Should You Buy A Rental Property For Your College Student?

If your college student is getting ready to live off campus, buying a rental property or condo may be an option worth considering. Of course, with high rental costs and the opportunity to create a tax shelter for your hard earned money, this is a strategy many parents have found to be beneficial.
An investment property is an excellent opportunity to put your money to work for you, and may even help offset some of the income invested into your child’s education. However, there are various factors you should consider before making any final decisions.
1. Long term goals – Although appreciation rates may be favorable, it is important to discern how long you intend to keep the property. Within a few years your son or daughter will be finished with their education, and you will still be left with a property to care for.
Some individuals would rather keep the home as an investment and continue to rent the property out to new students. Additionally, this may be a place that you will plan to use for future visits or football games long after your child is done with school.
The problem with solely relying on strong appreciation rates is that you may not be able to command the price you desire a few years from now. So unless you are prepared to hold onto the property for a longer time period to make the investment worthwhile, this may be something worth reconsidering.
2. Maintenance & management – Next, purchasing a rental property is a big investment, so you want to ensure that your property is kept in good condition. Although your son or daughter may be extremely reliable, you may need to consider other friends or roommates that will have to share in on the rent.
Are you comfortable with trusting in 2 or more college students to watch after your property? Also, it may be required to pay a property manager (especially once your child graduates) to help manage the home if you live at a distance.
Finally, it will be important that you can find reliable contractors to take care of any maintenance hassles and ensure that the property remains in tip top shape.
3. Cash flow & taxes – After carefully reviewing the first 2 points, you may still feel that a rental property for your student is well worth the investment. If this is the case, then there are a few things you must know about finances.
First of all, be sure that you are buying smart. Work with a qualified agent who knows the area and can help direct you to the best deals. They will be able to help you figure out projected rental income and appreciation rates as well.
After factoring in taxes, insurance, maintenance, associate fees, your mortgage, etc. you will want to make sure that you have some cash flow for extra profit and to cover unexpected problems that may arise down the road.
This will also make your investment pay off more in the long run and can free you up to invest in future properties as well. For those who are married, you must be aware that there is a limit to how many itemized deductions you can write off if your gross income exceeds approximately $240K.
Therefore, though it is possible that you can include the taxes and mortgage interest as deductions on your second property, this is something you will still need to review with a tax professional.
Finally, be aware that the property can also be susceptible to capital gains tax once you are ready to sell. Either way, you will still be eligible for some depreciation on your home and to write off a portion of your maintenance and utilities, so there are always good reasons to buy.
All in all, buying a rental property for your college student can be a wise investment for you and your family. We strongly advise that you take time to sit down with your financial advisor and/or tax pro to discuss the options available to you. For further guidance on locating a property, please contact us using the information listed above.

Read This Before Buying Homeowner’s Insurance

In order to guard yourself from risk and liability, it is essential to invest in a homeowner’s insurance policy that will give you the protection you need. Although such policies are not a requirement by law, any mortgage company will require this as a stipulation to receiving your next home loan.

Types of Policies

Several types of plans are available that include various optional riders dependent on your particular needs. There are specific policies for old homes, mobile homes, condos, and anything from basic protection to high liability coverage. However, a majority of owners will invest in something know as an HO-3 policy, because it offers protection for both the dwelling as well as your contents that are available in your home.
For example, the HO-3 policy will guard the outside of your property from any of the open perils (i.e. threats or dangers) to your home and also named perils for your contents. However, there will be a list of specific issues that the policy will not protect you from (such as earthquakes or water damage). Uncovered perils may be added at an additional cost.
On the other hand, others may be interested in reviewing the options available with the newer HO-5 policy. This coverage takes the HO-3 a step further by providing open peril policies for both the home and also contents. So essentially you would be protected for more items within your house, without having to prove that damage occurred under one of the named perils.

Other Important Factors

Next, there are liability limits. In the event that damage would occur, this amount would provide the coverage necessary to help restore your home. However, please keep in mind that this is not the same thing as the home’s actual value. There are other things that you need to consider such as the land, possessions, living expenses (if you need to rebuild), or other structures that are located on your property.
Therefore, take the time to assess what type of limit you would need to help cover the total loss in the event of a major catastrophe. Also, be sure to revisit your policy from time to time as the property appreciates, and/or you consider making changes and additions to the property.
Finally, it’s important to review the differences between actual cash value and replacement costs. For those who have a lot of contents that hold a high value, it may be better to consider replacement cost coverage, which could be worth the added price. This will provide a brand new replacement for all covered contents.
On the other hand, for people who are less concerned with replacing everything at market value with comparable items, may want to consider actual cash value protection for household items which will take into account depreciation.
Of course, this is only the tip of the iceberg when considering a homeowner’s policy. Other things that can be considered include:

  • Jewelry Coverage
  • Personal Articles Coverage
  • Umbrella Coverage
  • or Liability Claims Protection

Therefore, take the time to schedule an appointment with a qualified agent to discuss your needs and review what else may be available. Please contact us now for referrals and to obtain more information on how you can get started.

