A Strategy for Investing in Davis Real Estate
So, your Son or Daughter has been accepted to UC Davis for the Fall Term. Congratulations!!
Now you are thinking about student housing options like the Dorms, an Apartment, or sharing a rental home.
Let me suggest a strategy that I have seen many parents use to provide a great housing option for their child, while lowering the overall cost of sending a child to college.
The outline of the strategy goes something like this:
- Freshman year, the student lives in the dorms and enjoys meeting new people and maki ng 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 and that maintenance is kept up, and rent paid on time.
The parents get to take depreciation against their taxes on the home. Upkeep 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 might appreciate in value. Also, 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 I have seen used many times. Each summer, I am contacted by many parents from the Bay area or Southern California that have kids entering UC Davis or starting Graduate School here.
The cost of four or more years of tuition, books, housing, food and incidentals to put a child through college can be daunting. This is one suggestion on how you might be able to offset some of those expenses and make an investment in Davis real estate at the same time.
If you are looking for an investment in Davis Real estate, as a student rental, or for the solid value that the Davis market represents, contact me today, or call me at 530-219-7653 and lt's talk more about it.
*Of course this is just an outline. I recommend that you consult your accountant or tax advisor to understand the facts about depreciation and deduction of expenses on a rental property in California.
Vicki Walker, Realtor
California DRE License # 01033786
Coldwell Banker, Doug Arnold Real Estate
505 Second Street Davis, California 95616