Many public and private schools are running out of on-campus housing. With the number of first and second year students at public and private institutions on the rise, colleges are starting to actively encourage students to move out. This leaves many parents and students struggling to find proper off campus housing in disparate urban and suburban areas; combing college message boards and local newspapers to find apartments, rooms and houses for rent. Instead of renting, many financial planners have started to recommend parents take part in the once again booming real estate market.

Lenders now offer innovative programs to finance investment properties with low interest rates that make owning a home very attractive. Although interest rates are on the rise, purchasing a home you know your child will use for at least two or three years may have rewards later on. Consider a three bedroom home near a small or medium-sized college campus. Priced at about $125,000 and putting down as little as 10% (sometimes nothing if your credit is good enough), your monthly payment would be only $729 a month (not including taxes or insurance). With the average rate for renting one room in a similar property is $500 - $600 a month, parents can look to increase their total assets and possibly generate some additional income.  If we follow the previous example of a three bedroom home parents can rent the additional two rooms for $500 a month, generating an additional $1,000 in income. If we estimate monthly taxes and insurance at $175 a month and utilities (if included in the rent) of $300, the total cost to own the property would be $1,204 a month, or just $204 more than the incoming rent. With a net cost of about $2,500 a year compared to about $6,000 a year if your child rents, parents have an opportunity to cut college costs while building equity. It is important to remember that, despite the fact that your child may recruit his best friends as tenants; parents are still landlords and are responsible for the usual tasks like fixing leaky sinks and keeping the house safe and sanitary. Many property management companies can take this responsibility off your hands for a modest fee.  Don’t look to sell as soon as your child graduates. Students are always looking for good off-campus housing. After your child graduates you have the opportunity to generate a decent income from the property and continue to build your assets for retirement. Before becoming a landlord it is a good idea to sit down with your financial planner and run some numbers. Real estate investing can tie up your liquid assets and you need to make sure you have the extra funds in case things don’t go as planned. However, the prospect of turning college costs into retirement savings is undeniably attractive.