Buying Property in Your Child’s College Town: Worth It or Not?

Introduction to buying property in a college town

Buying property in a college town can certainly be a smart move. But only if you research the local housing market before you commit.

A successful college can generate a stable rental market for a city, as the annual supply of students entering their freshman or first year generates strong demand as seniors graduate and leave.

Meanwhile, you can ensure that your child lives in a safe, secure, home-from-home environment, which can be important if this is their first time living away from you.

And you get to set the rent, if any, allowing you to cushion the kid from an expensive aspect of college life. It’s up to you whether you also rent out rooms to other students, whom you can carefully vet.

This can be a win-win for you and your child. But not everywhere. So read on to discover the pros and cons — and the things to look out for that will help you decide whether buying property in a college town could be a sound investment for you.

In this article (Skip to...)

• Buying pros
• Buying cons
• Financing options
• The bottom line

Pros of buying real estate in a college town

Here are some common benefits of buying property in a college town:

Steady rental demand

Every academic year, seniors leave and first-year students arrive. That churn typically keeps demand for rental property buoyant, which might mean your rental income can grow in line with wider rents within the city and beyond.

The College Board estimates that, in 2024-25, on-campus housing and food (room and board) costs at a state university will average $13,310. At a private, non-profit university, the Board is expecting $15,250.

That may give you an idea of the sort of rental income you might expect, after deductions for food. However, there’s often demand for a wide range of housing options, including more comfortable accommodations, such as single-occupancy rooms with en suite bathrooms, providing it’s close to campus.

But it’s vital to recognize that each college is unique. So, you need to research both the student rental market and the overall residential sales market around the place your son or daughter is going.

Potential for property appreciation

Many college towns have limited residential space close to campuses, and that is likely to create strong demand for accommodation. This demand not only supports rental income but also has the potential to drive property appreciation, making such investments attractive both in the short and long term.

Savings on student housing costs

As you get to set your child’s rent, you can choose to ease his or her financial burden. If you forego rent entirely, you can limit the amount they need to borrow in student loans — or that you give them.

Future investment options

Given that your kid’s attendance at a college has triggered your interest in buying a home for him or her to stay in, you may be thinking of selling when they graduate.

However, if you find later on that your investment is a little gold mine, why not continue to enjoy your high returns, assuming you’re profitable? Keep the property and continue to rent it out to future students.

In-state tuition

Don’t think that your child can claim in-state tuition rates just because you now own a home in the state. We can’t say that’s impossible because we haven’t checked the policy of every single college.

However, of the ones we’ve sampled, every one requires you, the parents, to have personally lived in the state as your main place of residence for at least a year before enrollment.

Cons of buying real estate in a college town

Here are some potential drawbacks of buying property in a college town:

Market dependence on student demand

In some cities, the local college drives the economy. In Cambridge, Mass., for example, Harvard is the city’s single largest employer (and the state’s fifth biggest), and no doubt drives much more local prosperity than even that implies.

Imagine what would happen to Cambridge’s economy, its real estate market, and student accommodation prices if Harvard suddenly went into decline. Of course, Harvard is due to celebrate its fourth centenary in 2036, so the chances of it hitting the skids now are close to zero.

But can the same be said of your kid’s college choice? Chances are, it won’t go into a sudden decline. But check its current and recent enrollment numbers to make sure it’s as popular as ever.

Also, consider the city’s wider economy. Is it dependent upon a single industry? And, if so, is that industry thriving or failing? A drop in the number of non-college renters could force landlords to switch their focus to students, with the extra supply potentially driving your rents lower.

When you research local markets, you’ll likely be encouraged by the data. But don’t skip doing your due diligence.

Property management

Don’t underestimate the costs of running a rental property remotely. You’ll likely need professional help.

After all, should you really get your son and daughter to collect rent from his or her roommates? Some may be natural debt collectors, but some could struggle to impose their will on their peers.

And what happens when the HVAC or washer stops working? Or the roof begins to leak? You’ll need professional help. But who you gonna call? Not Ghostbusters.

You may decide you need the services of a property manager. A good one can take away all your headaches, from finding and vetting tenants, through collecting rents, to getting professionals to promptly undertake property maintenance and repairs. Just be aware that a property manager’s costs will eat into your revenue.

Read How to become a landlord in 2024: Start earning rental income to get a better understanding of the challenges and joys of owning rental accommodation.

Higher maintenance costs

It’s not always easy to predict which student tenants will respect and maintain your rental property versus those who may not prioritize its care. But you certainly shouldn’t expect student tenants to be as careful as, say, an elderly retired couple.

So, build more money than usual into your cash flow forecasts to cover repairs, redecoration, and the replacement or steam cleaning of furniture and carpets.

Resale challenges

Depending on the type of home you have and its proximity to campus, you may find your target market when you sell limited to faculty members and people like you: Parents and others looking for an income from student rentals.

This may not necessarily affect its resale value. But it’s possible that a limited market could ultimately depress the sum you realize.

In most of the United States, home values almost always rise. But, inevitably, there are relatively brief periods when they fall. Be prepared to wait out those brief periods.

Meanwhile, some pockets in America continually suffer economic decline and depressed home values. Avoid buying in these.

Financing options when buying property in a college town

Many of the obvious mortgage options may be open to you. But, unless you’re planning to live in the home yourself, you’re probably looking at an investment property mortgage or a second home mortgage.

Click those links to discover more about these. But note that both typically require a slightly higher interest rate than a standard purchase mortgage.

If you’re a homeowner with a lot of equity in your existing home and a healthy income, you could also consider a home equity loan or home equity line of credit (HELOC). You could choose to pay those back more quickly than a typical mortgage so you’re free of the debt sooner.

Tips for making a success of buying property in a college town

• Choose the right location: Put yourself in your kid’s and potential renters’ shoes. They want to be close to campus and other amenities
• Screen tenants carefully: Screening younger tenants can be challenging, as they often lack an established rental history. However, if their parents are co-signing or guaranteeing the lease, reviewing their background and financial stability can provide added reassurance.
• Consider a property manager: A good property manager can relieve you of tenant screening and most other landlord chores and responsibilities. But there’s an associated cost
• Have an exit strategy: Have a plan for the future. Will you sell once your child graduates? Or will you continue to rent to other students? What you decide isn’t set in stone, and you can always change your mind later

Buying property in a college town: The bottom line

You’re probably starting off wondering how to make your son or daughter’s college years happy and safe. But don’t be surprised if you end up recognizing the investment opportunity that student accommodation can present.

Assuming you don’t live locally, your biggest challenge is likely to be managing the home. For peace of mind, you might prefer to pay a local professional to take that burden from your shoulders. But see how it affects your rental cash flow forecasts before you commit.

Talking of cash flow forecasts, do what you can to make sure yours holds up over time. Research the college, city, and local economy to check that they’re thriving. If they’re not, you may be better off having your child stay on campus or rent somewhere nearby.