Leasing to Your College Student Child
Renting to your kid in college or grad school might seem like a good idea. There are some fun advantages and possibilities for collaborating with them on a rental property. None of that comes without money and without risk, but it can be amazing as well.
Your child is moving out of the dorms and is looking for some off-campus options to live. You, a savvy property investor, get to thinking, "I could buy a 3-4-bedroom house in that town and rent it out to my child and roommates. It could pay the mortgage and maybe even provide a modest income!" This starts to make even more sense when you were planning on helping your child with housing anyway. This house might even make a great long-term investment. If your child stays in the town, it's a great asset; if they decide to move on, you could keep renting it out or sell it in the future for a profit (hopefully). One of the nice things is that you have at least one guaranteed, stable tenant in the property for however long your child is in school. They can also serve as your de facto, live-in property manager. They also will be a great help in finding roommates to fill the other bedrooms. If someone moves out, it probably won’t be difficult to find someone else to fill the space. This all saves time and money.
At the outset, it seems as if this is the godsend real estate opportunity.
But there are a few things to think about:
Getting and Keeping Your Newly-Minted Property Manager Motivated
Remember how hard it was to get your son or daughter to do chores around the house? That's something to keep in mind when you hire your child to be responsible for real property. The best thing to do is to set out rules and expectations from the very start. You will want to draw up some sort of agreement clarifying all expectations. Give them some small stake of ownership in the property within that agreement so that they feel responsible. This teaches responsibility as well as creates a business side relationship with your child.
You should charge your son or daughter rent, no matter how small. Whether you will evict them if they don't pay is up to you. Many parents don't necessarily want their children working while in school so rent can be in trade-for-work form. This is another chance to build that business side relationship with your child. There is the parent side and there is landlord side of the relationship. That distinction is important.
But What About Those College Parties
You have to think about what happens when your son or daughter decides to host a small party, 50 people come out instead of 10. Suddenly you have a hung-over student laying in the yard fast asleep and possibly thousands in damages to repair. Even if a one-off incident like that doesn't happen, what state is your property going to be in at the end of your child’s time in college? It's likely that you'll be spending some money to get the property up to the right standard for the next tenants. This isn't necessarily a barrier, but something to think about and something to be mindful of during your budgeting.
Roommates will still need screening
You can decide what criteria you want to set (students don't have much for credit) but RHAWA always recommends you screen all roommates and use our Roommate Lease Addendum. In screening the roommates, you may want to have parents sign as guarantors or look for friends that are employed. It's important to write your criteria in such a way that you'll be accessible to students but still looking for students who will do better than most. The property is your investment, it’s important to keep that in perspective.
There is no way to guarantee that this will go well or be foolproof, but if you're considering this kind of arrangement, then these tips might help you successfully run a college rental for your son or daughter. Mixing personal and business can get messy and difficult. It is best if you decide how you want to handle things in advance which will help to ensure success.