My Old School
The 1973 hit song “My Old School” by Steely Dan references never returning to my old school and mentions where I went to undergrad at the College of William & Mary. Many of you may not be going back to your old school, but many of your kids may be looking to go to college at your old school. College today can be very expensive, and housing for your child is one of the most expensive components of their college education. According to the College Board, the average cost of housing, whether on or off campus, ranges on a national average from $11,620 per year to $13,120 per year, depending on whether the school is public or private. There is a way to cut this down radically and possibly make some $$$ on their housing.
Many parents and their student(s) may qualify to purchase a home in an area where they are attending college with as little as 5% down. In many cases, these homes will have 2 to 3 bedrooms, which can be rented out to “roommates.” Let’s look at a sample scenario. Assume you get a 30-year fixed-rate loan of $300,000 at 6.875%. This would yield a principal and interest payment of roughly $2300 with a possible down payment as low as $15,800 in this sample scenario. You could charge the roommates (let’s assume 2) $900 per month, which is less than they would pay for a dorm room on average, and this will be a house they are living in and not a small dorm room where they possibly have little to no kitchen and share a bathroom with everyone on the “hall.” So, you collect $1800 per month from the roommates combined on a $2300 estimated mortgage note, and you just cut your child’s housing expense significantly. Also, if you assume a modest 5% increase per year in home values over the next three years, your equity could grow by over $45,000 or more. You also don’t have to worry about the house being used for “parties” as your child will not only live there but also have a real investment in this property; they are an owner with you.
After your child graduates, you can keep the house for additional rental income or sell it for a potentially nice profit.
This program has certain restrictions, but it is worth checking in if you have a child attending college, and housing is NOT free. Check with your mortgage professional for details for this possible excellent long-term investment.
Remember… The BEST RATE… IS A LOCKED RATE… with a float down… ask me about our program that allows you to lock your rate and then float down if rates move lower.
Make sure you (or your buyer) get pre-approved before looking at homes so we can determine if you are looking in the correct price range and have you armed to submit an offer with a pre-approval letter!
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Blog post date: Friday, February 23, 2024