Mortgage Research Network Podcast

real people. Without further ado, let's get into today's topic.

I'm your host, Tim Lucas, editor of MortgageResearch.com and a former mortgage professional, and with me is Craig Berry, a loan officer of more than 25 years.

Glad to be here once again.

Craig, have you heard that college is expensive?

Yeah, I think I've heard that once or twice.

Well room and board has gotten so costly that, at 23 universities across America, parents could save tens of thousands by buying a house near campus instead.

That's a pretty bold claim - what kind of numbers are we talking about here?

Well, take Temple University in Philadelphia. Parents who buy a house there instead of paying room and board could save about $30,000 over three years. And if they hold onto the property for 10 years? We're looking at a potential $70,000 profit.

Hmm... but surely this can't work everywhere?

You're right. location is absolutely crucial. In places like Seattle or San Diego, you could actually lose over $80,000 trying this strategy. And in Montclair, New Jersey, where homes average $1.1 million, parents could lose up to $163,000 over three years.

So what's the secret sauce that makes this work in some places but completely backfire in others?

It's really about finding the sweet spot between three factors: affordable housing prices, high room and board costs, and a strong rental market. Like Marshall University in West Virginia. The average home price there is only about $138,000, but room and board still costs almost $39,000 for three years.

That's FASCINATING. but don't tell me parents have to become landlords too?

Well, that's actually part of making the numbers work. The study assumed each student would have two roommates paying rent. At Louisiana State University, for example, the total monthly ownership cost is about $1,849, but two roommates could bring in $930 per month.

You know what I'm wondering about? all those hidden costs of homeownership that people forget about.

Oh, we took all that into consideration. We factored in everything. mortgage payments, property taxes, insurance, closing costs, maintenance, even grocery expenses since students wouldn't have a meal plan. And here's what's really interesting. at some schools, even seemingly good deals can turn unprofitable because of high property taxes and insurance costs.

So what would you say are the absolute must-haves for making this strategy work?

Based on the research, you need four key elements: first, a location with relatively low home prices but high room and board costs; second, reasonable property taxes and insurance rates; third, a strong rental market with reliable student demand; and fourth, and maybe most important, a student who's responsible enough to handle property management while maintaining their studies.

That's quite a checklist - how many families are actually doing this?

Well, there's only anecdotal data out there. But just about everyone I've talked to about this study either did this or knows someone who has. It's not hard to see why. at multiple schools, the 10-year profit projections exceed $50,000. And consider this. the average room and board at four-year public universities is now over $12,000 per year, which is actually more than in-state tuition at many schools.

Those numbers really put things in perspective. it's like we've been so focused on tuition that we've missed this larger expense.

Exactly, and here's another fascinating aspect. there's actually a clever financing strategy that makes this more accessible. Parents can apply as "non-occupant co-borrowers" and make their student the primary borrower. The student just needs a credit score, not their own down payment or income.

That could be a game-changer for building wealth early, but what about the risks?

You know, that's where the local market research becomes so critical. The study found that in places with high taxes or homeowners insurance, local rents can't make up for these costs. But in stable college towns with low taxes and growing enrollment? This strategy could work.

I imagine this is a way to give college students a head start on homeownership as well.

Right. We recently completed a separate study showing that it takes about 10 years after graduating college to be able to afford a home. This could shortcut the typical timeline.

Looking at all this, I'm surprised more people aren't talking about this approach.

I think it's because it challenges our traditional view of the college experience. But with room and board costs continuing to rise, more families might start seeing student housing as an investment opportunity rather than just an expense.

Well, that's about all the time we have for this topic, but we go into even more detail on the site. To learn more, go to Mortgage research.com and type universities in the search bar on the homepage. We'll see you next time on the Mortgage Research Network Podcast.