Do you have a child who is either attending college or preparing to begin college? If so... you may want to consider purchasing a home instead of paying dorm rent. Not all college students are cut out to be homeowners or possibly even landlords. But if and when they are the benefits can be great.
The reason I genuinely believe this is simple. I'm one of the parents who paid rent either for a dorm or apartment for my child while he attended college. He was pursuing a five year degree at the time and I certainly wish someone had mentioned my helping him buy a home as an alternative.
During my son's first year of college he lived in a dormitory. I was pretty stunned the weekend we went to "set up housekeeping" for him. There were four boys housed in a room smaller than my great room with each having about the individual space of a walk-in closet. That's pretty cramped quarters to live, study, and sleep in. By the end of his first year he genuinely hated it and made his desire to live in an on campus apartment known. In the end that cost about the same and it lasted through the second year. Years number three, four, and five were spent in rental housing. Rental housing that was being offered by a fellow college student due to his parent’s foresight. For me this was the least expensive housing I'd paid for yet. My son paid a portion of the rent, power, and internet. The student homeowner collecting from three roommates managed to pay the mortgage, utilities, and had a bit left over.
At the end of five years my child had a degree and my money spent on college housing was gone forever... My son's friend however had a degree and a home WITH equity built up in it. Woe is me for not thinking about this just a little bit more.
If you have a child in college you already know how expensive housing for them is. Terms and conditions vary and some colleges will charge you a certain amount for housing regardless of where your child lives. So just how much will it cost? You should expect it to be between $6500 to $9000 dollars per year. That will include meals. But if your child is like my child and every other kid I've known they'll eat VERY little of what is served at school. Most likely they'll exist on noodles, macaroni, Cheerios, and pizza regardless of what the cafeteria dishes up.
So how does paying room and board stack up against buying a home? Let's do the math...
Average room and board 7750.00 x 4 = 31,000.00
Per month cost if averaged over twelve months =645.83
Now what is the estimated cost of a 100,000.00 house?
Home Value: 100K - Down Payment: 20K - Loan amount: 80KInterest rate: 6.5 - Loan term: 30 years - Property tax: 1.25 percent
PMI: 0.5 percent - Estimated monthly payment = 622.32
That's just a bit cheaper than dormitory or apartment rent. There'll still be food and utility costs but that's where roommates come in. A typical house will have three bedrooms so you can likely count on at least two housemates to pitch in. If you manage to get a four bedroom home or a house with a basement three or even four housemates become a possibility. Setting up a rental payment for each roommate that already includes utilities would be a good idea. The wisdom of this will come into play when your student is actually collecting enough to pay part or all of his/her mortgage and utilities while building home equity for their future.
I'm sure this option isn't for everyone but my opinion is it has merit. I wouldn't go this route for my child's first year in school but by the time the second year rolls around you'll have a pretty good idea if they'll be staying at that college and how they feel about the dorms.
In the end it's about making the money spent on housing work towards a more secure financial future. One thing's for sure, college is simply a stepping stone on the path of our children's lives. Rent money can never be recouped but a home can be lived in, rented, or sold. You get to decide.
