InvestmentShould I Buy An Investment Property for My College Student to Use?

By Holly Roberson, Guest Contributor  

Welcome to Charleston, where there are few dorms to house the College of Charleston students. Living on campus is the most reasonable housing, but it’s not always available and after four years, your student has some great memories and you have a series of withdrawals on your account.

College of Charleston Dormitory Rates 2019/2020

• Triple room: $4,500 – $6,700 for the 9 month school year
• Double room: $6,000 –  $9,000 for the 9 month school year
• Private room: $8,000 –  $10,300 for the 9 month school year

Average Individual Room Rental Rates for a single room in a 4 bedroom shared house 2016

• Harleston Village/Elliottborough: $950/month
• East Side of Peninsula: $850/month

Average Individual Room Rental Rates for a 1 or 2 bedroom house 2016

• Harleston Village/Elliottborough: $1350/month
• Elliottborough: $1350/month
• East Side of Peninsula: $850/month

For our investment research, let’s assume that your student is going to have a private room and round up to $1,350/month for all twelve months. You will spend $16,200 each year on rent for a total outlay of $64,800 once your scholar walks across the stage to grab that diploma. We both know that is only the tip of what you will have spent by graduation. Here’s how to lessen the pain. 

If you have $150,000 cash on hand why not park it in a piece of property where it will grow AND pay that $64,800 in rent?  Consider these basic cost assumptions on finding a 4 bedroom house:

• House cost: $500,000
• Down Payment: $150,000
• 3.62% fixed APR for 30 years
• Mortgage payment: $1,595/month.
• Taxes in Charleston on this property, valued at $500,000, will run approximately $7,272 (only $2,582 for primary legal residence)
• Homeowner’s Insurance: approximately $1,500 depending on flood zones

Rental Property Total Annual Cost: $27,912 (not including maintenance). Now, instead of paying $64,800 for your student to share a two bedroom downtown, your student lives in your investment rent free and the other three rooms each pay $950/month. 

Total rent income is $34,200/year. After paying the mortgage, insurance and taxes, your parked $150,000 is yielding $6,288 in cash pretty much a wash, but definitely not a loss. However, not only have you housed your college student for four years, look at what you have for your $150,000:

You’ve effectively parked your $150,000, housed your child, made some money, and offset taxes.  Sell your investment when your student enters the world of the gainfully employed, or renovate it and turn it into your second home in the world’s #1 travel destination. We can help at any stage of the process, from buying, building, renovating renting, maintaining and selling.

Tip – Have your child act as the landlord, save yourself 10% of the rental and they gain both experience and responsibility from working in the land of grown ups!  We will still be there for them if maintenance is needed. 

For more information on property cash flow, check out our blog post on Investing for Cash Flow.