Child off to University or College – Have you considered Investing in a Student Rental?

Have you been considering investing in real estate for some time but have allowed your fears to hold you back?  Do you have a child going off to University or College next year?  This may be a great opportunity to start dabbling in real estate investing instead of paying off someone else’s mortgage.  Depending on which town or city, your child may be able to live rent-free and build some equity while completing their secondary education.

Student rentals can financially be a great investment as they tend to cash flow quite well.  The added benefit is that you can start teaching your child the joys of homeownership and they can be actively involved in selecting their roommates which may ultimately take some stress away from them by increasing the likelihood of living with roommates that are compatible.  In addition, at the end of their education, you and they will have some equity and most likely saved some money on rent.

There is a perception that student rentals can be quite challenging but often it is the opposite as the parents are the guarantors and hence ultimately responsible for any damage that may or may not take place.  Plus if your child is living in the home this will dramatically reduce the likelihood of unpleasant surprises.  Student rentals can actually be quite a lucrative investment.

Here is a great example in 2016 a very good friend of mine did just this for their daughter.  Their daughter selected the roommates along with some assistance she had a very pleasant university experience.  They purchased a townhome that was quite nice in a quiet neighborhood and the students had pride in their home.  The home did not have high-end finishes but did have a dark hardwood floor in the living room, which was nicely decorated.  

Here are the financial numbers: the townhome was purchased for $307,000 and sold for $450,000 3 years later, a mortgage was paid down in the 3 years by approximately $13,000.  In total overall equity of $156,000 works out to $52,000 per year of owning the property.  

In addition to the financial gain, the other benefit is the peace of mind that your child will have a say in whom their roommates will be which will dramatically increase the likelihood of compatibility.  Their daughter lived with roommates that were very compatible with their daughter and she was fortunate to live in a home that she was proud of and hence she and her roommates were very particular about maintaining the home clean and in a good state.

  

Overall a great learning experience for their daughter, she learned that screening tenants weren’t that difficult and that being a homeowner makes tons of sense.  

If your child is going off to College or University it is quite feasible and not as complex as you may think.   I would love to help you with your student rental-purchase – give me a call.