Buying versus renting at top football schools
Students at many college campuses around the country are back to school, and the bills are coming due. Wondering if there are some corners you could have cut?
Cyberhomes recently looked at 15 of the nation’s top-ranked football schools, including USC, to see if parents would be ahead buying a house nearby and collecting checks or paying rent to someone else. They found that it made more financial sense to rent in only four of the college towns.
Los Angeles is one of those markets. A monthly mortgage payment on a single-family home in the area, according to Cyberhome's research, is $3,163, versus only $2,270 for rent. After USC, other school markets where renting beats buying include the University of Oregon and Fresno State.
So which of the college markets look best for buyers? Penn State, the University of Oklahoma and the University of South Florida.
-- Lauren Beale
Your thoughts? Comments?
Photo: Move-in day at USC. Credit: Francine Orr / Los Angeles Times
The article hedges its bets quite nicely, with the following MAJOR caveat stuck in a middle paragraph:
"Now, before you go rushing off to Tampa to buy that home for your college-age son, remember that this rent-vs.-buy monthly payment data is only one component that you should take into consideration. Another key consideration, of course, is home price trends."
Actually, other equally important key considerations that will affect your price:
- How long will it take you to sell the place once your college graduate decides to leave college, either through graduation or dropping out?
- How much money will you be spending on closing costs for BOTH transactions?
- If your graduate is able to take on some good summer internships out of the area, will you be able to rent the unit out to cover your mortgage?
The problem with buying AND selling on very fixed timeframes is you are betting that housing will not be tanking further in 4 years. That's a terribly short time period to be taking a financial gamble, especially when you also are in the hook to pay for college itself, which is getting more expensive all the time.
Posted by: Tim K. | August 28, 2008 at 07:29 AM
Why do you need to rent or buy a single FAMILY home for a single STUDENT?
Posted by: Tim | August 28, 2008 at 07:35 AM
What house are you going to buy in the USC neighborhood?
Posted by: Paul O | August 28, 2008 at 08:22 AM
did you take into account that the fortunate son or daughter with rich parents could rent out the other bedrooms?
Posted by: billyjoe | August 28, 2008 at 09:51 AM
"did you take into account that the fortunate son or daughter with rich parents could rent out the other bedrooms?" - billyjoe
no, just like they didn't divide the rent by the number of people sharing the rental house.
But basically it boils down to the timeframe as Tim points out. Renting is generally better in the shorter term, and buying for the longer term.
and 4 years is not very long when it comes to real estate.
Posted by: alvin | August 28, 2008 at 10:24 AM
Why would a wealthy family want to buy a home near USC anyways?
It's the hood.
Posted by: E | August 28, 2008 at 11:56 AM
I went to UC Irvine and lived one year in a house down on Balboa Island (cha ching) that the owner bought for his kids while they were at UCI. The owner's son and GF lived in the guest unit while he rented out the main house to students in the winter and summer vacationers by the week. It must be nice to be rich enough to afford a $1 million plus house for your kids!
Posted by: Melissa | August 28, 2008 at 12:53 PM
Looking only at gross montly rent vs. monthly mortgage payment is an OK starting point, but not real analysis. Income taxes considerations, property tax rates, future appreciation and rental increases, and maintenance are all important.
Posted by: tew | August 28, 2008 at 03:46 PM
"Looking only at gross monthly rent vs. monthly mortgage payment is an OK starting point, but not real analysis. Income taxes considerations, property tax rates, future appreciation (DEPRECIATION) and rental increases (DECREASES), and maintenance are all important."
fixed that for you.
Posted by: E | August 28, 2008 at 04:23 PM
It makes sense to buy by most universities, but USC is an exception. I cannot think of any university in the country that is so over priced as USC and in a worse area of LA. Basically you are going to pay $400K tuition, with a high probability your kid will not be safe. What an overrated dump.
Posted by: Steve | August 29, 2008 at 06:34 AM
"Basically you are going to pay $400K tuition, with a high probability your kid will not be safe." -Steve
USC Tuition is $18,500K a semester. Call it $20K to account for hidden fees and books. Add another 6K a semester for rent.
For a realistic 5 year plan, 2 semesters a year I arrive at $260K.
$400K? Seriously Steve, 53% error there.
Posted by: aero-engineer | August 31, 2008 at 01:05 AM