Is College Housing a Good Investment?

Is College Housing a Good Investment?As most college students can attest, it has become the norm at most institutions of higher education to live “off campus,” after either your freshmen or sophomore year. I know when I was in school, I couldn’t wait to get out of the dorms, and looked forward to “living on my own” for the first time. I say that ironically because my parents still paid for all my living expenses, including the egregious amount of rent that property managers charged in Oxford, Ohio. There was point in my collegiate career where I remember having a conversation with a few of my friends about going in together and buying a property in Oxford so that we would be able to pay a fair price for what we were getting. Unfortunately, we were all broke college students. This brings me to an MSN article I would like to address about purchasing college-area homes.

In MSN’s “College-area homes make the grade” Jay Macdonald of Bankrate.com discusses purchasing campus housing as an investment. Macdonald first addresses the issues that most face when deciding for purchase campus housing: “What if I can’t rent it? What if my kid drops out? What if the housing market suddenly flat lines?” Macdonald explains that if you do your homework, it’s not hard to find good investment properties located on or near college campuses. Macdonald interviews Robert Sheehan, a consulting economist for the National Apartment Association who, at the time the article was written owned “14 high-end properties.” Macdonald asks Sheehan about what to look for when investing in campus housing. Sheehan says, “The question is, how much growth is there in the community? The ideal situation is a relatively new university in a small town where the student population is growing. That’s almost a no-brainer to look for a place to buy.” – www.realestate.msn.com

Miami University Off Campus Housing
This is the only picture I could find of our formally pink house that my roommates and I once called home

I offer an analysis from one of my own living situations while attending Miami University: I lived at 316 E Vine St. in Oxford, OH (Here is a link to the auditor’s webpage). I, along with my four other roommates, paid $3,500 per semester, one of which went toward utilities. So four people paying $3,500 for approximately 4 months (I’ll count the last 10 days in August plus the first 20 days in December as one month) brings us to $14,000 for 4 months, and a total of $28,000 for the 8 months of the regular school year – not including rent paid over summer. If we divide that $28,000 by 12 – the number of months in a year – then we find that our monthly payment on a home was $2,333 dollars per month, again, not including summer rent. Using my handy-dandy Ez Calculator – thanks iPhone, you’re the greatest –  the monthly payments on a  $465,000, 30-year fixed rate mortgage at 4.5% (about where it is today) would be around $2,300, ignoring PMI and other factors that could go into a monthly payment. We lived at our little place on 316 E Vine St. in 2011 when it was purchased for $145,000. The monthly payments at the same interest rate on that $145,000 mortgage would’ve been around $730. Let that one sink in.

 

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