Clovis News

Parents buy Fresno homes for college students

Depressed home prices in Fresno have created a growing real-estate market for parents of college-aged children.

With the cost of a dorm room running about $700 a month, more parents have realized they can now buy property and make mortgage payments that are about the same, if not less.

Plus, they have a chance of later selling the home for a profit.

It's happening nationwide. A recent survey from Coldwell Banker found that 64% of its real estate agents have seen an increase in the number of "parent investors" buying homes for their kids to live in.

The math persuaded Daren Pereda to look for a house to buy for his daughter, Corinne, 20, a Fresno State student.

Pereda and his family toured 10 houses near Fresno State on April 23. Their plan is to buy a three-bedroom, two-bathroom house for $150,000 to $180,000.

His daughter and a couple roommates will live in the house to help pay the mortgage, which he estimates would come out to about $350 to $400 a month per person.

That is less than the monthly cost of a Fresno State dorm room. Students who live in on-campus dormitories pay between $7,000 and $10,000 a year for a bedroom and a meal plan -- or about $700 a month for the 10-month school year.

Regardless of the monthly cost, Pereda said he would rather see the money going into an investment than into a landlord's pocket.

"We are spending the money on housing anyway," Pereda said. "This would be a good opportunity not only to have a place for her to live, but we could also use it as an investment in her future."

The new math

The combination of low home prices, low interest rates and a slew of foreclosure and short-sale homes have made buying much more attractive to many parents compared with just a few years ago, when home prices peaked.

Now, condominiums along Fresno State's south end are a hotbed for parents and real estate investors who want to buy, said Brandon Gonzales, a real estate agent with Coldwell Banker Premier Real Estate in Fresno. House buyers look along Cedar Avenue and also will travel north into Clovis, he said.

Prices in the Fresno State area vary from $60,000 for a condominium to $165,000 for a house, Gonzales said.

If the parents of a college student buy a condo in Fresno for $60,000 with a $12,000 downpayment, and a 30-year fixed-rate mortgage, the monthly mortgage payment is about $350, Gonzales said.

Add on the typical housing association fee of $150 and the total monthly cost would be about $500.

That is less than renting the same unit, which can be about $750 to $800, Gonzales said.

"In the long term, that's quite a savings," Gonzales said.

For many parents, the risk also seems low.

Homes near universities "don't take as long to sell, and you'll always have renters," said Joe Sciarrone, a London Properties real estate agent.

$105 a month

For Ed Pfeiffer and his son, Travis, a Fresno State student, a short sale proved to be an affordable housing option.

Pfeiffer and his son bought a two-bedroom, one-bathroom condo within two miles of Fresno State in 2009. The price: $50,000.

Each paid $25,000, which they had. Travis Pfeiffer, 20, is listed as the owner, and now he is giving his father a monthly mortgage payment of $105 with an eye toward paying off the money his father invested. He spends $200 more on regular maintenance and taxes.

The mortgage is much less than the $500 monthly rent he paid for a one-bedroom apartment during his first year at Fresno State.

The arrangement is a private mortgage that includes the principal and interest to be paid to Travis Pfeiffer's father instead of a bank. Ed Pfeiffer reports the mortgage as income on his personal taxes and Travis Pfeiffer is able to take a mortgage interest deduction on his.

"I wanted him to know exactly how a mortgage works," Ed Pfeiffer said.

If Travis Pfeiffer rented out the second bedroom in the condo, he could collect $300 to cover the mortgage -- and have extra cash to pocket. He decided not to bring on a roommate.

"I think the real benefit is just the fact that the money you're paying every month is something you're putting back into the place," Travis Pfeiffer said. "I wouldn't say that I've saved any more money, but I do know that when I move out and decide to sell, that money will come back to me."