I don’t know about you, but I was a pretty poor college student. I lived in the dorms my freshman year, with about three feet of space between my bed and my roommate’s bed (both of which hugged either end of our tiny room). When I moved off campus my sophomore year, it was to a rickety old two-story house where I lived on the top floor with two roommates, and three others inhabited the bottom floor. The toilets clogged every week, the water pressure was awful, the gas stove never worked (but I did have the biggest bedroom — score!). My share of the rent was somewhere around $400 a month (this was in Columbia, Mo., back in the early 2000s), which I paid for by working part-time at a Barnes & Noble Café.
But many college kids today don’t have to live like I did. Now, they’re spending their ever-important college years in their very own home — paid for by mom and dad.
A recent Coldwell Banker survey spotted a new trend on college campuses where parents are buying condos, townhomes, and single-family residences for their children to live in while they attend school. Forty percent of Coldwell Banker agents report that these types of transactions have been on the rise in their areas, with some saying that their buyers are purchasing properties for kids as young as 14 years old.
OK, I admit I’m a little jealous. My mom loved me — but not that much. These parents aren’t just spoiling their snooty kids, though. They’re actually making a sound investment.
“Middle- and upper-income families are buying homes [for their college-age children] to save money on rent, and they are anticipating moderate appreciation of values while their children are in school,” says J. Parrish, GRI, who is CEO of Coldwell Banker M.M. Parrish in Gainesville, Fla., home of the University of Florida. “There is upward pressure on rental prices, and buying is often less expensive than leasing if you have cash or can qualify for financing. Parents let their children choose roommates, who pay rent to help offset the cost of ownership.”
Most often, these buyers are looking for homes for their kids with multiple bedrooms and bathrooms near campuses so they can rent extra space to other college students. But they also want the property to be suitable for themselves one day.
“We’ve seen a lot of international buyers and affluent buyers who are thinking of downsizing in the future, so they purchase a home or unit for their child to use now and will eventually move into it themselves once the child is out of school,” says Ed Feijo, a sales associate with Coldwell Banker Residential Brokerage in Cambridge, Mass. Cambridge is home of two of the most prestigious colleges in the nation: Harvard and MIT.
“These buyers are thinking of long-term investments,” adds Feijo, who says he’s seen a 10 percent increase in the market share for these types of buyers in the last five years. “The style and price of the homes they purchase vary, depending on their budget. We’re seeing them purchase one-bed condos close to the schools to more upscale properties to eventually transition into themselves after the children leave.”
But they are sometimes vacation homes for the parents, too. “Many parents also want the benefit of a place to stay while visiting their children and attending football games,” says Nancy Massey, ABR, an agent with Coldwell Banker Townside, REALTORS®, in Blacksburg, Va. (home of the Virginia Tech Hokies). “They want a clean, quiet, comfortable place not just for their children but for themselves.”
Still, other buyers are thinking of these properties as true investment opportunities. They’re buying for their kids, but they’re planning to make money off the property once their kids graduate and move out. Several real estate practitioners say that a good chunk of the parents buying homes for their children are paying in cash and plan to rent the places out for the long-term.
“Many of the parents have never purchased an investment property before, and this will be the only one they own, typically,” says Cherry Ruffino, GRI, a broker with Coldwell Banker United, REALTORS®, in College Station, Texas (Texas A&M University). She says that about 30 percent of her business this year has come from parents buying homes for their college kids. “Some of the properties will cycle back into the market after the student graduates, but many [parents] keep them as investment properties to rent to future students.”
Feijo agreed, saying that most of his clients are “holding the properties for long-term investment purposes.”
Because college towns tend to be “sound real estate markets,” it makes sense for parents with the financial means to invest in property there, says Budge Huskey, president and CEO of Coldwell Banker.
“When you have the presence of a major college or university, you often see a quality health care system, stable job market, and a constant flow of people moving in and out,” Huskey says. “More parents are recognizing this as a smart real estate opportunity. Rental housing is often tight and may not meet parental expectations. In addition, as rental rates are rising dramatically, some view this strategy as a way to lock into a predictable housing-expense budget.”