Buying a rental property for college housing

There is a quiet question many families ask once the first year of university is behind them. Is there a smarter way to cover housing for the next three or four years than paying dorm fees or splitting a premium off-campus lease. For one South Carolina family, the answer came after a reality check. Their son moved from a sister school into Clemson University as a sophomore and lived in a campus dorm with three roommates. The bills did not feel good. Clemson’s own estimate puts 2025 to 2026 housing at about 8,904 dollars, and off-campus rates in the new high-rise near campus were being quoted to the roommate group at roughly 1,000 to 1,200 dollars a month per person, still with shared living arrangements, still with student unpredictability layered in. Instead of signing up for that, the parent decided to redirect housing spend into an asset, not a sinkhole.

They found a three bedroom, two and a half bath townhome about ten minutes from Clemson, fully furnished, recently purchased by a coach who was relocating, and available at 227,000 dollars. They paid cash. One room began bringing in rent at 775 dollars a month from a classmate. The smaller third bedroom was kept open for now. Their son occupied the other room and the plan was to move deliberately rather than chase tenants out of urgency. The townhome sat empty for part of spring and summer, because the timing of the purchase overlapped with the academic calendar. This was a human decision, not a spreadsheet one. It is also a useful frame for any family considering the same move.

As a planner, I look for alignment before I look for return. The first alignment test is timeline. You are not buying a forever home for yourself, you are buying a four to five year solution for a young adult and their peers. That means you want a property that will be simple to exit, not just one that is nice to live in. Newer construction townhomes and compact single family homes in student-dense submarkets tend to be easier to sell and to underwrite for buyers who come after you, including other parents repeating the same logic. The family in this story chose a location ten minutes from campus, which spreads demand beyond one street or one building and usually keeps your tenant pool a little wider. That is good planning, because it keeps your future self from becoming a forced seller.

The second alignment test is cash flow under real conditions, not perfect ones. There are a few quiet truths in student rentals. Occupancy is lumpy. Summer leases are shaky unless the market has large research cohorts or year-round programs. Turnover and wear are higher. You will likely accept nine to ten months of true use and either discount the rest to hold a good tenant, or absorb a month or two of vacancy to reset and repair. On the revenue side, the family secured 775 dollars a month for one room without pressing for more in the first term. That single rent, run over a full year, roughly offsets a large portion of what a dorm would have cost. It does not cover everything, and it does not need to, because the son is living in the property too. The parent’s comment that they were not prepared to lose 12,000 dollars a year to rent gives you the third alignment test, which is opportunity cost. If you have 227,000 dollars sitting in a bank account or a conservative portfolio, that capital could earn a few percentage points a year without the headaches of landlording. For you to prefer the townhome, your avoided rent plus your net rental income plus the value of flexibility for your student must feel better than the steady return you walked away from, even before you think about resale.

Cash buyers often focus on simplicity. That is sensible, and in a student market it can also be strategic. Sellers and builders take clean, quick closings, and your family keeps monthly obligations low. The tradeoff is the invisible cost of tying up capital. One way to keep yourself honest is to run a plain comparison for your own situation. If your child would otherwise have paid 8,904 dollars for on-campus housing in a given year, and the market alternative is 1,000 to 1,200 dollars a month in a high-rise with roommates, your direct savings from owning will come from two sources. The first is the rent you no longer pay to someone else for your student’s room. The second is the rent you collect from other students. Against those inflows you should stack quiet but persistent outflows, including association dues, property taxes at the investor rate if the county treats the unit as non owner-occupied, landlord insurance that covers student tenancies, maintenance and turn costs, and the share of utilities you choose to hold for simplicity. When you add a one time furnishing line item, which this family avoided because the seller left the unit fully furnished, you will see the true year one footprint. If you are paying cash, there is no mortgage interest, which simplifies bookkeeping. If you are financing, your interest and eligible expenses can be deducted against rental income, subject to rules that depend on how much of the property is personal use. Most families in this situation will be splitting expenses between personal and rental use in proportion to rooms or square footage. That is a conversation to have with a tax preparer during the first filing season after purchase, not during April panic.

The family’s decision to slow walk tenant placement is wiser than it sounds, because your first group sets the tone for the lifetime of the asset. Many student rentals get into trouble not because of rough use but because of poor early screening and unclear expectations. A written lease with parent guarantors, clear rules on occupancy caps, parking, noise, and cleaning, and a simple system for repairs turns a student home from a stressor into a normal long term hold. It also helps to decide early whether utilities are included or billed back. All inclusive is easy and can justify a premium, but it invites waste unless you set reasonable caps and communicate them. Split billing reduces your risk but comes with administrative friction. There is no pure right answer here, only the one your student can manage without turning you into a full-time landlord.

Some parents will ask whether buying near campus is really a financial decision or just a lifestyle choice with a spreadsheet to justify it. The answer is that it can be both, and that is not a contradiction. The ability to give your child a stable, quiet place to live, to choose roommates more carefully, and to avoid last minute scrambles for housing is real value, even if you cannot sell it for a profit later. In this case, the parent kept one bedroom deliberately vacant rather than chase an uncertain tenant in the smallest room midyear. That looked like a missed revenue opportunity, but it was actually a risk management choice. Protecting fit is a valid way to protect value.

