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House for college kid?
Old 12-04-2020, 08:39 PM   #1
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House for college kid?

Please direct me to thread if this has been covered, but...

Daughter at college. Talking about buying house, she would live there and be landlord for 2 roommates. Told me sheíd make $1400/mo with an $835 mortgage payment.

Several thoughts / questions come to mind:
1). Should I simply own in my name, or should I set up some sort of company (LLC)?
2). Iíve got enough ďspareĒ cash so probably wouldnít get a mortgage.
3). I assume there are still deductible expenses/depreciation for furniture and upkeep.
4). Would probably sell in 2-3 years.
5). Iím not really looking to make money, but see it as a way to interact with my daughter on finances.

Iíd appreciate any thoughts of those of you who have experience in this area, especially pointing out things I may not be considering.
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Old 12-04-2020, 09:00 PM   #2
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I bought my daughter a 2800 square foot home to raise her 2 kids in. And the local DHS showed up one day and performed a drug screen on her because someone turned her in as being on drugs. The court cases cost me a small fortune, and we had to take in her 4 year old daughter to raise.

One day, the district attorney sent me a letter saying the home is a drug nuisance house, and that she had to go--or they'd take the house. I had to have her evicted.

Do yourself a favor and put your daughter in an apartment. Houses are too difficult to control, and girls often don't have the gumption to keep all their friends out.
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Old 12-04-2020, 09:01 PM   #3
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Had a buddy do this, at his wife's request.


He got tired of the calls from the police and the neighbors on an average weekend. The bad weekends he had to go there in person.


Two years later he saved two years of dorm expenses, then had to remodel the entire inside of the place.


You don't want to own rental property to college students, especially if they have the same last name as you.


If you want to interact with your children on finance, buy some stocks together. You don't have to clean up after them when you have a party.
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Old 12-04-2020, 11:19 PM   #4
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One of my relatives was a roommate in a house like that. The owners' daughter either got kicked out or dropped out of college. I don't remember the exact details, but it did not end well.
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Old 12-04-2020, 11:32 PM   #5
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One of my friends rented a house to his nephew...big mistake. Some people think that just because you're related they can miss payments with no consequences. My friend was lucky that he moved out after the first year, but his sister (nephew's mother) still thinks he was too hard on him expecting him to make rent payments in full and on time.
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Old 12-05-2020, 06:47 AM   #6
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We had a good experience contrary to others. Bought one side of a duplex near the university, 2 bed, 2 baths. My son acted as landlord and had 1 and a couple times 2 roommates. 1 covered the rent and taxes, 2 covered all other expenses. He picked his roomies carefully but still had 1 that was a bum, dirty, stayed up all night playing games, etc. Unfortunately this was one of his mom's best friend's son . He asked me what to do and I told him to kick him out, I'll explain to your mom. He did and it worked out good for him and cheaper than paying his rent for us.
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Old 12-05-2020, 07:23 AM   #7
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My opinion only: seems like a life complication that is best avoided.
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Old 12-05-2020, 07:50 AM   #8
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Have you already done RE management? If not, I'd avoid the first experiment with the added complications of your DD and roommates.

If still tempted, perhaps rent her a house and sublet rooms to the roommates, as a first year experiment. But still, yes, look into the LLC and liability insurance...

(still I also agree it's too complicated for the bother, she can learn finances many other ways)

Especially with Covid, the chances of 3 students all staying in place and not going home, or campus not closing, is quite a chance, at least through the first half of 2021.
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Old 12-05-2020, 08:05 AM   #9
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My daughter lived in a house like that while in college. It was all girls in the house. Owner had all the parents sign the lease. House was in a residential neighborhood one block from campus. The neighbors were the right kind of nosy and would contact the owner if they saw something wrong. Owner lived 90 min away. It worked out well for us and for him I presume. Itís unbelievable how expensive/fancy the newer college housing is.
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Old 12-05-2020, 08:08 AM   #10
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+1 Seems like lot of potential downside with negligible upside. If you do proceed, be sure to have lots of liability insurance in case things go wrong and put the ownership in an LLC.
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Old 12-05-2020, 08:21 AM   #11
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Depends entirely on your daughter’s level of maturity. I did this (bought a house with an additional basement rental unit) for my daughter to live in. She found co-tenants to live with her upstairs and I rented out the downstairs. The property generated nice Cashflow and significantly appreciated over 4 years.
DD ended up getting married and taking a local job, so I sold/gifted the property to her and DSIL as a starter home. Their downstairs tenant basically now pays for their entire housing expenses and they get to live in an amazing location for free.
All that said, I own and manage several other rental properties, so I did most of the landlording stuff (other than finding her room mates). Her job was to keep the roomies in line and paying rent (which she did).

