Every year I have clients sending a child off to college and they weigh student housing options. Most parents have one student attending a 2 or 4-year college and their child lives on or near campus paying an average of $700 per month per bedroom. Rent for one student over 4 years averages $33,600 plus utilities. 

  Many parents with grad students or two children in college at the same time, purchase a condo or house to save money or hopefully make money.

  I have sold dozens of homes around the U of M for college students. One of my clients purchased a house a few blocks from campus in November of 2010 for his two college students. He paid $170,500 for a 3-bedroom, 2-bathroom house. He made a 20% down payment and the seller paid his closing costs. The monthly payment with principal, interest, taxes, and insurance was about $1000 per month plus utilities. He rented out the third bedroom to another student for $600 per month. His student housing cost was down to $200 per month for each of his two children, plus utilities.

  His youngest student graduates this year and we are putting the house on the market for $229,900. We anticipate it will sell for at least $220,000 based on the market analysis. His selling expense will be about $15,000. The seller painted and refinished the floors to get the house ready to sell at a cost of about $1,500.00. The sellers profit will be about $33,000 plus $36,000 that he received for renting out the 3rd bedroom for five years. He must to pay capital gains tax, but he was also able to write off expenses for five years, which reduced his tax liability for owning investment property.

  In this case, instead of paying $84,000 for rent for two students over 5 years, he earned $69,000 on his $34,000 investment (down-payment) before any tax considerations. My client is using his earnings to pay down the student loans.

  An experienced real estate agent, a loan officer, and a CPA can help you weigh housing options for your college students.

  Ask the Real Estate Agent is a weekly column by Cheryl Kempenich of Coldwell Banker Burnet, who lives and offices in the Chisago Lakes Area. Submit your questions to ckempenich@cbburnet.com. All information is deemed reliable but not guaranteed. For legal assistance consult an attorney.