A RE/MAX star explains why parents of a college student may want to swap the “rent drain” of an apartment for the equity of a condo
By Duane Duggan
Editor’s note: In his new book, REALTOR® for Life, RE/MAX Associate Duane Duggan shares ideas for serving clients by expanding their knowledge of real estate possibilities. In this excerpt, the 38-year industry veteran discusses the benefits of purchasing property for a college-bound son or daughter.
Colorado has no shortage of world-renowned universities, which has helped me connect with clients on an important real estate investment strategy: Buying a condo for their college student to live in while attending school. It’s a strategy many may never think of themselves, so it’s our responsibility as agents to educate clients on new opportunities. Purchasing a condo for college-age children is beneficial to parents in several ways:
- They can build equity
The most obvious benefit is that your client will be building equity in a home instead of throwing money down the drain in rent. Chances are the student can find a friend to pay rent that goes toward the monthly mortgage payment. If the property appreciates in value, your client can sell it for a profit when the student graduates — or they can keep it as an income property.
I’ve seen this strategy work well for several clients, especially families where two, three or more of their children attended the same college. In some cases, the family’s use of the condo spanned a 10-year time frame.
- They avoid rising rents
Apartment rents in college towns typically increase on an annual basis. By purchasing a property with a fixed-rate mortgage, the student’s housing expense will be fixed. In addition, they won’t have to deal with paying security deposits or going through the hassle of getting the deposit back.
- Students receive real-world financial experience
The benefit to your client can go far beyond financial motivations. By purchasing a home for the student, the clients will be providing their child with an excellent learning experience. The student will learn not only about the process of investing in real estate, but also the responsibilities that go along with property ownership.
- Students will be more settled
The student will also have a greater sense of stability in that they won’t need to look for a different apartment to live in each year. They also won’t have to worry about storing furniture over the summer break.
I’ve experienced success with this strategy first hand. I have two sons who attended the University of Colorado. I bought them each a condo using owner occupied FHA financing. Each lived in the unit and had a roommate paying rent to help pay the monthly mortgage. At the end of their college careers, they had built up some significant real estate equity to utilize in the next phase of their lives.