a tax and/or wealth advisor before making any investment decisions. And it is important to connect with other professionals including realtors, insurance agents, and lenders who can also provide valuable information when considering your options. Housing markets vary, and certain markets may make for better investment potential than others.

Talk with your Regions Wealth Advisor about:

1. How or if investment properties may fit into your overall wealth plan.
2. Ways to save for college, including the benefits of 529 plans and how trusts can help fund a college education.
3. The pros and cons of providing financial support to your college student while helping prepare your child for life after graduation.

Interested in talking with an advisor but don’t have one?
Find a contact in your area or get started on your journey via our wealth management guide.