Room and board at college is usually a main expense for college students who go away to get an schooling. Jeffrey Decatur, an actual property agent with RE/MAX Capital in Latham, New York, close to Albany, mentioned he’s seeing a rising pattern of fogeys shopping for property for his or her kids to reside in throughout faculty as each a method to minimize prices and as an funding. He spoke to Bankrate about this technique, and talked by what you need to take into consideration when contemplating if it’s proper for your loved ones. His responses have been edited for size and readability.
Q. How frequent is it for fogeys to think about shopping for actual property of their child’s school city?
A. Dad and mom are realizing it’s a really viable choice to buy quite than doing the room and board factor, as a result of it winds up benefiting throughout within the long-run. You get a write-off, you may make a bit cash ultimately, and it elevates your baby’s studying. They’ve a distinct stage of duty than the typical school scholar.
Q. Why is that this an excellent technique?
A. Inside 5 miles of me, there are eight faculties or universities. It’s not tremendous, tremendous frequent, however contemplating I’m just one agent in an space of three,800 brokers, I’ve seen it sufficient that it’s one thing.
I had a dad or mum purchase their child a home as a result of first-year college students weren’t allowed to have a automobile. So the dad or mum purchased them a home so they might preserve their automobile and have a life. That was the primary one and I assumed, “Ooh, loopy wealthy individuals.” However it was truly loopy sensible individuals, as a result of they get the advantages of proudly owning a home.
I began seeing it increasingly more with medical college students and legislation college students. Their mother and father wished to verify that they had each benefit and weren’t distracted by different distractions going to high school and so they had a spot to focus and be quiet and examine and what have you ever.
One of many properties I truly bought 3 times, and it was to med college students every time. That’s once I began realizing that it makes far more sense for somebody to purchase a home. Considered one of my finest good friend’s children, they have been paying $6,000 or $7,000 per semester for room and board, that’s $14,000 per 12 months. In our space, you should purchase a home for that. My one good friend who purchased a home for his or her child, they purchased a 3 bed room two tub, their child obtained their very own bed room and toilet, after which they rented out the opposite two rooms. They took that $14,000 per 12 months, which was only a loss, they put that right into a mortgage cost, after which they rented out these different two rooms for lower than the school was charging for room and board. They made cash off of it, after which when it got here time for the children to maneuver on, they’ve a school rental or they will promote it.
Even when the market had gone down, they’re nonetheless saving cash and getting cash, as a result of they’re not lighting $14,000 per 12 months on fireplace and throwing it out the window with room and board for the school.
While you take a look at it in these phrases, there’s no actual shedding scenario. You can find yourself getting cash or you find yourself saving cash on paper.
Q. Are there any drawbacks?
A. I suppose you need to have faith in your child that they’re accountable and never going to trash the place and don’t want a brick wall, and that they’re going to proceed by 4 years of college. That may very well be a possible disadvantage. Within the huge image, actual property is rarely actually a nasty funding as a result of it’s tangible and traditionally, sure there’s up and downs available in the market, however traditionally, actual property all the time goes up. There’s no actual draw back in that side of issues, however it may be extra of a trouble when your scholar graduates, as a result of then you need to promote the home.
I don’t know that it’s for everyone, however for financially astute individuals, or those that’ve obtained a number of further bucks to play with, it’s a viable possibility for them and saving throughout.
In case your child’s taking out scholar loans, you’re not financing their dwelling. You’re taking $60,000 of debt out of that equation on your child and turning it into an funding.
Q. What ought to individuals know in the event that they’re contemplating doing this?
A. I all the time inform individuals to speak with their accountant or monetary planner to verify this makes monetary sense. If it makes extra sense so that you can pay your child’s room and board than it does so that you can have a rental or funding property, then your accountant will have the ability to let you know that, and that’s above my pay grade. I do know what I do and I do know the advantages of that from a few of the individuals I’ve labored with, however every particular person’s funds are totally different. Some mother and father see it as an excellent sink or swim second for his or her children, giving them the duty of getting a home.
Q. The rest?
A. At all times seek the advice of an expert it doesn’t matter what the scenario is, and just be sure you’re making a snug and educated choice. It’s not one thing to enter flippantly.
(Go to Bankrate on-line at bankrate.com.)
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