DORMS TO DEEDS: A Parent’s Guide to Buying & Investing
Think of this as your playbook - a roadmap to understanding the college-town investment process, from financing to long-term strategy.
Every family's goals and circumstances are different, so this guide lays out the key steps while leaving room for your unique situation. If you have specific questions or need personalized guidance, feel free to reach out!
Identifying A Property
There are a few key considerations when identifying a property:
Location: There are several distinct areas that offer viable housing options for UO students. Explore these neighborhoods and their distinct personalities on Finding the Right Property - another page I have published.
Size and Layout: Consider how much space you need. Are you looking for a small unit for just your student, or a larger property to house multiple roommates?
Condition: Are you after a move-in ready property, or are you willing to put in some work and save money upfront? A fixer-upper in the right location could offer a big return if you're ready for the work.
Financing the Purchase
Primary Residence vs. Investment Property: If the student is a co-borrower and occupies the home, the property may qualify for lower down payments and better terms. Otherwise, it is considered an investment property - which alternatively offers more flexibility in ownership and potential tax benefits.
Primary Residence: Better Loan Conditions - owner-occupied properties can qualify for down payments as low as 5% and offer lower interest rates than investment properties.
Investment Property: Future Income Potential - the property can continue generating rental income after your student graduates without needing to change its classification or financing structure. Ownership Flexibility - can be owned personally or through an LLC for liability protection. Tax Deductions - owner can, in some cases, deduct mortgage interest, property taxes, and some portions of depreciation, maintenance, and repairs. No Need for Student Credit or Income.
Property Management
Role of a Property Manager: A property manager can handle everything from tenant screening to maintenance, freeing you from day-to-day management. They typically charge 8-12% of monthly rent but can save you time and hassle.
Lease Creation, Tenant Screening & Rent Collection: Property managers draft and customize
rental contracts, screen tenants, and handle rent collection, ensuring timely payments.
Maintenance, Repairs & Inspections: They coordinate routine maintenance, manage contractors
for repairs, and perform property inspections to ensure everything stays in good condition.
Evictions & Lease Renewals: Property managers manage evictions when necessary, and handle lease renewals and adjustments to terms based on market conditions.
Legal Compliance & Tax Docs: They ensure the property complies with all relevant landlord-tenant laws, protecting you from potential legal issues. They also provide year-end tax documents.
Long Term Investment Strategy
Selling for Profit: If your student graduates, you may choose to sell the property for potential profit, especially if the area has appreciated in value and/or work has been put into the home.
Converting to a Long-Term Rental or Airbnb: After graduation, consider converting the property into a long-term rental or Airbnb for continued rental income.
1031 Exchange: A 1031 Exchange lets you defer capital gains taxes by reinvesting in another property, helping you grow your portfolio over time.