Should You Invest In A Rental Property For Your Son or Daughter At UC Davis
So, UC Davis has accepted your Son or Daughter for the Fall Term. Congratulations!!
One immediate consideration is student housing. Available options include the dorms, apartments, or sharing a rental home.
The following is a general outline for how some parents have purchased a rental property for their student. Please consult your tax professional or CPA for specific advice concerning your specific situation.
- Freshman year, the student lives in the dorms and makes new friends with other freshman and sophomore students.
- During the summer after Freshman year, the parents purchase a home, duplex or half-plex in Davis, either near campus or along one of the many “UniTrans” bus routes that run throughout Davis.
- In the fall of the sophomore year the student moves into the home and asks his or her friends to share the home. A professional property manager can screen the prospective roommates to ensure that they are financially able to make rent payments.
The rents received from the roommates will offset some of the monthly mortgage that you pay on the property.
The property manager makes sure that the property is kept in good condition, and that rents are paid on time.
During the three remaining years of the child’s college education, the rents received help pay the mortgage and build some equity in the home. Additionally, the child has some peace of mind knowing where they will be living each year. No more frantic search for an apartment before schools starts.
After the child graduates, the parents can sell the home or continue to rent it out. Hopefully, the home will have appreciated in value. But Sellers also have to consider sales transaction costs which can reduce any profits from appreciation.
In the short-term, there is no guarantee that home prices will rise or rise sufficiently to cover transaction costs. Buying for short-term gain is a risky proposition.
However, Davis has been a fantastic market to own rental property given a historically low vacancy rate and high rents. For parents wishing to hold on to a property for the long-term as an investment after their son or daughter graduates, investing makes much more sense.
Buying right can also make a big difference – an old investor adage goes that you make your money when you buy not when you sell. Granite Gate Property Management can help you decide whether buying a rental property is right for you – Our Mission Is to Help Investors Succeed!!
If you are exploring investing in Davis Real estate, contact us at 530-231-5482 or info@GG2.com to discuss your options.