१७ ऑक्टोबर, २००७
Should you buy your college kid a condo?
A lot of people do these days, and it might make financial sense. Obviously, there are problems with the housing market that affect the decision these days, but generally, I wish I'd thought of doing this when my sons were in college. A big problem is that older folks who like condos don't like student neighbors. The lower priced the condos are, the more likely they'll be chosen for students, and the more likely they'll have badly soundproofed walls and floors. But it would be nice if there were some condo building designed for students, that the parents would buy and then sell to each other every 4 years.
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२७ टिप्पण्या:
What happened to dorms and shared apartments?
When my father was in college, he lived in a fraternity where they had mass use bathrooms and everyone shared rooms. When I was in college I lived in a fraternity that had only two to a room and public bathrooms, but could only be use one at a time. Nowadays, kids in fraternities want their own rooms and own bathrooms.
I have heard the same is true in High School. Kids now refuse to take showers in public bathrooms.
I thought our society was becoming more "open." It seems that people actaully want to be more private.
Why is that?
Some of my friends' parents did this and it seems like a great idea. They even shared the condos, so their roommates were essentially paying the mortgage.
Sloan, why are you so hot about getting young men to shower together?
It's an alternative to dorms and crappy apartments that might make good financial sense for the parents. And you could bring in roommates and collect some rent from them too. I'm considering buying a condo for myself now in Madison.
Buying a condo or a house in a college town, if you have students attending there makes good financial sense. You have a rental that you can take tax deductions. If you want to later sell, you may have property appreciation or a capital loss which can be a handy tax strategy.
If you don't sell you can continue to rent...if you can stand to deal with college students. I know several people who have done this and have kept the cottage/house for their own use as a vacation getaway.
Sloan, why are you so hot about getting young men to shower together?
Blah Blah, I guess I deserved that luckyesque remark.
My point is that students today demand and get a lot more luxury living than people did even 20 years ago. Just look at Madison and the increase in the amount of "nice" apartments in the last 15 years. I am wondering why that is? Is it because people have more money... do more people come from homes where they had their own rooms? Is it because students now pay their way using loans instead of parents money...Hmmm....
I speculate that this condo discussion stems from the same issue and that having the option to buy a condo is a reflection of how wealthy the middle class has become relative to where we were even only 20 years ago...
It's a great time to be alive.
I thought there was a big controversy about schools handing out free condo's in school...what...what..... free condoms...oh Nevermind.
(The Church Lady from SNL)
(We are very confused here on the Althouse Blog)
Friends who've bought condos for college have never regretted the investment.
I was just looking (on-line) at condos being built on the Tennessee riverfront in Knoxville "with a view of Neyland Stadium." (What was I thinking?) The nicest ones were three bedrooms, each bedroom with it's own full bath. That surprised me until I realized it must be designed for students. Turned this older person off of buying there.
After my freshman year, they put all ~250 freshmales in one big dorm, and I got stuck above them for 2 years because of bad lottery numbers. I still think the dorm experience is worth it, if only to learn to appreciate good behavior, though unlike now, I would have freaked at a communal shower. Condo's stink of real life.
Re: Althouse
It's an alternative to dorms and crappy apartments that might make good financial sense for the parents. And you could bring in roommates and collect some rent from them too.
My parents are actually doing that for one of my sisters. It's a house (a surprisingly nice one, to tell the truth), and they're collecting rent from the other girls. They chose a decent neighbourhood and a decent house, not with the expectation that they'll sell to other college students' parents later on, but that they'll have that as a property they can stay at in the future, when visiting my father's family. In the past, we've just stayed at my grandfather's house, which (owing to his large number of children) has a surplus of bedrooms, but he'll be selling in the next few years. So the incentives and opportunities all lined up nicely.
Re: Christy:
The nicest ones were three bedrooms, each bedroom with it's own full bath. That surprised me until I realized it must be designed for students. Turned this older person off of buying there.
I'm not sure that's necessarily the case. I'm in Northern Virginia, at the moment, and look at condominiums from time to time, and I see almost no recent/new-construction condominiums where the individual bedrooms don't have at least a shower to themselves. I'm only looking at 2-bedroom apartments, here, so it may be different with 3, but that seems to be the pattern. Some of these buildings are or are going to end up full of students with wealthy parents, to be sure, but that's not true of all of them. Some are just full of yuppies.
Re: Sloanasaurus:
Is it because students now pay their way using loans instead of parents money...Hmmm....
Wouldn't that cut the other way? If you're living off of your parents money, it would seem to me to be more likely that you (i.e. they) can afford a nice apartment. On the other hand, if you don't have the money for university and you're attending university on student loans, how are you going to pay for a nice apartment? Frankly, if students are renting luxury apartments with their student loan money, we ought to reduce the amount we lend out via the government. I don't think that's the case, though.