College rentals are not as bad as people think. The majority even of Undergraduates are perfectly fine (if at times amazingly inexperienced) folks. Selecting the right tenants is key - no different than any other rental unit. Parent’s always co-sign student leases in my units. No exceptions.
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Old 12-05-2020, 08:55 AM   #12
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Doing it to teach finances alone is not worth it. My daughter and I connected financially over a couple books - The Millionaire Next Door and a Dave Ramsey book. We would discuss as we were reading the books.

If you proceed get the renter's parents to sign the lease as jazz4cash suggested. Also, keep in mind what position this puts your daughter in - it's not easy being a landlord, especially to some friends.
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Old 12-05-2020, 09:12 AM   #13
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Quote:
Originally Posted by mrfeh View Post
My opinion only: seems like a life complication that is best avoided.
I agree. It could turn out well. It could turn into a time consuming, unpleasant problem for the student-landlord. If the student is in a challenging academic program with plenty on her plate already, the risk of having issues with the house or roommates complicating that situation doesn't seem to justify the possibility of negative outcomes.
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Old 12-05-2020, 09:31 AM   #14
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Headache of a way to teach daughter about finances. if thats the intent. ANd I wouldnt buy a prop and want to sell it in 3 years. and buying explicitly to rent to college kids sounds like a dubious proposition to start with. They drop out, disappear, and if they stay around its even worse than that alot of times. Dorm or apt rent is looking pretty cheap comparatively.
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Old 12-05-2020, 10:02 AM   #15
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I think this would be a good idea for saving some money, but if it only is for four years, it might not be worth the effort.
The intricacies of rental property finances might not be the right place to teach about finances, but it would be a great way to teach your daughter about rental property investments if you do all the book work, screening and finances together.
A former colleague of mine showed me how beneficial it could be. He purchased a home for his DD when she went to college and ended up with more real estate net income than his highly paid science W2 income did 17 years later.
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Old 12-05-2020, 10:55 AM   #16
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Depends entirely on your daughterís level of maturity.
+1
You are asking your child to be a college student, landlord, tenant screener, and property manager. That is asking for a level of maturity that only you can assess how capable your daughter is for these roles.

Although there have been more negative than positive examples on this thread, bad news and anecdotes tends to travel much more than good news. In real life among friends I have seen both great and horrible results. You probably have 50-50 odds of this working out. The more mature your daughter can be acting in the above roles, and the more experience or desire you have to own, manage, and deal with the property, the better.
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Old 12-05-2020, 05:27 PM   #17
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If your daughter is responsible and can handle home ownership, I think itís best to put her on the title and provide a private mortgage (with legitimate paperwork and recordings) where she makes monthly payments to you. If something bad happens, I donít think you want to be more than a lien holder.
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Old 12-05-2020, 05:35 PM   #18
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I think it depends on the student and the school. My DD lived in a condo owned by one of her friend's parents for that purpose. The school was Santa Clara University. Parents had a significant profit when they sold it.

So, if your child is attending a selective well-funded school and is a serious student then go for it. While house values are up this year many colleges are struggling with enrollment. The parents may find a good buy. Insist, however, that room mate's parents sign a lease.
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Old 12-05-2020, 05:49 PM   #19
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Depends on the daughter of course, but it can work. A cousin of mine did that with his daughter, he bought the townhouse ~20 minutes from the college, she picked out two roommates who were good ones and paid rent on time, didn't party too much, etc. The rent paid the mortgage + a little bit. After the first year all three girls got in-state tuition because they were WV residents, not something to be overlooked.

It worked out well in that case.
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Old 12-05-2020, 05:50 PM   #20
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'I'll not pile on'.
pb4u's analysis seems spot on. Like a lot of potential downside with negligible upside.
No doubt she's paying for all her own college costs correct, she's good w/money right?
No good deed goes unpunished rings a bell*BING!.

Good Luck & Best wishes though......
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