So this may just be a brainstorming post that I type out but then delete and don’t post but here goes.
My daughter is graduating and then moving on to a Phd program somewhere undetermined yet. She has been accepted at a couple of programs but the process is ongoing.
I have floated the possibility of purchasing a condo near whatever University she ends up at and having her pay rent back. Daughter is hesitant but willing to entertain the idea. Wife is all for it. I am told the time it takes to earn the Phd is 5-6 years. These are all tuition paid with minimal living expenses paid programs.
Not expecting to make a lot of money off this but if we end up profiting I won’t complain.
We can afford it. We have income way over our expenses at this point. Even while paying for her school which ends this semester.
Worst thing that happens I guess is losing property value, or kid drops out in some way.
I am relatively naive in such matters so teach me. The thing I expect is probably to have her rent for at least a semester before going in with a purchase wherever she ends up.
What are the big positives and negatives? or even minor ones?
Absolutely. I considered it for my son as an undergrad, and it was a mistake not to. I would have sold after 4 years and made out very well, especially if he had roommates who paid rent.
I floated the idea to a good friend who had twins attend GW in DC. 4 years later, he admitted that not buying an apartment for them was one of the worst financial moves he ever made.
Years ago I dated a girl who lived in a condo owned by the parents of twins. They bought the place when their kids started college in Philadelphia, and both stayed for grad school. So 8 years rent free, income off other tenants and a huge appreciation in their investment as that neighborhood improved in those years.
I was in my early 20’s and knew enough then that it was a solid plan. I think upside > down. Especially if she ends up in a town/city that looks like it will only be more desirable over time.
Not personally, but I know people who do this and they seem to feel that it is a good arrangement. I also know people who purchase houses for their kids and the rent the other rooms during the duration of their degree program. It could also be an experience in owning/keeping up with property.
From what I hear, the finances seems to either even out or a slight profit, depending on the time of departure/sale.
The benefits seem to be long term stability (location, costs, furniture, no hassle of moving, etc), especially for a condo where most utilities are covered. Though I think it largely depends on the real estate situation in the city. University towns in my region seem to be booming, causing a shortage of accommodations or really (unfairly) high rents.
There is also nothing from stopping you in keeping the condo after graduation to use as an investment property?
So, from my uneducated N=1 view, it does seem that the benefits outweigh the negatives, after overcoming the initial logistics of a real estate purchase.
I did it for my daughter while she was at the University of Alabama. It turned out to be a great investment thanks to the run up in real estate prices in recent years. I would recommend it however pay close attention to the market where you are buying. Expect many markets in the U.S. to see a 10-20% drop in the coming couple year after the big run up during Covid.
So this may just be a brainstorming post that I type out but then delete and don’t post but here goes.
My daughter is graduating and then moving on to a Phd program somewhere undetermined yet. She has been accepted at a couple of programs but the process is ongoing.
I have floated the possibility of purchasing a condo near whatever University she ends up at and having her pay rent back. Daughter is hesitant but willing to entertain the idea. Wife is all for it. I am told the time it takes to earn the Phd is 5-6 years. These are all tuition paid with minimal living expenses paid programs.
Not expecting to make a lot of money off this but if we end up profiting I won’t complain.
We can afford it. We have income way over our expenses at this point. Even while paying for her school which ends this semester.
Worst thing that happens I guess is losing property value, or kid drops out in some way.
I am relatively naive in such matters so teach me. The thing I expect is probably to have her rent for at least a semester before going in with a purchase wherever she ends up.
What are the big positives and negatives? or even minor ones?
I don’t have kids, and certainly don’t have a PHD. The only consideration would be if she is unable/un willing or otherwise “un†to finish the program where she started.
My niece is doing her PhD at McGill and she will now likely finish….it was/is a shit ton of work and bumps in the road.
Pros are a great and stable tenant (my assumption) , good lines of communication for problems etc, and not throwing money away on rent.
Friend in grad school lived in a house her parents bought with 3 roommates. She didn’t stay for the PhD and I don’t know what the parents did after. But while she was there it was like having a live in rental manager for her parents and no need to worry about bad tenants.
