Condo for College Students

15 12 2005

More parents are viewing their children’s college experience as a way to get on the property ladder. As the real-estate market has taken off, so have parents’ interest in off-campus housing. And while most wait to buy until the child’s sophomore year, some parents figure the earlier, the better.

Historically low rates and flexible financing have driven the trend in recent years. The National Association of Realtors found last year that 6 percent of investment buyers purchased a second home for use by a child attending school, a figure that equates to about 169,000 properties. The association hadn’t asked the question before, so a year-to-year comparison isn’t available.

Many parents would rather buy a condominium or house rather than spend the money on campus housing, which has steadily risen. For 2004-2005, room and board amounted to $7,434 at four-year private colleges and $6,222 at four-year public colleges, according to the College Board.

The real impetus, though, is diversification of the portfolio, financial planners say. Amid bubble concerns, the college market is perceived as more secure because of the steady flow of incoming students.

Parents can write off mortgage interest and property taxes, and either sell the place at graduation or keep it as a rental property.

Parents of college-bound kids are jumping on the opportunity early, often when their child has just sent in applications. A popular purchase for parents is a two-bedroom, two-bath condo.

Nevertheless, parents should factor in a long holding time in the event of a market dip. Taxes and mortgage interest, while a write-off, may cause a cash-flow crunch.

While renting is an option, some parents might be ill-prepared to be landlords.

Parents might need to hire an agent to manage the property, especially if the condo or house is out of state. Parents also should consult a tax adviser about the differences between treating the property as a second home versus an investment property.

Source: Associated Press


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