SDSU Parents Are Savvy – Invest In A Condo For Your Student

With today’s low interest rates and home values bottoming out, more and more parents of Aztec students are choosing to make the wise investment and purchase a condominium for their SDSU student to live in rather than rent. Investment savvy parents are realizing that they can build equity and save on taxes in San Diego’s real estate market while providing a safe environment for their son or daughter to live in during their college years. Other benefits include: more permanent housing, more control over roommates, and practical living experience.

By purchasing a condominium for their college student, parents can forgo the monthly rental bills and instead opt for monthly mortgage payments, which provide tax benefits, and at the same time, build equity. After their student graduates, many of these parents sell the property, rent it out to other students or faculty, or give it to their students to start them on the path of home ownership.

Consider that current rents around the SDSU area average around $1,200/month for a two bedroom/two bath home. After paying four years of rent, the conservative yearly increases of $50 per month, the total comes to $61,200. After graduation, the student gives up the home with nothing to show for that $61,200 investment.

Instead, suppose that the student’s parents buy him or her a condominium to live in during the college years. Adobe Falls, an actual condominium complex a mile from SDSU, has a two bedroom/two bath home available for $119,900. A 20 percent down payment would cost $23,980. Using a very conservative appreciation rate of 5 percent a year, that condo could be worth $145,739 in four years, an increase in worth of 21.5 percent. That profit of $25,839 reflects a 42.2 percent return on the initial $61,200 investment. And, the tax savings realized through property ownership would mean even more money back in the parents’ pockets.

Let's look at the numbers based on the scenario outlined above:

$591* = Monthly mortgage payment

$285 = Homeowner Association Dues

$125 = Property Taxes

$1,000 = Total monthly payment (versus $1200 to rent same unit)

($175*) = Tax savings

($500) = Rent other room out & help cover mortgage

$325 = Net Total Payment per month

Factor in the added benefit of realizing income from the sale of the property, and purchasing the condo becomes a no brainer. After four years, renters will have expended $61,200 with a zero return, while buyers (that rent to a roommate) will have expended $15,600 after tax savings and the ability to sell the home with a potential $25,839 profit. By purchasing a condominium rather than a single family home, parents need not worry about hiring someone to maintain the property, since homeowner association fees cover the cost of maintenance. And, the concentration of homes within a condominium complex provides security and a built-in social network.

Now you see why purchasing is becoming more and more popular among the Aztec parents of SDSU college-aged students.

Jason Conner is a Real Estate Consultant for Pacific REO Properties, one of San Diego County’s foreclosure and short sale specialists. He can be reached via email at sandiegoREOsales@cox.net.

* Based on 6.25 percent, 30 year fixed loan and combined fed/state tax bracket of 35 percent.