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Economics 101: Parents Ponder the Costs of Renting and Buying

For most students, college is a wonderful opportunity to learn, grow and discover. For most employers, it is a necessary prerequisite and a resume must-have for all prospective hires. For most parents, college is a time of economic hardship.

Over the past decade, the cost of higher education has soared. From tuition to supplies, many of these costs are unavoidable for most students and their parents. However, room and board is one area where parents may find variability. According to scholarships.com, it is estimated that the average cost of room and board each year is $10,000. This hefty price is necessary because students need a place to live during their time at school. However, this cost is one element of college expenses that can be variable. For some parents, in fact, it can even be a way to make money.

Instead of renting, creative parents have started to think about buying. While the initial cost of buying is more substantial, it is also an investment that can be turned around for a profit. After all, four years of renting is no small amount and often equals or exceeds the cost of a down payment on a home. If the home is large enough, parents can also get additional renters in the space, thereby helping sustain house payments.

Then, when the student has graduated, the home can either be sold at a profit or retained as a rental property. Either way, parents can often make money, continuing to see their investment flourish or recouping their initial investment plus any equity that accrues. Homes that are located in college towns almost always see a yearly increase in property value since there is always a pool of interested buyers and renters on hand.

For parents who are interested in this tactic, it is important to consider the local market for the university in question. The costs of buying a home are substantial and can vary widely. For a school like Stanford, which is located in Palo Alto, the cost of a home is quite high, making such a purchase more difficult for parents. In fact, some of the priciest markets are in California.

However, while the upfront costs may be overwhelming for some, it is important to remember that those schools will also have the highest renting costs, making the question of buying even more pressing. Even in these areas, if parents can find the right home and take on enough renters, the upfront costs can be quickly offset and the investment can be worthwhile.

Ultimately, the costs of higher education will continue to rise. As parents look to support their children, they should also look to support the bottom line. If the right home can be found and a down payment is available, buying a home can be the smarter choice. After all, it may be impossible to avoid the cost of higher education, but it is possible to make a real estate investment that will pay dividends in the end. Read more

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