Get The Best Price On Your Next Home Purchase!

One of the most important aspects to buying a home is to ensure that you purchase for a fair price. Since there are certain key steps that you must follow in order to make a sound decision, it pays to have a knowledgeable Realtor on your side who will be able to help obtain the best and most realistic asking price for a property.

Determining Market Comparables

For example, one of the first ways that your agent will discover the price of a home is by researching local market comparables. In most cases, they will be able to bring up a list of properties sold over the last 6 months within a 1 mile radius. Properties should also not be bigger than 20% of the subject size.
Additional features to consider would be the neighborhood each home resides in, structural differences, bedrooms and bathrooms, overall condition and other amenities such as a pool, a/c, or garage. Other factors, such as if a particular home sold for much lower due to foreclosure is something your agent can uncover as well.

Houses That Have Not Sold

Next, many homes could be on the MLS for 6 months or longer without ever selling. Others that are comparable could have been taken off the market after not getting enough offers or being listed for too high. This is valuable information, because you may be able to get a particular property for a substantial discount or it may not even be worth pursuing.

Neighborhood Reputation & Appreciation

When it comes to buying a house, this is one of the most important reasons to work with a Realtor. Since your agent will have a familiarity with various local market trends and statistics, you will be able to learn what makes a particular neighborhood desirable and also which areas to avoid.
A lot of things can affect a home’s value such as the school district, crime levels, or even other properties located nearby (such as those burnt in a fire or properties that were a bank sale). In fact, sometimes these factors can even differ from block to block!
Your agent will also help you to assess the appreciation rates for various neighborhoods and future development plans that could affect home prices, so that you can get a decent indication of what to expect down the road. This can be extremely valuable information dependent on how long you plan to live at the said property and the length of time the home may need to sit on the market.

Appraisals & Inspections

After you place an offer on a property, you will have the opportunity to get an appraisal and home inspection as further due diligence. Even with an agent, there are sometimes issues that may arise with a property that could affect the home’s value that you were not even aware of.
Some of these problems could include structural issues, plumbing or electrical, termites or insects, mold or even water damage to name a few. Obviously many of these things could impact the price significantly and would either have to be fixed by the seller or renegotiated to get a fair price.
In conclusion, there are a lot of areas to consider when choosing a home and getting a fair price on a property. Since this is one of the biggest purchases you will ever make, it is crucial that you protect your interests and ensure that you are getting the best deal possible.
In order to get started researching homes in our local area, contact us right away using the information located above. We look forward to serving you as you search for your next future home!

Make A Wise Real Estate Purchase

In this video we explore some tips for making a wise real estate purchase.

  • Save For A Big Down Payment
  • Don’t Overextend Yourself
  • Consider the Work Involved
  • Really Shop Around

What To Know Before Buying Your Next Fixer Upper

If you’re looking to buy a fixer upper here are some rules to follow:

  • Pick the right location!
  • Know Your Stuff
  • Make sure you consider the time and cost associated with doing a rehab
  • What are your financing options?

Get Pre-Approved

Before you even start shopping for a home, you’ll want to be sure you have financing in place to make your next purchase.
Getting a “pre-approval” from a reputable lender is one of the first steps in your home shopping process.
Watch this video for more details:

Negotiating Rules

In this series of videos below, you’ll learn about the 7 rules to follow when negotiating your next home purchase.
These are:

  • Never Put Your Best Offer First
  • Develop a good relationship with the cooperating agent
  • Know when to walk away
  • Gauge what the seller wants
  • Have a working knowledge of your market
  • Get A Home Inspection
  • Ask For it!

These rules are outlined in the 7 videos below…

Negotiating Rules 1

Negotiating Rules 2

Negotiating Rules 3

Negotiating Rules 4

Negotiating Rules 5

Negotiating Rules 6

Negotiating Rules 7

Buying A Home? Take This Free Video Credit Course

Below is a series of videos that will teach you what you need to know about getting your credit in shape for a future home purchase.
Please feel free to share these videos with a friend who currently owns or is looking to buy a home.
Staying out of credit trouble can have a big impact on your financials for years to come!

Credit Course Video 1

Credit Course Video 2

Credit Course Video 3

Credit Course Video 4

Credit Course Video 5

Credit Course Video 6

Credit Course Video 7

stack by DynamicWp.net
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