Parents Buying Housing for College Students

An article this week in the Fresno Bee could be telegraphing a national trend for real estate in college towns. Titled “Fresno parents buy homes for students,” the article gives some local facts and figures comparing student housing rental to ownership.
Generally, national statistics are showing greater demand for rental homes. With a great many previous owners now renting due to foreclosure, and the vast majority of first time buyers staying out of the market, there is upward pressure on rents. Landlords are enjoying greater demand, higher occupancy, and bigger rent checks. This trend is in all of housing, but also gaining traction in college markets.
A dorm room cost is around $700/month at the college, and the parents profiled in the article are looking at 3 bedroom 2 bath homes for between $150,000 and $180,000 in the area. Their daughter and a couple of roommates can live in the home for around $350 to $400 per month each, and it’s an investment to boot.
Condos in the Fresno State area can be purchased these days for around $60,000 according to a local real estate agent. With a 20% down payment and a 30 year mortgage, one of these condos would be a cash investment of around $500 per month including homeowner fees. The same units are currently renting for around $750/month. For parents with the down payment and ability to get a mortgage, it seems like a better investment than just paying rent for four or more years.
What does this mean for investors? First, not all parents can swing a purchase in today’s tough mortgage climate, especially while funding a college education. So, there will still be plenty of rental prospects out there for long term investment. To capitalize on couples like the one profiled in the article, it could be a great flip situation. With many foreclosure properties hitting the market in need of rehab, the strategy of buying, repairing and flipping can lead to a retail sale to parents.
In real estate investing, there is always an opportunity, even when the market is changing and previous strategies are becoming more difficult to employ. The successful investor finds a new approach for profits.