The numbers "might" pencil out on exchanging the room and board costs of college dorm living for buying a condo and renting the extra rooms to other students.
In the college my daughter went to the room and board costs were $9500 a year. Depending on where you are a a $200,000 condo at 6.5% for 30 is a monthly payment of $1,261 or 15,169 a year. If you rent to two other students for $600 a month for just 8 months or $9,600 for the school year, you have traded off the cost of your student's room and board for a real asset (real estate), you have rental income to offset the cost of the mortgage. In addition there are tax perks to having a rental that may offset the net negative cash flow from the condo/house.
Of course, this doesn't include the down payment on the condo. But it is a long term win win situation. :-) Certainly worth looking into.
On the other hand, your student misses out on the college experience and camaraderie of living in a dorm situation. That actually might be the more valuable investment.
Today's kids have never had to share a room. And dormrooms seem terribly cramped compared to their McMansion's bedrooms. But the cost of dorm housing is inflated by the cost of food. Even dormfood is likely to be more nutritious than what busy students would eat: top ramen and pizza.
If you plan to buy a condo for your kid you should calculate your closing costs when buying and selling, the monthly assessment, the fact that we're looking at a declining real estate market, and the general preference for single family houses.
You've been your child's landlord for the last seventeen to eighteen years. Why do you want the job for another four to five? Furthermore, you'll be far away enough that getting maintenance done will be a pain and a half. They won't learn anything, because you'll be on the hook for all the bills. They won't have to deal with anything - not the social and personal chaos of a dorm, not the real-world hassles of dealing with a landlord who *isn't* Mom.
Furthermore, there's a lot of hidden costs here. With the real estate market having entered into a bear market, you're not likely to make back much of anything when you have to sell out. Also, there's the financing & closing costs - what might be reasonable spread out over a normal ten-to-thirty year residency might be prohibitive in a four year turnover cycle.
How about your adult (over 18) children fending for themselves?
How about your adult (over 18) children fending for themselves?
What do you mean by fending for oneself? I hadn't earned that much before I went to college, and the idea of borrowing money for living expenses was unthinkable. So I lived at home and commuted to school. But a classmate told us we were all chumps for going to college, that he was going to be a tuckpointer, and make more money as a high school graduate than we would when we graduated college. Is that what you advise?
I lived in a dorm designed in the late 40's that the GI Bill guys of that time thought was heaven compared to their previous accommodations. The dorm had mass bathrooms and mostly double rooms. Today, I pay a premium for my daughters apartment because she had a bad dorm experience with other kids having drugs - including one guy a few doors down who was busted for intent to distribute. The worst that used to happen was putting up with the smell of beer puke; today its fearing getting rousted by the DEA if you are in the wrong place at the wrong time. My daughter is now at a different university as her former college wasn't too serious about education, either. Just another thing to consider in the dorm/apartment/condo debate - can you be sure that whomever your kid shares an apartment with doesn't have a serious problem?
"the idea of borrowing money for living expenses was unthinkable"
Almost everyone that I know had to do this at some point. I paid my rent waiting tables and living off of what I earned over the summers. My final year of college was too heavy going for anything but paying rent with student loan money. My family lived 400 miles away so commuting wasn't practical.
Of the friends that I have who were subsidized by their parents, most are paying off credit card debt rather than student loans. And the debt they're paying off was for things like pizza and airplane tickets, not textbooks.
I wonder how many people can actually afford the condo route when most kids seem to be awash in student loans, even for undergrad degrees?
Funny you should bring this up as I look out my window.
There is a new condo building right around the corner and behind my apartment. They had sales of about 10 units in the first 6 months. I live fairly close to St John's University in Queens. I notice that now most of the apartments are full and the new tenants are almost all St John's students. I don't know whether this is done by St Johns or by the parents of the students or what the scenario is. The students are ferried back and forth to classes on a rented Greyline tourist bus that makes runs every hour.
Considering the cost of housing in this area I would assume this is probably done by the university and the landlord. A typical row house with 3 apartments goes for around $850-900K here and a single family home starts around $750K. 2-BR condos go for about $275K with monthly charges of around $750. Seems a bit steep for college students and their parents but who knows what the arrangements are.
I have to say that the kids are very nice and really seem to behave themselves with no really loud parties so far and since I face their balconies directly I would hear it if they did. I guess we are just lucky so far.
The point of owning the condo is that you are then receiving rent from other students. You don't need to ever sell it to anyone other than parents of college students.
