Should You Buy a House for Your College Student? A Financial Deep Dive
As college costs continue to soar, savvy parents are exploring creative alternatives to traditional student housing. One increasingly popular strategy: purchasing a property near campus that can serve as both a home for their student and a potential investment opportunity.
The Financial Case for Campus Property Investment
When faced with paying $10,000-15,000 annually for dormitory housing, many parents are discovering that purchasing a modest home near campus can actually save money while building equity. In college towns where homes can still be found for $160,000-200,000, the math often works in favor of buying.
"I bought a house for my kids to go to college. Mortgage was the same as rent on a 1-2 bedroom apartment. My kid decided he liked the area and wanted to stay. Found a job and is happily living there. Learned responsibility, good all the way around."
The financial benefits extend beyond simple cost comparison. By renting out additional bedrooms to other students, parents can often cover most or all of the carrying costs. With typical room rentals ranging from $400-600 per month in college towns, a four-bedroom house can generate substantial income to offset expenses.
Success Stories Paint a Compelling Picture
The long-term financial gains can be remarkable. One parent reported:
"Bought a townhouse when my oldest started college. Two other children followed separated by 4 years. Kept the place for 22 years. Sold it last week and made $600,000."
Another family saw their investment multiply: "My parents did this for me in Austin, Texas and now that house is worth 2.4 million dollars."
Even shorter-term ownership can yield positive results. "By the time my son graduated it had gained 60k in value," notes another parent, adding that the appreciation helped fund their child's first home in a more expensive city.
The Reality Check: Challenges to Consider
However, the strategy isn't without its pitfalls. College students, while potentially reliable tenants with parent co-signers, come with unique challenges.
Common Challenges
"Have you ever been to a college house? Holy crap it's a nightmare. You don't want to be responsible for being a landlord to that."
Maintenance calls can be frequent and sometimes frustrating. "Just be prepared for calls for stuff they should be taking care of. Clogged toilet for example and they 'promise they tried to plunge it themselves,' 'I found a small random insect and that means you have termites here.'"
The Hidden Educational Value
Beyond the financial considerations, many families discover unexpected benefits in teaching their children real-world skills. Property management, tenant relations, basic maintenance, and financial responsibility all become part of the college education.
"My dad always said he regretted not doing this when I went to college. He said he could have paid for most of a house for what he paid in rent those 5 years."
Practical Strategies for Success
Parents who've successfully navigated this approach offer several key recommendations:
Success Strategies
1. Structure it professionally
Create an LLC to own the property, protecting personal assets and creating appropriate distance between parent-landlord and student-tenant relationships.
2. Use property management
"I would consider putting the house into a LLC and then let a Property manager handle the calls." This prevents your child from being caught between friendships and landlord responsibilities.
3. Timing matters
Many recommend letting students live on campus their freshman year to build friendships and adjust to college life, then moving to the investment property as sophomores.
4. Clear expectations
Establish written leases with all tenants, including your own child. Include specific language about guests, maintenance responsibilities, and behavioral expectations.
5. Insurance is critical
"Make sure you have a large umbrella policy," emphasizes one parent, noting the liability risks when housing college-age tenants.
The Location Factor
Not every college town presents equal opportunity. Parents should evaluate:
- Current home prices relative to rental rates
- The stability and growth potential of the area
- Distance from campus (walkability is highly valued)
- Local regulations regarding rental properties
- The likelihood of finding reliable student tenants
"College towns are a good place to invest. There will always be demand."
Making the Decision
The choice to buy ultimately depends on several personal factors:
Key Decision Factors
Financial capacity
Can you afford the down payment without straining your finances? Can you handle unexpected repairs or periods of vacancy?
Risk tolerance
Are you prepared for potential property damage, difficult tenants, or market downturns?
Management commitment
Whether doing it yourself or hiring help, managing a rental property requires time and attention.
Your child's maturity
Success often hinges on whether your student can handle the responsibility of being an on-site caretaker or informal property manager.
Alternative Approaches
Some families find middle ground by:
- Purchasing a condo with lower maintenance requirements
- Buying a duplex and living in one unit
- Investing in a property management company from day one
- Keeping the property as a long-term rental after graduation
"Why sell it after? Use it as a rental later and other college kids can rent from you. Surely it will cash flow."
The Bottom Line
For families with the financial means and appropriate risk tolerance, purchasing a college-town property can offer both immediate savings and long-term investment potential. However, success requires careful planning, realistic expectations about the challenges of student tenants, and often, a strong stomach for the occasional 2 a.m. maintenance call.
As one satisfied parent summarizes: "Absolutely do it. It will pay for college and you can hire your son to be house manager."
The key is approaching it not just as a way to save money on college housing, but as a real estate investment that happens to benefit your student. With proper structure, clear expectations, and a bit of luck, it can become one of the smartest financial decisions a family makes during the college years.
Analyze Your College Housing Investment
Use our tools to compare the costs of buying versus renting for your college student.