Buying a home for your college student

A new trend among investors is buying a property in the town where their college-bound children will be attending school. The move allows parents peace of mind as the investment would provide a low cost alternative than if the child were paying rent or lived in on-campus housing. For the kids, it's a way of learning responsibility, the do's and don'ts of looking after their own home, and perhaps a chance at being a landlord.

The most important thing to consider when investing on a property with the intent of having your child live in it, is deciding what will happen to the property after he or she graduates. Is the property going to be a vacation home, will you retire their some day, will your child live there once they find a career? Or will you rent it out to another person or family? My suggestion is determine what your intention with the home is, take in to consideration the wants and needs of your child, but ultimately find a home that will satisfy your needs. Find a place you can see yourself living in and ask your agent if the home is in a good neighborhood for renters and/or if renters are allowed (should the home be located in an HOA) in case you decide to rent it out.

So you've found the home you want, now what? My advice would be to speak with your tax advisor to determine the way in which you purchase the property. Ideally you should speak with this person before even finding a property. They can help you determine if your name should be the one on the deed, your child's-in order to save on Capital Gains tax, or if you should put the property in a family trust. Many out of state colleges require a deed or lease agreement in order to receive in-state tuition, so it is important to have this discussion prior to the start of their semester.

Lastly, If the your child intends to have roommates, even if they are with friends, it's important that the living arrangements are spelled out in advance in a businesslike manner. Each renter should sign a lease agreement that covers how much rent will be paid, fees associated with late payments, what additional costs (such as utilities) will be paid by the renter, what facilities will be shared, and house rules such as whether pets are allowed, smoking policies and provisions for parking and laundry facilities if applicable. This will set the tone as to what is to be expected and will ensure your investment is protected and maintained.