Affordable Ann Arbor college student housing?…..talk about a classic oxymoron! Well, not necessarily. Please read on. As  parents with kids away at college, we know that on or off-campus housing is quickly putting a lot of us in the poor house. For the 2008-2009 academic year, the average costs for room and board at public universities was more than $7800. At private colleges, the cost is nearly $9,000. These are averages, so some schools are charging more…a lot more, depending on the school. At the University of Michigan, here in Ann Arbor,there are several high-end, state-of-the-art high rises  that are charging $15,000 per year-per student.  And I hope you’re sitting down… that 15 grand doesn’t include meals. Include the costs of food and you’re talking another $3000-$5000 bucks per year. The bottom line: We parents with kids away at college can expect to shell out $30,000 or more, for room and board per child to cover their four year college stint. Yes, college housing and meal costs are getting out of hand. So, what can be done, so we don’t end up by the side of the road with a “Have kid away at college-please help!” sign.

To counter the high costs of on or off campus housing, many parents are purchasing a  condo or single family property for their child to live in-instead of the traditional rental scenario. Now, while purchasing a property for your young student while he/she earns their degree is not for everyone, for some parents it’s just what their Financial Planner ordered.

*Here are some advantages of purchasing housing -vs- renting for your Ann Arbor Collegian.

• If you itemize, assuming that you’re not not subject to the alternative minimum tax, you’ll be able to deduct the property taxes paid on the property.
• If you have a mortgage to finance the purchase any interest you pay will be deductible as well. The property in essence is taxed as if were a second home.
• When you sell the property and you’ve owned it more than a year, any gain will taxed at 15%, as a long term capital gain.
• Let your child live in the property and rent rooms out to one or more students. Because they’ll pay rent to you, the residence will become income-producing property-with all the accompanying tax benefits.
• Operating cost will become tax deductible. These costs include utility bills to insurance. Also, you’ll be able to take depreciation deductions for the real estate,furnishings fixtures and so on.
• Hire your child to be the property manager. Duties would include screening tenants, upkeep of premises, arranging for maintenance items and so on. For your child’s services you could pay them a management fee of 10% to 12% of rental income provided by tenants. These fees would be deductible for you the property owner. Additionally, these management fees paid to your child will be tax free to your child.
• Your trips to the college town where the property is located may be deductible if your primary purpose is to check up on your investment property.

As you can see, owning your child’s college accommodations could be very lucrative to you as the parent and indirectly to your child as well. They have the potential to earn some spending money and  learn some valuable lessons on capitalism, entrepreneurship and to experience first-hand what it takes to make a profit from a business venture

I’ve just skimmed the surface on this intriguing subject. If you would like to discuss the advantages and drawbacks of purchasing an Ann Arbor investment property, for your young collegian, please feel free to contact me at the Wickland Group of the Keller Williams Ann Arbor Market Center. We are Ann Arbor Property experts and know the Ann Arbor Housing Market better that anyone. Professional assistance is just  a click or call away.

*Note: Please consult with your Attorney,Tax-Preparer and Real Estate Professional to see if purchasing vs. renting offers the needed financial/tax benefits for your particular situation.

Source: Greg Weyandt, CPA, MPA, of the Welch Group