The Pitfalls of Buying Your Child’s College Housing

Updated August 2026

The Pitfalls of Buying Your Child’s College Housing

This has got to be an old idea, but is it outdated? Is it no longer valid? What I am referring to is parents or even grandparents buying a condo (or single-family home) for a college student who rents it (perhaps with a friend) for four years as their college housing, then it is sold.

At a nice profit, of course.

I question whether this is still the case but years ago (20 or so), my own son went to Georgia Tech, where he got a great education at a good price as well: something like $25,000 a year. Back then, that was a competitive rate for a top-tier engineering program, and the campus was far less saturated with on-campus housing than it is today.

I didn’t buy him a condo but I did have friends who did. Most of them made a small profit. So it can be done. But that was then.

This came up at a time when I got a real estate ad from an Atlanta-based realtor who suggested parents of present-day students consider buying a Midtown Atlanta condo for their Georgia Tech son or daughter to live in, and you guessed the rest.

Sounded good, of course.

The offspring’s rent pays for the building, and perhaps a roommate’s as well. Get a two-bedroom, the site suggested.

Can much go wrong with that? (It might even make you hope the student will stay there long enough to get a Master’s or even a PhD), no? Or maybe even dad/mom or granddad/grandma has other potential renters in sisters or brothers, no?

Well, maybe not.

The realtor points out that in Atlanta, condos are easily surpassing the $300,000 price point, which is far beyond what many middle-class families could afford without significant leverage. According to Federal Reserve data from 2013, the median home price in the Atlanta metro area was $215,000, but high-demand areas like Midtown were already approaching $300k.

In more recent years, one development is that you need a lot more money than formerly to even think of the idea.

In addition, universities everywhere have been building a lot of college housing (some of it very upscale and catering to students with amenities such as swimming pools and recreation centers) to add more housing competition.

Approach this idea with caution for various reasons. They include the housing rules of the university, the whims of the local market, and the relatively short investment timetable.

Potential problems in today’s market:

The condition of the market you are investigating. Does it offer much student housing? Of course, it has a large university, since you already checked. But is it large enough?

The potential or future of the university. I live in Orlando, where we have one of the largest and fastest growing universities in the country. This is something that needs careful examination not only for the university size today but where it’s headed: growth or not?

Local housing trends in the university but also in the community in general. There are no signs that tell potential renters they can only lease this college-convenient building, so a place with a lot of rental units may be far too competitive for small owners to make money on their investment.

Ownership costs are a given, no matter if your tenant is your son or daughter. As is always the case, find maintenance and common area costs if it’s a condo (and apartment and other rental unit costs). These costs alone can outstrip the price of even cheap housing.

Your window of investment. Students can typically take anywhere from three to five years to graduate. A lot of such owners look at three years, which is at times not enough of a time period for the property to appreciate. If that is not the case, the landlord can continue to rent it out but tenants will no longer be relatives, of course.

This all is in no way a warning not to do it. But amateur investors who see this as a potential gold mine, and a mindless investment, might want to check with area professionals for their advice. Maybe you have a relative who already knows the market who (as luck would have it for the best) majored in real estate?

Why This Strategy Is Riskier Than It Seems

At first glance, buying housing for a college student appears to align all the right incentives: the rent covers the mortgage, the property appreciates, and the child gets a stable, convenient place to live. But this model depends on several assumptions that rarely hold in practice.

First, the idea assumes the student will stay for the full four years, something that’s not guaranteed. According to the National Center for Education Statistics, only 63% of full-time undergraduates complete their degree within six years. A student may transfer, take a gap year, or drop out, each of which breaks the rental chain.

Second, the model assumes steady rental income. But if the student moves out, finding a replacement tenant, especially one without a family connection, is far from certain. The Bureau of Labor Statistics reports that vacancy rates in college towns can exceed 10% during peak academic years due to short-term leases and seasonal turnover.

Third, it assumes the property will appreciate at a rate that outpaces holding costs. In 2013, the U.S. Census Bureau noted that urban core areas like Midtown Atlanta saw average annual appreciation of 7.2%. But that’s not guaranteed, market downturns can reverse gains quickly. The Federal Reserve data shows housing wealth declined by 18% nationally between 2007 and 2009.

For example, if a parent buys a Midtown Atlanta condo for $300,000 with a 20% down payment ($60,000), the remaining $240,000 mortgage at 4.8% interest would require a monthly payment of about $1,150 in principal and interest. Add in $720 in HOA fees, $3,120 in annual property taxes (1.04% of value), and $1,800 in insurance, total annual ownership costs would be $18,240. That’s almost $1,520 per month. Even with a student paying $1,800 per month in rent, the investor still loses $200 monthly after covering just the fixed costs, $2,400 per year. Over four years, that’s a $9,600 loss before any appreciation or resale risk.

