Graduation-is it time to do a real estate deal?
Graduation seasonis here. Transitioning from one grade or classification to another. Or maybe beginning graduate school, or professional school, or if the stars are aligned just so, a new career.
These transitions should be a time to consider the students living situation too. Here's why this blog came to mind. A few weeks ago, one of the members of my Rotary club told me that his friends from St. Louis were coming to San Antonio to look for a condo for their daughter. The daughter will be starting the second year of medical school in the the fall. The family decided that it is more cost effective to buy a condo than to continue paying rent for the balance of her time in school.
I helped them find a condo that fit their living requirements, location needs, and price parameters. This was a good solution for their needs.
Each situation is different and each family has to decide the cost-benefit relationship of such a decision. But, for my money, this transition is a great time to think about a real estate situation. The student will have living expenses somewhere. This is a situation where the expense may actually add to the family assets.
In this case, the numbers worked. We found a location close enough to campus to make the commute tolerable, and based on the inspectors report, and their observations, the family is satisfied the structure is sound.
This sort of arrangement can work in many cases, but here are a few things to consider:
-Discuss the potential purchase with your financial planner or a tax professionalto get an independent assessment of how the purchase may affect your current standard of living, tax situation, the impact on other assets, and how the purchase may affect your ability to handle current and future obligations.
-Like all other real estate transactions, your total profitability is largely determined by not over paying when you buy. This will usually have a larger affect on profitability than the sales price you get when you sell.
-Don't buy for a student who is not willing to accept the responsibility of watching out for your investment.
-Age is just a number, but I would not buy for one of my kids until they were a junior in college. Each family can set the benchmarks that work for them.
If the site selection is good, your asset can usually be sold at the conclusion of your students' studies or used as a rental property. I was at my former college for an event earlier this year and many of the rental properties that were there when I was a student are still generating cash for their owners. And I left the area many, many, many years ago. But then I was not smart enough to invest in the real estate.
If you need some help finding that great location to set up shop for your student and you are in the San Antonio area, call me. I'll be glad to help.
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