Many parents have gone through the challenge of finding housing for their college students. Some parents and students decide that dorm life is the right choice and some want to live on their own. A popular approach over the past few years for parents is purchasing real estate in the area in which their child goes to school.
When looking at any college towns across the United States and comparing average rent versus a mortgage payment (with 20% down) on a similar property, buying a property can save you money over a the 4 years that your child goes to school. Should you purchase a property with multiple bedrooms, you could rent out the additional bedrooms and have incomes on this property while your child lives there. Then, after your child finishes with their studies, you own the property, potentially made some appreciation and income on the property, and now you can rent it out to other students attending that university. You now have a property that you are holding for investment purposes and after a period of time you could complete a 1031 exchange. This would allow you to purchase a new investment property and defer your tax liabilities.