During the last year or so of college my wife and I threw around the idea of owning investment property in our college town. During our college career we had both seen our fair share of horrible landlords (if there were any) and dumpy homes that were never maintained. We told ourselves that we would make great property owners and that we could easily maintain a nice looking home that could be rented out to four or six college kids. If we maintained the property, we were convinced that we could charge a bit more than the dumps in the neighborhood and still attract tenants.
Now that we’ve left that college town and are actually considering our investment options, it’s time to seriously consider an investment in student housing – but is it a good idea? Apparently off-campus student properties are providing good returns around southeastern and southwestern campuses, especially at public universities. But taking what you know about college students, would you want to maintain a house full of them?
One expert in the field of student housing ownership, Michael Zaransky, states “that for at least 20 years there will be a boom in the population turning 18 and a large percentage of them are choosing to go to college.” But do a large number of college students automatically mean that student housing is a good investment?
One suggestion is that your individual investment decisions should be made first on the ratio of university-owned beds to total enrolled students. The lower the ratio for the campus, the greater need for privately constructed student housing – and the greater demand for your off-campus property.
Another suggestion is to purchase property for your own children while they attend college. To help you purchase this type of student housing, the Federal Housing Administration offers something called a â€˜kiddie condo loanâ€™. This loan program is designed to allow both students and non-students to purchase a home with a blood-relativeâ€™s good credit standing and cash, according to MSNBC. These homes qualify for all tax advantages of a primary residence and require only 3 percent down. The owner-child can build a positive credit history as they escape from university dorm life.
But what happens when your son’s roommates are late on the rent? Can you deal with that awkward situation?
Although my wife and I are still researching the subject, student housing still looks to be a good real estate investment. Student housing properties bring in a steady positive cash flow (even after maintenance and insurance) and can even bring in enough to cover your mortgages. But when looking for college towns to invest in, look for areas with increasing rent prices that you can take advantage of – even if your child will never attend that school.