We had a friend that did this. They paid the down payment. Child paid mortgage. At the end of degree. the child sold the condo and used the profits to buy their next home and get started in the real world. It was a nice graduation gift so to speak and really helped them start their adult life.
We had a friend that did this. They paid the down payment. Child paid mortgage. At the end of degree. the child sold the condo and used the profits to buy their next home and get started in the real world. It was a nice graduation gift so to speak and really helped them start their adult life.
I can see this happening. It would be ideal and a good reward for what will be years of hard work.
I’ll add a little more. Her field is computer science, and she currently works for a research group as an undergrad and has already published a paper. So I expect her passion to continue as it was unprovoked by her parents. She has also been president of a 20 person co-op for the last 2 years. So her management skills are spot on when it comes to tenants.
Honestly I don’t know how I made this child other than to not discourage her. I am so proud.
Way back around 1980, when the Miami condo market was hot, I read about this where the parents were buying condo’s for their children at the U of Miami, and planning to pay themselves back for the college expenses by selling the condo after the kids graduated.
My wife and I did something similar when our daughter went to Hawaii in the Coast Guard. She was at Barbers Point on Oahu for 6 or 8 years. We made the down payment and the Coast Guard paid all the monthly expenses of the condo. Over that time, she got married and was able to sell the condo and buy a house in Wahiawa, using the profit from the condo to put in a large down payment on the house.
I’d say go for it. No matter how it works out, in the long run when you sell it you should be better off than paying rent for 4 to 6 years.
No matter how it works out, in the long run when you sell it you should be better off than paying rent for 4 to 6 years.
You are still paying rent, maybe in a different form (mortgage interest, opportunity cost) and it may be cheaper but you are still paying for it.
To the OP:
You are also taking on risk and landlord hassles. I am not saying don’t do it, but being a landlord (for you and your daughter) has a learning curve and can be a royal pain.
As to her finishing, unlike other PhD programs computer science grad students have significant incentives to drop out because you can get very high paying and interesting jobs without a PhD or even Masters degree. Not saying she won’t finish, but I am pretty sure I would have bailed from my program if the opportunities for bachelor level chemists were anywhere near the opportunities for computer science majors.
I am not sure we understand why you want to do this? Is it for potential financial return (you or daughter) or more emotional (nicer place to live, consistency, etc).
If financial - I strongly recommend running numbers through something like the NYT rent or buy calculator (here). In general, for a 4-6 year program the idea of “throwing away” money on rent is typically not borne out by a strong look at the financial costs.
I can share my N=1. When I was in graduate school, the cohorts that were 2-3 years ahead of me and had purchased homes/condos made out great (>100k equity) while those that were in my cohort or a year or two behind me lost 20-40k. So within a 5 year window, timing will be important. Someone will likely say that is less than the cost of rent, but this is where the calculator can be helpful - what is the opportunity cost on the down payment, etc. that could have been generating a return.
While I have no doubt that your daughter is smart and talented, a Ph.D. program is typically not a walk in the park for anyone, has significant roadblocks and hurdles and as a result, the attrition rate is typically 50%. Would your daughter view this generous gift as a reason to stick it out if it isn’t her cup of tea or feel some responsibility in that way? If she were to leave graduate school, would she want to stay in that location? Perhaps probing a bit more to understand her hesitancy could be helpful.
My response is colored by the fact that my parents are very generous, and would never charge me rent if they did this. They’re in the financial position that they don’t need it and they’d rather I save my own money. So my question is what do you get from your daughter paying you rent? I say this in part because grad school stipends are not very big most of the time, and getting a PhD is very stressful without adding money worries on top of it.
I lived in an apartment during grad school and paid my own rent, but if I’d been unable to do that my parents would have helped me out, and I doubt they would have asked for that money back. (I had a full scholarship including dorm room and board to undergrad, so when I was in grad school my parents had paid very little for my education aside from giving me a little bit of spending money when I was an undergrad, about $50 a month in the early 2000s). That’s probably not true for most people I guess. My family may just sort of do our finances differently and as I said, my parents are extraordinarily generous.