Hidden Costs That Can Kill the ROI

Even if the student lives in the unit and pays rent, the financial reality is that ownership costs are substantial. The average HOA fee in a Midtown Atlanta condo was $720 per month in 2013, according to Apartment List. That’s nearly as much as a single student might pay for a shared apartment.

Plus, maintenance, property taxes, insurance, and potential repairs add up. The Internal Revenue Service reported that property tax rates in Georgia averaged 1.04% of home value in 2012, about $3,120 annually on a $300,000 home. Insurance premiums for rental properties average $1,500–$2,000 per year, depending on coverage.

These costs are especially burdensome if the student pays rent below market rate. For example, if the student pays $1,200/month ($14,400/year), but the total monthly cost (mortgage, HOA, taxes, insurance) is $2,500 ($30,000/year), the investor is losing $15,600 annually, before considering depreciation or resale risk.

Even if the student pays full market rent, a 2013 Federal Reserve study showed that investors in rental real estate often see net returns below 2% after expenses, far below the long-term stock market average.

If you have a 620 FICO score and need about $8,000 for a down payment and closing costs, this strategy becomes significantly riskier. A low credit score can limit your ability to refinance or secure a mortgage with favorable terms. The Federal Reserve reported that borrowers with high debt-to-income ratios were more likely to default, and a low score may disqualify you from better loan products even with strong income.

University Policies and Market Competition

Many universities now own or manage their own housing. At Georgia Tech, for example, the Georgia Tech Housing Office manages over 5,000 on-campus beds, including high-end options with fitness centers, lounges, and 24/7 security.

These facilities often outcompete private rentals in quality and convenience. According to BLS, 14% of college housing units in major U.S. cities are university-owned or operated, reducing private rental demand significantly.

Even if the student wants to live off-campus, the university may require approval. Some schools limit off-campus living to juniors and seniors, while others require proof of financial responsibility, something a parent-owned unit might not satisfy under FICO Score thresholds.

The student’s FICO Score matters. If they plan to apply for a credit card or student loan, a rental agreement with a parent could complicate credit history. The Experian guide notes that rental history is not reported to credit bureaus unless the landlord chooses to report it.

Market Timing and Exit Strategy

Most investors assume they’ll sell after four years, but the window is narrow. A student might graduate in three years, or take five. If the student stays only three years, the investor has only three years of appreciation to work with.

Appreciation rates vary wildly. In 2013, the U.S. Census Bureau reported that Midtown Atlanta saw 7.2% annual growth from 2012 to 2013, but that was a rebound year after the 2008 crash. In other years, growth was flat or negative.

Even if the property appreciates, selling is not guaranteed. The National Association of Realtors reported that the median time to sell a single-family home in 2013 was 76 days, and condos took longer, often 90+ days.

During that time, the investor must continue paying the mortgage. If the market turns, the property may be worth less than the loan balance. This is known as being “underwater”, a risk that Federal Reserve data showed affected over 10 million homeowners in 2009.

This strategy is not suitable for families with limited liquidity or those who cannot absorb a loss. If your household income is below $50,000 per year and you’re already stretched on debt, the added burden of a $300,000 property, even with a student’s rent, can be a financial strain. The risk of being underwater or facing a negative cash flow is too high for most modest-income families.

A Real Estate Comparison: Parent-Owned vs. University Housing

Frequently Asked Questions

Is it smart to buy a condo for my college student?

Only if you can afford the full cost, including maintenance and taxes, and if the market supports appreciation. Most experts advise against it due to high risk and low returns.

How much does a typical college student rent pay?

In 2013, average off-campus rent for a two-bedroom in Atlanta was $1,400–$1,800/month. Apartment List data shows this range held across most major college towns.

What’s the average HOA fee for a Midtown Atlanta condo?

HOA fees ranged from $600 to $800 monthly in 2013, according to Apartment List and local real estate reports.

Can universities force students to live on campus?

Some universities do. Georgia Tech, for example, offers on-campus housing priority to first-year students. See the Georgia Tech Housing Office for details.

How long does it take to sell a condo in Atlanta?

, the median time to sell a condo in Atlanta was 92 days, according to National Association of Realtors.

What’s the risk of being underwater on a mortgage?

If the home value drops below the loan balance, you’re underwater. In 2009, Federal Reserve data showed over 10 million homeowners were in this position.

Does renting to your child affect your credit?

No, unless you report the rent to credit bureaus. Most landlords don’t report rental payments to Experian, TransUnion, or Equifax.

What’s a better alternative to buying housing for a student?

Consider a 529 college savings plan or a low-interest student loan from Chase or SoFi. These offer more predictable returns and lower risk than real estate.

How do university-owned housing units affect private rentals?

They reduce competition by offering convenience, amenities, and often lower effective cost. The Bureau of Labor Statistics reports that 14% of college housing in major U.S. cities is university-operated.

Can I use a home equity loan to finance a student condo?

Potentially, but it’s risky. A Federal Reserve report shows that borrowers with high DTI ratios (debt-to-income) are more likely to default.