Benefits of and what to consider when investing in college town real estate

Investors and parents alike have developed an interest in purchasing real estate in college towns.

1/14/2015 7:12:09 PM

Investors and parents alike have developed an interest in purchasing real estate in college towns. Some benefits are present with an investment of this nature in addition to some risk associated with the decision to purchase real estate in neighborhoods and cities near an educational institution.

Stability in demand for rentable real estate present near colleges. Regions with a college situated nearby provide an opportunity for investors to gain profits. Students and faculty will raise the demand for housing options in the area.

RealtyTrac, an online real estate company, ranked the top 10 college towns for flipping properties. The towns included on its list solidified top spots due to 2012 enrollment indicated by the National Center for Education Statistics and an unemployment rate below 6.2%. RealtyTrac gathered the unemployment rate from June 2014. Zillow, another online real estate company, determined top college towns to invest in properties and homes based on the number of students compared to the total population — preferably over 24%. Investors should consider similar factors when deciding to purchase a property.

Some of the top college towns to invest in include:

• Tempe, Arizona
• Berkeley, California
• Cincinnati
• Seattle
• Champaign, Illinois

The demand for rental options and housing has steadily continued to rise. This heightened market drives up prices while the values of homes continue to recover from the start of the housing downturn in 2008. Freddie Mac, a government-backed enterprise, showcased the continually decreasing and historically low interest rates associated with U.S. home mortgages. If executed properly, an investment in property located near a college or university may accrue wealth.

Purchasing real estate for your college-aged child gains popularity. Research from Zillow indicated in some cases, buying college homes may be a better investment than the expenses associated with renting or paying for a room in a residence hall.

Many parents are also purchasing homes with the intention of moving after their sons or daughters have graduated, according to Ed Feijo, a Coldwell Banker sales associate, reported Forbes.

This is a particularly appealing option if a parent is interested in long-term ownership. If a parent is considering a real estate purchase of this type as a long-term investment, this may be a valid option due to higher rental costs and lower mortgage rates and monthly bills.

Additional issues arise when owning property in a college town. While students are eager to sign leases during the months when school is in session, vacancy may present an issue during summer. according to Zillow. An investor may have to purchase additional insurance for an unoccupied building, and this can create an issue if income ceases over the academic break.

Forbes also noted the importance of budgeting for repairs. Rental units in college towns may experience a bit more wear and tear than a typical residential space.

In addition, a property manager is likely necessary if the investor does not reside in the area.

Academy Mortgage is one of the top independent purchase lenders in the country as ranked in the 2013 CoreLogic Marketrac Report. Visit www.academymortgage.com to find a loan, get a rate, or calculate your payment today.

Want to be contacted by one of our specialists?

Fill out this short form and we will contact you by email.