This is a dilemma that most parents face at some point or another. Your little angel has grown up to be a young man/woman, and now it’s time for them to go to college. For a lot of students, commuting to and from their original home to their college is simply too time consuming. So, there arises the following question.
Should you buy them an apartment, or let them live in a rented one?
There are a few things you need to consider as a parent here, particularly if you are a real estate investor. The obvious reaction would be to buy them an apartment, because you could treat it as an investment and flip it later, right? Well, maybe, but not necessarily. Let’s look at it in a bit more detail.
The Investment Time-frame
Depending on what course your child has undertaken, they may be at the apartment anywhere from 2-5 years. After they’re done, they’ll likely move out to a location that is in closer proximity to their workplace. In real-estate, you always have to look at a property as an investment. And like any investment, a property needs time to mature and grow in value. Even under the most volatile market conditions, 2-5 years isn’t that much of a timespan when you consider the area of real estate.
If you’re thinking of renting out the property to other prospective students, you could still justify this as a worthwhile investment. But if you’re planning to sell the house off once your child is out of college, then you won’t be making too much money off the deal. Considering the rising inflation each year, you might at best make a minimal amount, which won’t be enough to justify the cost of the transaction.
Student Rentals Aren’t A Magic Pot Of Gold
Despite what you might have heard, having a property for student rentals isn’t the quickest way to make money in the real estate market. If you drive up the prices too high because you think it’s a sustainable model for as long as the college or colleges in the vicinity are in business, you might drive away potential tenants. On the other hand, if you go the other extreme and keep prices too low, you won’t make enough money off the property to justify your investment. Make sure you don’t jump into buying a property that you intend to use as a student rental before performing thorough research and analyzing the prices of your competitors.
The Value Of ‘The Life Lesson’ Vs. Business
When your child ‘leaves the nest’, so to speak, the experiences he or she faces and how she will cope with them without your supervision will determine in a large part, the kind of adults they will eventually become. Keeping this in mind, do you try to be as hands-off with your property as possible, and try to let the kids learn their own lessons when it comes to dealing with neighbors and collecting the rent from their roommates if they have any? Or do you play the protective parent and take care of everything in the apartment, furnishing and repairing it pre-emptively, so that your children can focus only on their studies?
It’s a tough choice to make, and both sides have their pros and cons.
In addition, you have to keep in mind that since students have vacations for a month or so every year, your properties will remain vacant for that time. Depending on your agreement with the tenant, you may or may not be receiving the rent for this particular month.
In light of all of these considerations, it’s really better if you let a professional deal with the rentals and reduce the hassle involved for both you and your children. If they’re staying in a property that is managed by a property ownership organization, you can be more at peace knowing that your children will be living in a proper environment and they won’t lack any basic utilities. It’s also less expensive than you buying a property for them that you will have to handle on your own, and, after your children graduate, may not net you the return on your investment that you were hoping to achieve.