Parents look to buy, rent to kids to turn a profit

Some parents are buying property in Richmond for their students to use during school and post-graduation.

Sam Isaacs
News Editor 

Although living in a dorm or a run-down Richmond apartment might be seen as the norm for VCU students, some parents are opting to house students a different way.

Long & Foster realtor Wanda Fears said she has noticed a new trend: parents of college students purchasing houses before enrollment, and renting them to their kids and their kids’ friends.

“It is one of those situations where if you hear about it, you will assume it is a rare, unusual instance. The reality is, it is becoming a regular thing in Richmond and all over America, especially for graduate students,” Fears said. “I personally have already sold three or four places alone in the last year-and-a-half or so.”

In one instance, Fears recalled a parent purchasing a condominium on Strawberry Street so he had a place to stay while visiting his daughter in town, and could offer her a place to stay once she graduated VCU. The parent, Phil Solomon, is a pilot and flight instructor at Hanover County airport.

Solomon said his daughter’s education and his career played into the decision to invest in the real estate.

“This was my first time as new property buyer. I kept traveling between Richmond and Martinsville for my job, and it made more sense to me to just have a place of my own,” he said. “I bought the condo so my daughter and I could both have access to it whenever we needed a place to stay in Richmond.”

His daughter, Sophie Solomon, has used the condo as well. Solomon graduated this past spring, and plans on living there once she starts working at VCU Theatre Department.

“It will be nice knowing I have a rent-free place to stay while I get my feet on the ground post-graduation,” she said.

Her  friends have also used the condo throughout her college career. When the lease was up at Solomon’s former apartment in 2011, her roommate used the condo because there was a gap in between their new lease.

“This happened to my roommates and I last year,” Solomon said. “Our lease was up in June, but the new one didn’t start until August. I ended up going home, but one of my roommates had a job in Richmond so rather than getting stuck couch-surfing, she stayed at our condo over the summer.”

Investment is what’s fueling the trend, Fears said.  In theory, a parent could take out a loan to make the initial down payment, collect rent from their kids and their friends and sell it after the students have graduated.

“If you are a parent and you know your kid is going to be paying rent to a landlord or paying for a dorm, why not be the one to collect rent from your kids and their roommates?” Fears said. “That money is going 100 percent straight back into the investment.”

The investment does not come without risk, however.

Doug Dunnevant, a financial planner in Richmond, said he would not recommend getting involved in an investment like this.

“Any time you are going in to try to make money in a four-year period, that is the definition of risk. The housing market is just too unpredictable,” he said.

“If you are going to rent that place to a bunch of college kids, you are going to have wear and tear. If selling the place back is the only way you are going to make a profit, that is a really dicey proposition.”

Even with an unpredictable housing market, Fears said she thinks the investment is relatively safe.

“Interest rates are down, so it is a smart time to buy property. In 2006-09 the market wasn’t very good, but signs are pointing to an improvement,” Fears said. “At the end of the day, if the market has not improved by the time your kid has graduated, you can always rent the place out to a new group of students and wait until it does improve.”

Dunnevant said he agreed over time the investment could yield profit, but said he doubts a parent is up to the challenge.

“At the same time, if you rent the place for 15 years, the risk is down, and you have more time for things to happen in the market,” he said. “A parent would have to seriously think about the maintenance needed in a college apartment before making a long-term decision like that.”

Both Dunnevant and Fears agreed that putting a property in the students’ names could have lasting positive effects on their credit.

“That definitely would help to build credit, so when your kid goes out to buy their first house or car, they already have a good credit score because of the investment,” Dunnevant said.

Though Fears said the trend of parent-owned housing exists all over Richmond, she has noticed more cases of it happening at VCU than University of Richmond due to the larger student body on and off campus. Fears said the poor economy has forced students and parents to think about new ways to save and make money, and she said she thinks parent-owned properties could be an easy solution.

“There is more than one way to college. Honestly, you are not going to be making any money in savings accounts these days,” she said. “Dorms are the traditional route, but there is more control and financial opportunities elsewhere.”

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