It probably doesn't make much sense now, but certainly in the great run up of the last few years, it was a welcome relief to students getting priced out of housing.
In Berkeley, CA, a 2 bedroom apt was 2k in 2000; a 4 bedroom house was 3-4k. While apartments were rent controlled, condominiums had vastly different rules about rent raising.
re: dorms: nearly no colleges have enough student housing to support all 4 year students. Most large state schools basically support the first years, and that's it.
to the first commenter:
You'd probably refuse to take showers in public bathrooms in coed dorms, too, if you knew how much sex was going on in them, or how much drinking, drug taking, vomiting, and passing out was going on in them.
how would that work in nyc? nyu or columbia costing 40-50k anyway, another 75k in mortgage payments? sounds great.
not for nothing but Ms. Althouse makes a very good salary I am sure and deservidly so. If she had purchased into her present location, high floor, nice building, incredible view, the starting price would have been north of a mil and building fees another 1-2k after that. with taxes it would be, as they say, not easy.
what to do. what to do.
Should you buy your college kids a condo?
If you can afford it, the answer is a resounding yes with a few caveats.
1. You have to maintain a "B" average in your courses.
2. You have to keep the place clean.
3. No drugs and no wild ass parties that offend the neighbors and the home owner's association.
4. Don't blast the music.
5. Be respectful of others.
If you break any of these rules, the condo's going up for sale tomorrow.
I've lived on campus sharing a tiny cubicle with a dumb ass who broke every one of the above rule and them some (I won't mention the used condoms I found in my trash receptacle.)
On the question of whether you can afford it, you have to compare it to the cost of dorms or apartment rentals. You save that money, and you've got an investment. The kid has to live somewhere.
I did this, but with houses, for my three kids. At 19, each kid had to worth with a real estate agent, find the house, run the numbers with me, go to closing, find roommates, and then manage the house, including finding replacement tenants, and arranging repairs. I did this because buying my first house was frightening and unpleasant; they needed to get an early crack at management and at practical finances. This worked fine as long as the kids were available to manage, and somewhat less well after they graduated and I took it over. I bought the sort of houses I would be willing to live in, lucked into towns and times that were on the verge of substantial appreciation, and got out after I tired of students.
All in all, this is a useful thing to do for your kids. There's something very cool about hearing your 20-year-old daughter saying offhandedly, "That maintenance guy you suggested sucked about responding to my phone calls. I've hosed him, and located another." Or having her present a case for thermopaning the house. If you can stand tenants, or have kids who can find good ones, real estate's tax benefits are too great to miss - way better than the market. Two of my three are now landlords in their 20s. It's also a useful thing to do for yourself. In my case, via appreciation and pre-payments on 15-year low-interest loans it also funded early retirement. Now I do real estate via syndications, but I still do it.
Hmph. In my day, we had 47 kids to a bed, in a tiny, unheated room in the fifth sub-basement. We ate roaches and broken glass in the cafeteria, and when we weren't studying we'd beat each other with sticks -- for fun.
Kids today are just a bunch of mollycoddles, I tells ya!
My college town actually does have condos designed with students in mind; so far as I know, they've worked out really well for all concerned.
I have noticed that the newer college apartments seem like the lap of luxury compared to the roach-ridden hovels I lived in while in school. Are today's students missing out on some real character-building experiences by having such a nice place to live? (And, for that matter, does a place like that seem so inviting that it would distract from studying?)
I'm a little late to the party; however, my two kids each wnt to the same University (three years apart in age). When my eldest was a freshman; i.e., living in the dorms, I realized that I could save nearly $14,000 if she qualified for in-state tuition. The major bar to this was that my wife and I lived out of state, and the University viewed a tenancy (apartment dweller) to not qualify as in-state.
There was an alternative, however. Ownership of real estate "in state" (and the ability to prove payment of real estate taxes as a result) qualified for immediate recognition of in-state residence. Thus, the house was purchased for my eldest, who recruited three housemates (4BR house). The housemates actually saved a little cash flow vs. living on campus, my eldest lived rent-free, and the house appreciated a little.
Later, when offspring #2 attended, the freshman year was again in the dorms, and the house sold from #1 to #2 in the spring of Freshman year. Child #2 qualified for in-state tuition for the latter three years of school, and Mom/Dad saved a total of about $40k over the entire six-year period.
The two kids agreed to split the appreciation on the house (it WAS legally theirs), and treated their now-aging parents to a month-long tour of Hawaii. On the whole, it was the most objective and rewarding decision I ever made with respect to the kids' future.
Everybody benefitted - including credit histories, maturity, being able to organize repairs, etc. The only real downside was the fact that the house was not sold to an "incoming" group of students.
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