It is also helpful to think about exit on the same day you buy. The parent mentioned a sister with two younger boys who might use the home later. That is a soft option that takes pressure off the need to time the market. For families without that option, a realistic exit window is within six to twelve months after graduation. That window gives you time to shift from a mixed personal use property to a clean income unit if you choose to sell to an investor, or to repaint, replace flooring, and market to a new set of parent buyers if you prefer to sell into the owner-occupant pool. Both routes can work. The route you pick should be guided by what the townhome community allows. Some associations cap rentals or require leases of a minimum length. You want to know those rules before you buy, and you want to keep a simple compliance file so a future buyer can see that your usage fit the rules. Clean files sell faster than pretty descriptions.

Parents sometimes ask whether a smaller mortgage would have been smarter than paying cash, because a low loan to value mortgage spreads risk and opens up tax deductions. The purely financial answer is that it depends on your alternative return and your tolerance for payment risk if your student housing plan changes suddenly. If your child transfers, takes a leave, or studies abroad, you will need the unit to carry itself for a term or two without your household using the space. A modest mortgage with strong rental coverage may suit a family that wants to keep more capital invested elsewhere. Paying cash may suit a family that wants the simplicity of no monthly lender obligations and is comfortable with the opportunity cost because the point of the purchase is control and stability more than return. What matters is that you choose on purpose, not by habit.

There is also a people side to this choice. When you own the property where your child lives, you are both a parent and a landlord. Boundaries prevent friction. It helps to agree on who takes the first call for repairs, who sets roommate rules, and how rent received from roommates is handled. Many families open a separate checking account for the property, pay recurring costs from that account, and deposit roommate rent there. Keeping the money flows separate reduces confusion and makes your tax preparer’s life easier. It also teaches your student healthy financial habits, because they can see the link between upkeep, reliability, and respect for other people’s time and money.

What if the numbers feel tight and you are worried that you will not meet your break even target. The story here shows a way to create breathing room without forcing it. The family let the smaller bedroom sit until the spring, rather than chase a partial semester tenant. They can test that room at a lower rate later, or they can leave it as flex space if the household prefers calm over cash. The tenant rate of 775 dollars for the first room, set early and with a known person, reflects a choice to value predictability over maximizing price. That decision is common in student markets, where certainty about who will live in your home is often worth more than squeezing every last dollar.

If you are evaluating a similar move, use your own calendar and your own child’s path as the steering input. Map the next three academic years in one quiet sitting. Note the semesters on campus, any known co-ops or internships, potential study abroad windows, and the likely graduation month. Layer over that the local leasing cycle, which in many college towns pushes students to sign for the next school year before the holidays. Owning a place gives you the ability to step out of that cycle, but your future tenants will still live inside it. Plan your marketing and lease renewals around that reality. If you want to keep turnover low, offer renewals early and promise light improvements at each renewal. Small upgrades at predictable times build goodwill and reduce needless vacancy.

A word on taxes and compliance is warranted, even in a human story like this. A property used partly by your family and partly as a rental is a mixed use property. In broad terms, personal use days reduce the share of expenses you can allocate against rental income, and depreciation is only allowable on the portion of the home used for rental. Accurate records of who lived in which room and when, fair market rent receipts, and copies of leases will help you defend your allocations if asked. Local ordinances may require a rental license or inspection, and student markets sometimes have occupancy rules based on unrelated adults per dwelling. This is not about fear, it is about avoiding surprises. The time to check is before your first lease, not after a neighbor complains about four cars parked overnight.

What about appreciation. It is tempting to assume that a college town asset will rise because demand feels permanent. Resist the urge to build your case on that. Treat any price gain as a bonus. Your real return will come from rent collected, rent avoided, and the intangible benefits of control. If the exit price simply returns your capital after a handful of years during which you did not pay expensive dorm or high-rise rates, you may already be ahead. If you do better, take that as a gift you earned through quiet management, not as an entitlement of the market.

The parent in this story said they expect to profit or at least break even when they eventually sell. That is a healthy mindset, because it sets a floor without promising the sky. It also shows that the real objective was to stop writing large checks for housing that gave them little in return. Buying a home for your student is not a universal solution. It is, however, a credible option when you can keep the numbers honest, when you have the patience to select tenants carefully, and when you are clear on how you will exit. If you can run your plan without assuming perfection, and if the combined effect of avoided rent and stable room income covers the quiet costs of ownership, then buying a rental property for college housing can be a sound way to convert a persistent expense into an asset with options.

If you make this move, keep your decisions simple and your records clean. Decide who you want living in your home before you decide what you want to charge. Choose leases that match the school rhythm rather than fighting it. Fund small repairs promptly, and ask for quiet reliability in return. Review the plan once a year, ideally at the same time you review financial aid or course plans. Most of all, keep the goal in view. You are buying time, stability, and control for a young adult who is still learning how to live with others and care for a space. Money matters, and alignment matters more.

In the end, this is not just about an address in Pendleton or a number on a closing statement. It is about using your balance sheet to create a better housing experience for your student while keeping your long term plan intact. That is what good personal finance looks like during the university years. It is steady, it is thoughtful, and it respects both the family’s cash flow and the student’s life. When you approach it that way, buying a rental property for college housing stops feeling like a gamble and starts looking like a measured choice you can live with.