How a Kiddie Condo Can Help Parents and Students

Website visitors and listeners have long taken advantage of Ask RP, an interactive tool where questions are answered directly from host Robert Palmer. Visit Ask RP today and have Robert answer your questions through email or on air.

Should You Buy a House For Your College Student?

Robert, we have Ask RP. A rather interesting Ask RP. Stan and Ingrid have written us on Ask RP at SavingThousands.com.

They have a son currently in college and a younger son who, next year, will be joining him in college. They’re considering buying a condo or a small house rather than live in dormitories where there’s just really no privacy. There’s always distractions and a lot of problems. It’s really not conducive to a studying lifestyle.

A house can be a little bit more conducive to that. At least it’s also a place where you can eat when you want to eat, do what you want to do, stay up as late as you want or go to bed as early as you want.

So what do you think about an idea of buying a place for your kids in a college town?

Buy Your College Student a Kiddie Condo

“I think it’s a great idea. The nickname for that in the industry, we call that a kiddie condo. I don’t know where that came from.

Somewhere between junk fees, and TILA, and RESPA , and the jargon we throw around in the mortgage business, they call that a kiddie condo. So there’s two ways to do this:

1) The parents just buy the home on their own And then they just rent it to the kid.

2) You actually have the kid buy it and the parents cosign with them.

Now, the kid starts to build credit, they’re on the mortgage and the down payment is less.

Because they’re going to live in it, so now you could treat it as an owner-occupied property. The caveat is your kid has to have a credit score.

They don’t have to have any income. We can do it with no income, but they gotta have a credit score. So again, this is why credit is oh so important.

But think about that- you’re the kid who right in college are a homeowner. I mean, you want to talk about building responsibility and everything else. Parents cosign with you, and you’re a homeowner right out of the gate.

I think it’s a cool idea and it’s definitely something that people should consider. If I had college-age kids– one day, when I have and if I have college-age kids, I’ll probably do that.

However, if you do decide to get your kid into rented accommodation at college, keep in mind the often-forgotten renters insurance.

Why to Buy a Home in a College Town

Because if you think about it, rentals in college towns are probably the best place to have them. Because there’s always a lot of people looking to rent.

You can rent two or three rooms to two or three different kids and really get a good return. I know a lot of people who’ve bought homes for their kids like that. Then when the kid graduates, they keep it.

Here’s what always happens- so when your kid is a senior, you have them bring a freshman in as one of the tenants. Then, they become like friends. When your kid eventually moves out, that freshman now has four more years of being there.

They’re kind of like the eyes and ears, then they recruit. So there’s this passing of the baton. If you stage it correctly, you’re only losing one student a year. You’ve got four bedrooms. You rent them out. Keep them all in different classes. They’re making the payments.

You’re turning one a year. Then the other three kind of lay their law of the land down for the new one. Whereas, if you’ve got like four kids, four college kids all come in at once brand new, they may trash the place. They don’t have the same kind of respect for it.

But when three of them have been there, one of them has been there three years, one’s been there two years, one’s been there one year. Then the new one comes in, they’re going to show the new one the ropes, right? The new tenant.

So I think that’s kind of a cool idea. The fact that your child is one of the early people in there, they’re going to make sure nobody’s trashing the house, especially if they’re on the note with you.

Again, we call it kiddie condo. We’d be happy to talk to you about what that looks like. If your child doesn’t have the credit score, if they can’t qualify to be on the mortgage, we can still make it work as an investment property for you.

But there’s a lot of benefits when you put them on that note. The down payment’s lower. It’s a much easier transaction to do if the child can qualify with you, which is no income required. They just have to have credit.”