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May 1 was “National Decision Day” when high school seniors formally accepted an offer of admission from just one college. That milestone choice has its own host of anxieties for today’s soon-to-be college freshmen. For their parents, the day after “Decision Day” is the first time many parents can take advantage of a growing trend to cut the costs of college.
College enrollment continues to grow dramatically and more high school graduates are going to college than ever before. According to a report by the National Center for Education Statistics (NCES), “Projections of Education Statistics to 2020,” between 2009 and 2020, an 11-year period, dramatic enrollment increases are projected:
- 13% increase (to 23 million) for total enrollment in postsecondary degree-granting institutions;
- 12% increase for undergraduate students;
- 18% for post-baccalaureate students;
- 13% increase in public institutions;
- 13% increase in private institutions.
Yet, as millions of students troop off to university they are experiencing one of the worst housing shortages in memory. Faced with ever-smaller budgets from state legislatures, many public universities haven’t kept up with demand for on-campus housing – sometimes not even for all the incoming freshmen. Research by Wintergreen Orchard House, a college database compiler, enumerates off-campus living for 99% of students at University of Texas—Brownsville to schools like Youngstown State University in Ohio where 90% live off campus, according to the website CollegeExpress.com.
That growing demand for off-campus student housing is a boon for some parents – and real estate investors who know how to spot college-town markets with rising rents and translate those higher rents into higher property values when it’s time to cash out.
Here’s why this is important to parents.
Once a student has chosen a school…only then can parents investigate that college-town market to determine if the parents can save tens of thousands on dorm fees and rents by investing in their own college rental. But how does a parent know if their kid’s school is a market worthy of investment? Dan Gooder Richard, author of SMART ESSENTIALS FOR COLLEGE RENTALS recommends parents look for the top ten signs of a great college-town real estate market.
“First, look at the school, then the town, to find a college market worth your investment,” Richard said. “Schools in demand with growing enrollment is one sign. Another is where applications far outpace open seats.” One essential rule of thumb that Richard lists in his new book is where a high proportion of students live off campus. “A benchmark of about 70% living off campus is one of the key signs of a solid college-town rental market,” Richard said.
“Every student housing investor wants two things: Tenant demand that is greater than the supply of rental units, and a future pool of investor-parents to buy the property when your kid graduates someday.”
After tuition, the cost of student housing is by far the second largest expense of college today. Cut the cost of housing and parents can cut tens of thousands in dorm fees and rents — money that can minimize student debt after graduation or maximize parent’s retirement savings.
Across the country “bed rents” average about $500 per month, and can easily climb to over $1000 a month in some high-cost university towns, according to the 2013 U. S. News Short List, “10 Colleges That Charge the Most for Room and Board.” The average costs for room and board have been rising steadily over the years, ranging from $7,500 to $9,000 per year, depending on whether you’re looking at public or private universities, according to CollegeBoard.org, an advocacy and policy center for trends in higher education.
“Parents who make a smart property choice in the right markets,” Richard said, “can cover their carrying costs by renting the extra rooms to other students, and then sell years later at least at a break even price.” Some parents may even hold onto the investment property after graduation if they have multiple children headed to that school, and others keep university properties with retirement in mind.
“In many college-towns across the country,” Richard added, “parents are discovering a convergence of lower prices, available inventory, low interest rates and rising rents. Plus the tide of Echo Boomers – the children of Baby Boomers — and others headed to university in the coming years guarantees tenant and buyer demand.”
Bottom line: For parents with a child heading to college, if you know how to size up a college-town rental market and find a property that rents and can be managed easily, then cutting the cost of college is within your grasp.
Decision Day has passed for your child; now it’s time for parents’ to investigate cutting housing costs with a college-town rental.
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Dan Gooder Richard is author of SMART ESSENTIALS FOR COLLEGE RENTALS: Parent And Investor Guide To Buying College-Town Real Estate (Inkspiration Media, 2013) available on Amazon.com, BarnesandNoble.com and SmartEssentials.com (ISBN 978-1-939319-04-03). Richard can be contacted at DGR@GooderGroup.com or (703) 698-7750, ext 102.