Some families are finding new and innovative ways to save money regarding the high cost of college tuition. Scholarships and grants are one thing – but the inventive are often taking advantage of entirely unrelated conditions.
One such thing is the real estate market
It’s no secret that the cost of real estate investment has plummeted in recent years – and, even with prices recovering somewhat this year, houses are still extremely cheap. Interest rates are also still near all-time historic lows.
That means – in many situations – a family can save money by buying an off-campus house for a child to live in. There are pluses and minuses, of course – and today, we’re going to go over them. But if it makes sense financially, it might be worth it to see if such an arrangement makes sense for your family.
Will buying a nearby house make financial sense while your child is in college? This is the first hurdle that must be cleared. If buying a house (or condo) doesn’t change the financial picture, then it likely isn’t worth the headache.
But in today’s market, owning a home near campus can make a lot of sense.
Ask yourself these questions:
- How long does my child’s school require on-campus living? (If it’s a year or less, you have more time to recoup value – two or more years, and you’ll need a very good deal for everything to work.)
- What’s the real estate market like near the college? (Buying in Manhattan near NYU will never make financial sense.)
- Can I make a down payment for the same cost as on-campus housing? (If you can, than you are breaking even, at the start.)
- Will rent from housemates cover the monthly cost of my mortgage? (If it does, than your child can stay in the house for free, while you build equity.)
- Can we save money cooking off-campus instead of buying a meal plan? (The answer is almost always yes – though some schools require meal plans, rendering these potential savings moot.)
- Can I trust my child and his or her friends to treat the house with respect, and not lower its value? (There will always be wear and tear – especially so with students – but there’s a big difference between hard living and abuse.)
If you answer yes to these questions, then buying a house might make sense. You’ve spent the same amount of money as you would have on campus housing – but instead of watching it go down a hole, it has turned into (hopefully) equity in your property.
Likewise, if rent from housemates covers the mortgage (or comes close), than you’ve done better than break even – because, again, you’re building equity.