It's a fairly common strategy. Rather than paying for your child to live in a dorm or paying rent on their behalf, you can instead purchase a home in a college town. Once your child's done with college, you can convert it into a rental. Buying a home for your college child means you're building equity rather than paying rent, but there are some things to consider.
What's the Market Like Around the College?
Some colleges are more strict about dorm life than others. There are colleges that require freshmen to live on campus, and there are colleges that don't care where their students live at all. It's important to do your research before you purchase a property because the investment really only makes sense if you're going to hold onto it.
To determine whether a market is good for real estate investment, you generally need to compare the mortgage cost to the average rental. If the average home has a mortgage of $1,000 but rents for $1,500, then it's easy to see a profit. If the average home has a mortgage of $1,000 and rents for $1,000, then the rental market isn't strong.
Is the Local Real Estate Market Appreciating in Value?
If the local real estate market is hot right now, with values increasing, then purchasing a home is almost always a good investment as long as you can hold it. If the local real estate market is in a bubble or expected to go downhill, on the other hand, it might not be the best option.
Is Your Child Responsible?
When it comes to future tenants, you'll be able to hold them responsible for any damage. When it comes to your own child, it's likely the expenses are going to fall upon you one way or another. If your child is responsible enough to take care of a home, then it's probably a good investment. If they could cause significant damage to their first home, you may want to reconsider.
Getting professional advice is always important when you're making a major purchase. If you're considering purchasing a home for your child, speak with your financial adviser first, and a real estate professional in the area second. A real estate professional will be able to go over the ins and outs of the market with you and determine whether it may be a feasible investment. They may also know a property management company you can use.
For more information, contact a company like Rodney Bean Real Estate & Investment.