Opportunities in Investment Properties for College Students
Posted August 25, 2011
We Recommend...
Billy Yerman, CEO, The Strata Group
By William Yerman
Households throughout Maryland are scurrying around town in preparation to send their college-aged children off to the upcoming fall semester.
There is so much to buy - from clothing to footwear to dorm room accessories and furniture. Picked out a new comforter for the bed? Check. Select new posters to decorate the walls? Double-check. Visit the food store to stock up on a three-month supply of cup-a-noodles and bottled water? All completed on this end.
But financially-savvy households with a long-term plan might do well to ask themselves the following questions: Have we selected the perfect single-family house or town home - located within close proximity to Anywhere University - that my sophomore can live in for the next three years? Have we sat down, "done the math" and compared what we are paying for room and board expenses with what an average monthly mortgage payment would be?
The scenario is worth considering in an effort to combat the steady rise of college tuition, room and board costs. And, the position is supported by a recently-released survey by Move, Inc. that ranked Baltimore among the "Top 10 real estate markets in college towns" in the United States.
According to the report, "housing demand tends to be high in these places, vacancy rates low and rental prices are on the rise."
Purchasing a house in which a college student can live for four years - or more, factoring in graduate school - is not a common thought among parents with college-aged children, but a local financial and market analysis demonstrates it should be. Spending money on a college dormitory, apartment or space in a Greek house is the equivalent of renting an apartment for four years.
With more than ten colleges and universities in our immediate area, we see great opportunities in the purchase of an investment property that can produce long-term dividends.
According to the survey, the median price of a house in the Baltimore area is approximately $243,000. With a monthly mortgage of approximately $1370.00, you could still rent the balance of the space in the house to other college students, creating positive cash flow. The average rent for a two-bedroom house is approximately $3122.00 and the average rent for a three-bedroom house is in the $3913.00 range.
Based on information posted on their websites, room and board costs for a student attending Towson University is $9942.00 annually and $11,108 for students attending Goucher College, by way of example.
There are tremendous housing opportunities within areas surrounding local-area schools including the University of Baltimore, Towson University, University of Maryland at Baltimore County and Stevenson University, among others. It is a simple math formula to understand that families could be paying down a mortgage and building equity in an investment property, rather than paying rent which also has no positive tax implications. And, after the college student graduates from the school, the family owns an income-producing asset with a built-in rental audience.
There are other advantages to purchasing a house for your college student. Because campus housing is in short supply in certain schools, especially for upper classmen, the stress of looking for housing year-in and year-out is eliminated. Owing a house places a fixed cost on living expenses for your college student, and you do not need to factor in rising year-to-year room costs.
There are safety and home maintenance issues to consider. You control what neighborhood your child is living in, as well as overseeing the proper upkeep of the house. No unresponsive landlord to deal with. Finally, owning a second home allows you to take advantage of appreciation factors and the investment property can be used for tax purposes.
Is your child attending school out-of-town? In addition to Baltimore, other U.S. cities mentioned on the list include Washington, D.C.; Boston, Houston, Atlanta, Syracuse; Nashville; Chicago; South Bend, Indiana and St. Louis.
William "Billy" Yerman is Chief Executive Officer of The Strata Group, which features a full-service residential brokerage division, Yerman Witman Gaines & Conklin Realty. Visit www.ywgcrealty.com or contact Billy at wyerman@thestratagroup.com or 410-583-1110.
blog comments powered by