Anyway, I’d maybe rethink the rent thing based on the amt of $ your daughter is going to get for a grad school stipend, prioritizing making her life comfortable so she can obtain her degree and not have to worry about too much other stuff.
My response is colored by the fact that my parents are very generous, and would never charge me rent if they did this. They’re in the financial position that they don’t need it and they’d rather I save my own money. So my question is what do you get from your daughter paying you rent? I say this in part because grad school stipends are not very big most of the time, and getting a PhD is very stressful without adding money worries on top of it.
I lived in an apartment during grad school and paid my own rent, but if I’d been unable to do that my parents would have helped me out, and I doubt they would have asked for that money back. (I had a full scholarship including dorm room and board to undergrad, so when I was in grad school my parents had paid very little for my education aside from giving me a little bit of spending money when I was an undergrad, about $50 a month in the early 2000s). That’s probably not true for most people I guess. My family may just sort of do our finances differently and as I said, my parents are extraordinarily generous.
Anyway, I’d maybe rethink the rent thing based on the amt of $ your daughter is going to get for a grad school stipend, prioritizing making her life comfortable so she can obtain her degree and not have to worry about too much other stuff.
Oddly it’s the only way she’ll agree to it. She desires to be independent. I desire to be generous. But I do understand. Both me and and her mother made many (some wrong) choices to become financially independent rather early and she has the same independent streak but without the judgy and string pulling parents (I hope). My ultimate desire is to make her living situation comfortable in a way that supports her studies. It could go many ways at this point.
My response is colored by the fact that my parents are very generous, and would never charge me rent if they did this. They’re in the financial position that they don’t need it and they’d rather I save my own money. So my question is what do you get from your daughter paying you rent? I say this in part because grad school stipends are not very big most of the time, and getting a PhD is very stressful without adding money worries on top of it.
I lived in an apartment during grad school and paid my own rent, but if I’d been unable to do that my parents would have helped me out, and I doubt they would have asked for that money back. (I had a full scholarship including dorm room and board to undergrad, so when I was in grad school my parents had paid very little for my education aside from giving me a little bit of spending money when I was an undergrad, about $50 a month in the early 2000s). That’s probably not true for most people I guess. My family may just sort of do our finances differently and as I said, my parents are extraordinarily generous.
Anyway, I’d maybe rethink the rent thing based on the amt of $ your daughter is going to get for a grad school stipend, prioritizing making her life comfortable so she can obtain her degree and not have to worry about too much other stuff.
Oddly it’s the only way she’ll agree to it. She desires to be independent. I desire to be generous. But I do understand. Both me and and her mother made many (some wrong) choices to become financially independent rather early and she has the same independent streak but without the judgy and string pulling parents (I hope). My ultimate desire is to make her living situation comfortable in a way that supports her studies. It could go many ways at this point.
Interesting, I can appreciate that desire to be independent. I’m considering the same thing, depending on where the kids get into school. Another thought would be to charge her the rent, but set is aside/invest it for the time she’s in school and then give her a graduation gift of her own money, to get her started in her own life. This gives you the time to think about it, and see how you make out with the condo, before deciding how much the gift would be!
I hadn’t considered a 2-3 BR condo, tho, and renting out the other rooms… that might be a way to make it cashflow positive…
My son is heading off to Tallahassee this summer to go to FSU. He is going to live in the dorms freshman year at the very least. I’m thinking about buying a condo/townhouse after that though. He will likely do a BS/MS pathway so he will be at FSU for 5 years. Possibly rent a couple of rooms to friends of his. 529 plan complicates this though. My understanding is I can charge my son a qualifying rent and basically pay myself back with the 529 funds but the numbers need to make sense from a tax perspective (does the rental income get offset by rental/mortgage expenses). Also, the current market likely isn’t conducive to buying a property for short term purposes.
I’m thinking about it now if I can find the right house. My monthly “all in” payments for a mid-priced house would be a lot less than what I’m paying in room and board and he gets a house with a garage rather than a small room with a shared bathroom and parking lot parking.