August 11, 2020
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Condo or on campus? Covid-19 changes the game for parents of college children

Condo or on campus? Covid-19 changes the game for parents of college children

AliExpress WW

When both sons Diane Pearson studied at Robert Morris University, buying an apartment for them in a suburb of Pittsburgh made financial sense.

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Pearson, who is a certified financial planner, in 2013 took a line of credit for the purchase of equity for the purchase of real estate in cash.

Three years later, the family sold it for a profit of $ 5,000. Given the savings in paying for dorm rooms, “in the end, we probably saved $ 40,000,” she said.

“I recommend this process for many years,” she added.

Diane Pearson with husband Alex and sons David and Alex.

Source: Diane Pearson

Before the coronavirus crisis caused a shock in the economy, parents increasingly bought real estate or “orphanages” as an alternative to paying for student housing.

In a number of US cities it was more profitable buy a house, not rent a room on campus.

According to The College Board, average living and board expenses have risen by about 20% over the past decade to $ 12,990 in private four-year private colleges in the 2019-2020 school year. Public colleges are only slightly less – $ 11,510 in 2019-2020.

Meanwhile, record low mortgage rates and constant demand from incoming students have increased the market for ready-to-go college apartments every year.

There is an additional incentive for owning property during a public health crisis, giving students a socially remote place to live, away from crowded dormitories.

In addition, it can provide additional income if you decide to take roommates or rent out property to other students even after graduation.

Many parents, such as Pearson, can even make a modest profit when they sell, after considering closing costs and other expenses.

As an investment, however, this is far from the right thing.

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When Malcolm Etridge was an A&T student in North Carolina, he bought a house in his Greensboro College campus.

“I went to college and wanted to get the right to study in the state, which I did,” he said.

As a state resident, Etridge was able to significantly reduce tuition fees. At public colleges, state tuition fees may be a small fraction of the cost, although the requirements for obtaining a residence permit vary by state.

In addition, the monthly payments for his house of $ 100,000 were approximately $ 750, just a little more than the $ 600 he paid for the rent.

However, by the time it was finished, in the midst of the Great Recession, economic conditions had changed, and Etridge had a house that he could not sell.

“I closed on property in September 2007, which, without my knowledge, was in the midst of a housing market at the time,” he said.

“The collapse of the market that came next year turned me into a landlord against my will.”

As a junior in 2007, Malcolm Etridge bought a house in his town at Greensboro College, North Carolina. When the market sank, he could not sell the property.

Photo: Malcolm Etridge

Etridge hired a property manager and continued to carry a mortgage along with “all the headaches that had to be a landlord” for another eight years, he said.

Finally, in 2018, he sold the house for $ 98,000.

Certified Financial Planner and Executive Vice President of CIC Wealth Management, based in Rockville, Maryland, Ethridge is warning clients to carefully consider this type of investment.

According to Scott MacLeod, a certified financial planner and president and CEO of Brown Financial Advisory at Fairhope Alabama, families who still don’t know if the college will work personally in the fall are risky.

In addition, buying a property that you intend to hold for four years or less can be especially problematic in troubled times.

“The economic outlook is just blurry right now,” said Macleod, who is also the father of a junior college.

“Even in a good economy, you need to make sure that you have sufficient liquidity due to uncertainty,” he added. “It’s still a house, and things are breaking down.”

In addition to expenses, campus has other important benefits, said Mary DeNiro, director general of the International Association of College and University Staff.

According to her, there is support, “which helps students find relatives with their peers and the wider campus community.”

In fact, the data shows that students who live on campus, more likely to stay registered and complete their degree,

“That’s why in most four-year schools there is a requirement for continuing education for first-year students, and many of them have added additional requirements for second-year students,” DeNiro said.

Pam Schreiber, executive director of the Department of Housing and Catering at the University of Washington, adds that campus living improves student experience.

“As I like to say, it’s not just a placement business.”

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