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Forbes: The Pros and Cons of Buying A House in College

May 29, 2015

With thousands of students flocking to college towns later this summer and fall, a constant question arises in the minds of the financially savvy: should college students buy a house instead of renting? On one hand, it sounds like it could make a lot of financial sense. But on the other, beyond the affordability factor, should a young adult really tie themselves down with property?

Here are some of the main pros and cons of a college student buying a house, and options to help them get started if that’s the course you want to take.

Why College Students Should Buy A House In College
There are a lot of reasons why college students should buy a house in college, if they can afford it.

One of the biggest being that real estate, especially in college towns, can be a great investment. Diana George, founder of The Vault Realty Group, says “There are a lot of benefits to college students who are weighing the pros and cons of buying a home. College students can turn the home purchase into an investment and rent rooms to tenants to help pay for the mortgage so the burden doesn’t completely fall on their shoulders. In addition, it’s a tax write-off, can be used as a rental income in the future, or can be sold and upgraded to a nicer home after graduating from college and starting a career. In the Bay Area specifically, it often makes more sense to buy versus rent given that rent increases are outpacing home price gains. As the economy continues to improve, college students (and their parents) are realizing that they’re spending the same on rent as they would on an actual monthly mortgage.”

In addition, Erin Ellis, a financial educator with Philadelphia Federal Credit Union, highlights that “You will build equity while paying down your mortgage. This equity can be used for a future home purchase. The equity you have built in your “college house” might be enough for a down payment on your next home. In addition to building equity, you’re building your credit.”

However, buying a house in college doesn’t always make sense. Ellis also wants to remind college students that “Being a landlord can be hard work and stressful. There are a lot of additional expenses you are responsible for when you own a home – homeowners insurance, taxes, maintenance, and more. When you are in college you should focus on studying, not on which roommate owes you money or if the furnace is going to last through the winter.”

Furthermore, there are implications if you move after college. Going into college, it seems like that could be your permanent residence for a long time. However, college students move. Not only do many students move while in college, about 45% of recent graduates move back home after graduation, according to Pew Research Center. And while home-owning graduates may not move home, many will potentially move for jobs after graduation. This can make home ownership a burden after graduation.

The Bottom Line
The bottom line is that home ownership will in college is tough. There are many stories of success, with students owning a house with roommates and turning it into a real estate empire. However, the trail is also littered with horror stories about people buying homes, struggling to afford and maintain them, and regretting the decision.

For most college students, it likely doesn’t make sense to own. Home cost a lot of money, and college students aren’t apt to be tied down to one location. But for others, buy away.

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