Having a child begin college can be an extremely exciting time, but it can also be very costly. Of course, all of the expenses are justified because you want to see your kid receive a secondary education that will enrich their future, but are there ways that you can save money here and there?
One of the most effective ways to improve your family’s education budget is to buy a condo instead of paying college room and board fees or rent.
Living expenses will be the most significant cost your child faces when starting college, after tuition. Depending on the degree program, your child may need to pay living expenses for four, six, or even eight years while in school. Whether they live in a dorm, or in an apartment, they will need to pay thousands of dollars each year.
Once they graduate, they will move out of these buildings and have nothing to show for the immense amount of money they put in. Additionally, if you have younger children potentially attending the same school, the benefits can multiply exponentially as you gain equity that you can benefit from for many years after graduation.
The Benefits of Buying Instead of Renting
Obviously, you gain equity by buying, but there are many other factors to consider:
Multiple Children – If you have younger children who plan to attend the same university, this housing option will be ready and available to them when the time comes.
Rent – Your condo can help pay for itself if you allow your children to have roommates that pay rent. If you do have roommates in the property that pay rent, you will want to be sure to get the condo properly ensured and only rent to responsible students. You may also have your children pay rent toward the mortgage. The rent they pay while living in the condo will likely be much more affordable than what they would be responsible for when renting an apartment.
Long-term Investment – After your child graduates, you may choose to sell the condo, or utilize it as a rental property as an additional source of income.
Mortgage – Many parents choose to use the FHA non-occupying co-borrower loan for this situation. This type of mortgage provides a lower interest rate and helps the child establish a strong credit rating. While the condo is considered the child’s residence, the parents may retain ownership. This is a very complex mortgage process, and you should always discuss your options with a Mandeville real estate professional before moving forward.
Taxes – There are many tax benefits to consider when buying a condo for your college student. There are several different federal tax deductions that may be applicable depending upon your ownership of the property, and whether it is a personal or investment residence. To better understand the tax implications of buying a condo, consult with a professional.
Things to Consider Before Purchasing a Condo for Your Kid
One of the most important factors that must be considered before you proceed with buying a condo is your child’s maturity level and ability to handle the responsibilities of maintaining a property and possibly collecting rent. You also need to feel confident that your child is going to stay at his or her university and complete the degree program.
In order to protect yourself from unforeseen circumstances, it is important to consult with an experienced real estate lender when structuring your mortgage agreement. A qualified and skilled real estate professional will be able to help you take advantage of the current low interest rates so that you can see return on your investment in the even that you choose to sell in the future.
If you would like help shopping for a condo for your child attending college, please contact me today for a free consultation!