With rising costs in tuition, textbooks, rental rates and other general living expenses, many students face a challenge in managing their finances.
A frugal student will find ways to stretch each dollar to the fullest, whenever there is money to be made or saved. One of the most significant costs for students, outside of tuition, tends to be rental expenses. Continually paying rent without building any equity can be a frustrating experience – especially when coupled with student loans after graduation.
For this reason, some students decide to purchase a property while away at school and rent part of the house to roommates. Students can make great landlords by being on-site to monitor the household closely and do repairs quickly. While purchasing a rental property may not be a fit for every student, it can be a successful endeavor if he/she has the means and is ready to take on more responsibility.
The Millennial generation is overall more likely to obtain at least a Bachelor’s degree. It was previously more popular for prior generations to take advantage of on-the-job training or apprenticeships, rather than further their education. The rising costs of post-secondary education, along with changing trends, may be a contributing factor to why millennial home ownership hit an all-time low in 2015 at only 31%.
But millennial students who do purchase a home instead of renting, create a lucrative opportunity for themselves – no rental payments, built-up equity, positive credit history, more control over roommate selection and many other perks! Depending on a student’s credit history and employment, a co-signer may be required. A down payment would be necessary for the purchase, and some extra cash flow to cover routine expenses is recommended (parents or guardians can sometimes provide assistance with these).
While mortgage rates in both Canada and the United States are on the rise, they are still near the bottom of a historical low. In the 1980s, mortgage rates were at an all-time high in both Canada and the United States. Canada peaked at more than 20 percent and the US almost reached 20 percent.
It’s very important to be prepared and do research before purchasing a home. Get to know student-housing demand versus supply in the community, general housing market trends and prices, preferable neighborhoods and the local landlord/tenant laws. Location is usually the most critical factor, especially for student housing. Assess whether the purchase of a house will provide a worthwhile return on investment after graduation, unless continuing to live in the area is the goal.
SEE ALSO: Is Buying Student Housing for Your Children a Good Investment
The Places4Students.com Team