A Strategy for Investing in Davis Real Estate
Congratulations, your daughter or son have been accepted to UC Davis!
If you are looking for an investment in Davis Real Estate, let us suggest a strategy that many parents use to provide a great housing option while lowering the overall cost of sending a child to college:
- Freshman year, the student lives in the dorms and enjoys meeting new people and making friends with other freshman and sophomore students.
- During the summer between Freshman and Sophomore year, the parents purchase a three bedroom, 2 bath home or half-plex in Davis, either near campus or along one of the many free "UniTrans" bus routes that run throughout Davis.
- In the fall of sophomore year the student moves into the home, occupying the Master bedroom with private bath. The student invites two friends to share the home, each getting their own room and sharing a bathroom.
The rent paid by the two students in the guest rooms will offset some of the monthly mortgage that the parents are paying on the house.
The child acts as property manager seeing that the property is kept in good condition, maintenance is kept up and rent paid on time.
The parents get to take depreciation against their taxes on the home and expenses are offsets against the rental income. The parents might pay a small fee to the child to act as property manager. This payment is also a deduction against rental income. *
- During the 3 remaining years of the child’s college education (perhaps more), the home may appreciate in value. The rent being paid by the guest students helps pay the mortgage and build equity in the home. Best of all, the student has peace of mind. They always know where they will be living each year. No frantic search for an apartment before schools starts.
- After the child graduates, the parents can sell the home or continue to rent it out, having a local Davis Property Management Company handle the leases, rent and maintenance.
- If, after graduation, the child chooses to make Davis their home (many do!), then they already have a place to live, and they can arrange to buy it or lease it from the parents. Some parents might even make the home a graduation gift to the child.
This is a basic strategy that we have seen used successfully many times to help offset some of the expenses of putting a child thru college.
*Of course this is just an outline. We recommend that you consult a professional to about the facts on depreciation and deduction of expenses on a rental property in California.