by Dana Ventling Lich
First the bad news: College costs are on the rise, increasing over six percent in 2007-2008, with average costs of tuition, fees, room and board now running upwards of $13,000 to $31,000 per year. Those are scary numbers, and quickly approaching a reality for me with my 15 year old stepdaughter already talking about where she thinks she’d like to go to college. Moreover, nervous parents like my husband and myself are wondering where those frog skins are going to come from.
Now for the good news: Many parents such as us (especially since I’m in the real estate business), are wisely considering the prospect of purchasing a place for their college-bound children versus paying for dormitory or apartment rents. One parent expressed, “There are so many affordable homes on the market right now, and home buying assistance programs from the city, that I do not understand why more people do not go this route. We found a home for our son…he has two roommates who pay rent. Depending on your purchase price, it is very possible that the rent paid by roommates can either cover the mortgage or subsidize it. We think of this as an investment in our son’s future. Not only is he building credit with the home he bought, that hopefully when he graduates in four years that he can sell for more then he bought it for and pay off some of those student loans. Or he can keep it until he is ready to move, start his Real Estate Portfolio, or sell and make no money…so we break even, basically live there for free..............hmmmmmmmmm?” (In other words, DUH!) Beside appreciation and subsidization, plus the building of equity and financial competence, there are tax write-offs and credits as well. Benefits wait…just make sure you also consider the risks. Rule number one is simple: count the cost (find a trustworthy realtor and/or financial planner). San Francisco financial planner Tim Kochis typically tries to talk his clients out of buying real estate to house their college students. He finds parents often: 1) Overestimate the possible savings; 2) Overestimate the potential appreciation; and 3) Overestimate their children’s ability to serve as landlords. Fortunately, we in Yellowstone County live in an appreciating real estate market. Unfortunately, Mom won’t be there to remind him to “mow the lawn and take out the trash for the last time, I’m telling you!” A self-proclaimed investment-savvy student gave this consideration. “Another benefit of having your (own) home is that you need not worry about pesky landlords, telling YOU how neat your house should be (or) can or CANNOT look etc. You can decorate or paint your house, whether it is bright pink or the colors of your favorite NFL team without having the landlord freak out on you.”. Not too smart of an idea for resale, but homeownership does give a child an opportunity to be more responsible and learn that running a household is not all fun and games. One of my clients, Tim and Pati Lechner, currently has me on the search for a good realtor in the Eugene area, as they are looking into purchasing a condo for their youngest daughter who will be attending the University of Oregon. Top reasons they say are financial and personal. After sending three daughters to seven schools, they have realized that the cost of moving in and out of temporary housing was becomming exorbitant. Moreover, they want to make Jenna’s educational experience a positive one. They have found that residence halls are usually small and often substandard. “The bottom line,” Pati explained, “is we figure that if we have the financial resources available, we prefer to reap the benefits from them. That way, this time, we plan to see a return on our investment.” So, whether your kid makes it to graduation or not, at least make sure your investment will get a passing grade. SFM
Dana Ventling Lich is married with two step children. She has been a licensed realtor in the state of Montana since 2002.