(This article is somewhate dated and parts have been removed but owning college rentals is still popular)
by Leif Larsen
Today, thanks to low interest rates and a Buyers´ Market in housing, the idea of parents buying a home for their university-bound children has become more attractive than ever. Parents investing in real estate around campuses is a growing trend nationwide in cities with universities, real estate professionals say, due in part to the significant role that room and board represents in higher education expenses. The College Board, the organization that administers the SAT exams and other entrance programs for its 4,700 member schools, reports that the average published charge for room and board in the 2005-06 school year was $6,636 for a four-year public school and $7,791 for a four-year private school. Over a nine month school year, that comes to roughly $737 and $866 per month, respectively. And unlike money spent on university housing or renting an apartment, the money spent on a mortgage can be recouped. The investment is also appealing to parents if multiple children are, or will be, attending school in the area and can use the home. Before purchasing here are a few things to consider:
Real estate, like any investment, is not a financial guarantee and most experts agree that at least three to five years are needed for a home investment to be profitable. But with appreciation averaging between 4% and 6% annually, it is not unreasonable to expect a minimum appreciation of 20% after four years. If you own the home for just a few years it´s likely that you will get enough appreciation to offset the expenses of buying and selling the property and end up with a profit.
Mortgage interest, property tax and mortgage insurance can be written off your taxes, just as they can on your primary residence. If you collect rent you can write off part of the utilities and maintenance, as well as take some depreciation on the property. Your best bet is to talk with your accountant to get more specific information about your situation.
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Update Note: The financing discussed in the article originally has changed. Please call me Lori for updated
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Leif Larsen was a National Mortgage Banker with Chicago Bancorp in South Barrington, Illinois when this article was written.