If your college student is getting ready to live off campus, buying a rental property or condo may be an
option worth considering. Of course, with high rental costs and the opportunity to create a tax shelter
for your hard earned money, this is a strategy many parents have found to be beneficial.
An investment property is an excellent opportunity to put your money to work for you, and may even
help offset some of the income invested into your child’s education. However, there are various factors
you should consider before making any final decisions.
1. Long term goals – Although appreciation rates may be favorable, it is important to discern how
long you intend to keep the property. Within a few years your son or daughter will be finished
with their education, and you will still be left with a property to care for.
Some individuals would rather keep the home as an investment and continue to rent the
property out to new students. Additionally, this may be a place that you will plan to use for
future visits or football games long after your child is done with school.
The problem with solely relying on strong appreciation rates is that you may not be able to
command the price you desire a few years from now. So unless you are prepared to hold onto
the property for a longer time period to make the investment worthwhile, this may be
something worth reconsidering.
2. Maintenance & management – Next, purchasing a rental property is a big investment, so you
want to ensure that your property is kept in good condition. Although your son or daughter
may be extremely reliable, you may need to consider other friends or roommates that will have
to share in on the rent.
Are you comfortable with trusting in 2 or more college students to watch after your property?
Also, it may be required to pay a property manager (especially once your child graduates) to
help manage the home if you live at a distance.
Finally, it will be important that you can find reliable contractors to take care of any
maintenance hassles and ensure that the property remains in tip top shape.
3. Cash flow & taxes – After carefully reviewing the first 2 points, you may still feel that a rental
property for your student is well worth the investment. If this is the case, then there are a few
things you must know about finances.
First of all, be sure that you are buying smart. Work with a qualified agent who knows the area
and can help direct you to the best deals. They will be able to help you figure out projected
rental income and appreciation rates as well.
After factoring in taxes, insurance, maintenance, associate fees, your mortgage, etc. you will
want to make sure that you have some cash flow for extra profit and to cover unexpected
problems that may arise down the road.
This will also make your investment pay off more in the long run and can free you up to invest in
future properties as well. For those who are married, you must be aware that there is a limit to
how many itemized deductions you can write off if your gross income exceeds approximately
Therefore, though it is possible that you can include the taxes and mortgage interest as
deductions on your second property, this is something you will still need to review with a tax
Finally, be aware that the property can also be susceptible to capital gains tax once you are
ready to sell. Either way, you will still be eligible for some depreciation on your home and to
write off a portion of your maintenance and utilities, so there are always good reasons to buy.
All in all, buying a rental property for your college student can be a wise investment for you and your
family. We strongly advise that you take time to sit down with your financial advisor and/or tax pro to
discuss the options available to you. For further guidance on locating a property, please contact us using
the information listed above.