PARAMOUNT MORTGAGE - LENDER'S BLOG

Depressed home prices have created a growing real estate market for parents of college-bound children says BoNhia Lee of The Fresno Bee, Calif.

With the cost of a dorm room running about $700 a month, some parents have realized they can now buy investment property and make mortgage payments for about the same amount of money they expect to spend for their child’s dorm room, if not less.

Plus, the parents have a chance of later selling the home for a profit.

It’s happening nationwide. A recent survey from Coldwell Banker found that 64% of its real estate agents have seen an increase in the number of “parent investors” buying homes for their kids to live in while attending college.

The math persuaded Daren Pereda to look for a house to buy for his daughter, Corinne, 20, a Fresno State student.

Pereda and his family plan to buy a three-bedroom, two-bathroom house between $150,000 and $180,000. His daughter and a couple of roommates will live in the house to help pay the mortgage. Pereda estimates the monthly mortgage to be the equivalent of about $350 to $400 a month per person.

That is less than the monthly cost of a Fresno State dorm room. Students who live in on-campus dormitories pay between $7,000 and $10,000 a year for a bedroom and a meal plan, or about $700 a month for the 10-month school year.

Regardless of the monthly cost, Pereda said he would rather see the money going into an investment than into a landlord’s pocket.

“We are spending the money on housing anyway,” Pereda said. “This would be a good opportunity not only to have a place for her to live, but we could also use it as an investment in her future.”

The combination of low home prices, low interest rates, and a slew of foreclosure and short-sale homes have made buying much more attractive for parents of college-bound children.

For these parents, the risk also seems low. Homes near universities “don’t take as long to sell, and you’ll always have renters,” said Joe Sciarrone, a London Properties real estate agent.

Condominiums are also a viable option for real estate investing parents says Brandon Gonzales, a real estate agent with Coldwell Banker Premier Real Estate. Prices in the Fresno State area vary from $60,000 for a condominium to $165,000 for a house, Gonzales said.

“If the parents of a college student buy a condo for $60,000 with a $12,000 down payment, and a 30-year fixed-rate mortgage, the monthly mortgage payment is about $350,” Gonzales said.

Add on the typical housing association fee of $150 and the total monthly cost would be about $500. “That is less than renting the same unit, which can be about $750 to $800.”

"In the long term, that’s quite a savings,” Gonzales said.