Down Payment Articles & Advice

To Buy or Rent For Your College Student

September always means Back To School, and for thousands of families it also signals Off To College. In addition, more and more young people are opting to continue their education with post-graduate studies.

Once a student is past the Mandatory - Freshman - Year - In - The - Dorm Policy that many colleges have, parents face an interesting dilemma: should they continue to shell out rent, or considering buying a property for their children to occupy while attending school?

Here is a TRUE Story.

In 1994, A young man decided to attend North Carolina State University. He enrolled in a combination Master/Ph.D. program. This meant he would be in Raleigh, NC for the next four -six years. After investigating the rental options in the area, his parents decided to help him purchase a townhouse.

This was the deal. A 3 bedroom, 2½ bath townhouse in close proximity to the school was bought for $72,500. Because the young man would occupy the property, he qualified for a minimum down payment, FHA mortgage. Because he had very little income of his own, (a small living stipend offered by the University), he needed his parents to co-sign the mortgage. The total outlay of cash (down payment and closing costs) was approximately $5000, which the parents provided. The total mortgage payments were around $760. With the help of a local rental agent, the young man was able to quickly identify two other graduate students who wanted to share the house. They each paid $400 a month, and all shared the utilities.

Fast forward four years. It is now 1998. The young man has lived virtually rent free during this time. From his living stipend, he would even have been able to re-pay his parents the $5000 they invested. (Note the use of the phrase "would have been able to". Since this a TRUE story, the truth is - he didn't!). Almost four years to the date that the property was settled, the young man had the townhouse appraised. The appraisal revealed a value of $98,000!

Partially because he didn't have to worry about moving, or fret about uncooperative landlords, the young man did well in his studies. He now looks forward to graduating with his Ph.D. in the near future. Thanks to his ownership of the townhouse, he has also established a good credit history, learned some valuable lessons in responsibility, and earned a whooping $26, 500 in appreciation!

This TRUE story reveals the distinct advantages to buying, as opposed to renting, for students. It also illustrates the factors that should be present to keep such a purchase from becoming an abject failure, instead of a resounding success.

Before You Buy For Your Student, Ask Yourself:

• Can my child handle the responsibility of ownership? This is more often a question of maturity than an issue of chronological age. Some students are perfect for this arrangement at twenty, and some are not ready by thirty!

• Does the city/town where the school is located have suitable housing, at a reasonable price, to purchase? If your child is attending N.Y.U. and wants to live in Greenwich Village, you probably are NOT going to make the numbers work!

• Is property appreciating in the area; is this a "hot" location? With Raleigh recently rated #2 among southern cities, it is easy to see why this townhouse rose in value.

• Will there be a steady supply of good tenants? If quality student housing is in short supply, then chances are excellent that the unit will never be without a good tenant.

If the answer to all these questions is "Yes", then you might do well to examine this option. Beginning the process is quite easy. Search the web for a good agent from that area, explain your goals, and leave the rest up to your real estate professional. If you've made the right decision and found the right REALTOR®, you won't be the first parents this agent has helped.

Since 1989 Dan The Roommate Man has helped 1000's of people find roommates. Need help? Contact him at 800-487-8050 or www.roommateexpress.com info@roommateexpress.com

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