If you will be dropping off a college student for the fall term, it might be worth your time to check the prices of homes for sale near campus. Not only have some red-hot markets slowed considerably, but the housing cycle could move back into positive territory by the time your student graduates.
Some of the more consistent and stable real estate markets for traditional second homes and rental properties are the residential neighborhoods surrounding established colleges and universities. Why? The school isn’t going anywhere, and visiting faculty, staff and students will always need a roof over their heads.
According to the National Association of Realtors, not only are recent retirees “buying down” to smaller college towns with their educational amenities and vibrant social and athletic environment, but a growing number of business owners with relatively small groups of employees are also moving to smaller college towns for the convenience of research and a larger entry-level employee base. Buying a home in a college town and letting visiting faculty members rent it out and thereby reduce your mortgage is a great way to build an asset.
For parents with college-age children, purchasing a home to rent in a college town makes a lot of sense and provides an attractive alternative to dormitory living. When the student graduates and you are finally free of tuition bills, expensive textbooks and outrageous airline tickets, sell the college rental via a 1031 tax-free exchange and buy a rental condo in the sun that you can periodically enjoy.
One of the safest real estate moves is investing in a single-family residence, or duplex, in close proximity to a college or university. You will have a constant pool of renters, even if you eliminate the uncertain category known as “undergraduate males.” If you are considering purchasing in a college town, it’s always a good idea to know an adult who lives within a 30-minute drive of your rental property. That way, if the entire Greek Row camps in the backyard for the weekend, you can at least send someone to count the tents.
Here’s some quick suggestions you will not find in the campus bookstore:
- Ask the Housing Office what percentage of undergraduates live on campus. Are freshmen and sophomores required to do so?
- What is the cost of dormitory living? What amount does the school earmark for food?
- Does the school offer off-campus units? If so, how many and what is the monthly cost? Gauge your rent from this information.
- Does the school accept private homes as rentals to its faculty? If so, what is the referral fee?
- Initially, advertise your home for rent in faculty and administration circles only. Ask that your attractive flier be posted in the faculty lounge. Remember, not all faculty members are married with children. Two professors, or more, can share your place.
- Married graduate students often are ideal renters. One spouse is the breadwinner, the other a dedicated student. They pay the rent on time, are quiet, and watch movies at home on the weekends.
- While there are a lot of tobacco users on any campus, don’t allow them to live in your home.
- If you begin to get desperate for occupants, remember that female undergraduates are usually gentler on a dwelling than young men. When in doubt, allow an extra girl (the added income will pay off).
- If you are facing foreclosure and thus must rent to undergraduate males, send a cleaning service once a week and build the charge into the monthly rental amount. Not only will the service curtail damage, but also you can ask about extraordinary findings. When in doubt, do not allow an extra boy (the added income will not cover the extra wear and tear).
Some Realtors suggest that parents think “condo” rather than “single-family dwelling.” That’s because students rarely prioritize maintenance and upkeep issues that ultimately protect the investment. A condo eliminates chores such as grass cutting and gutter cleaning that need to be handled in a conventional home.
If you are a parent with college-bound kids, try to estimate how many years you expect your child to live in the near-campus rental. Many accountants advise parents with college kids to approximate what home prices will be when the student’s course work is done. And, if he or she transferred, would you want to rent to students who are not family members?
Next week: An alternative to renting to students.
Tom Kelly’s new book “Cashing In on a Second Home in Mexico: How to Buy, Sell and Profit from Property South of the Border” was written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores, on Amazon.com and on tomkelly.com. Tom can be reached at firstname.lastname@example.org.