Buy a condo for the college student in your family

When I was a freshman at the University of Massachusetts -- Amherst last year, I took the plunge: I pulled some money out of savings to make the 20% down payment on a condo near my school, planning to live in it (After I bought it I decided that I could make more money renting it out and living in the dorm, but that's another story that involves night of stepping over other people's barf to get to the shower while the tenant relaxed in my hot tub.).

Admittedly, most students don't have the resources to invest in real estate but maybe their parents do. If you're a parent in that fortunate situation, buying your student a condo to live in is something you should give serious consideration to.

Realty Times recently reported that "Student housing in major college and university towns has been one of the steadiest performing niches in real estate throughout the current down cycle. After all, no matter what's going on in the economy, college students are still flooding campuses, they still need a place to live, and they strongly prefer private rental housing over dormitories."
There are number of reasons that student housing in college towns appears to be a compelling investment opportunity, but here are two of the best ones:
  • The aging fleet of dorms at public colleges are less desirable than what the private sector has to offer, and state budget budget woes across the country make it unlikely that large quantities of new ones will be built anytime soon.
  • The "Echo Boom" generation -- the children of baby boomers are heading off to college, providing strong demographic trends that should lead to an increase in demand for student housing, especially with college becoming a prerequisite for more jobs than ever before.
One thing to look out for: rising fuel costs may make off-campus living less attractive because of transportation and utilities but many college towns offer a free bus service. If you invest in student housing, buy something that's on the bus line! Heating costs can be a significant chunk of change for college students, but condo living offers some economies of scale similar to what dorms offer. If you live on campus, you're paying for heating, even though it isn't broken down on the invoice.

I haven't mentioned single-family homes here for a reason: if you're a part-time investor looking to buy something for your kid that you plan to keep for income after they graduate, condos are a heck of a lot easier. They're easy to rent and many complexes have on-site management used to working with college students. And you don't have to worry about anything other than what's between the walls. Condo fees are, according to some, a drawback, but the things they cover: landscape, snow removal (if applicable), master insurance, trash removal, water, etc. are expenses you'd have anyway. And you benefit from the scale of sharing them with a bunch of other owners. Condos also tend to be cheaper than single-family homes.

If you're even contemplating thinking about thinking about investing in student housing, you absolutely must buy Michael Zaransky's book Profit by Investing in Student Housing: Cash In on the Campus Housing Shortage. For a quick overview of some of the issues to consider, check out this great piece from FrontDoor.com.

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