National surveys attempting to determine the best places to live continue to include several college towns. The small-town environment is attractive for its slower pace and the athletic facilities and educational programs offered by the school. College towns also remind many aging baby boomers of the places where they grew up or received their education, and where they would ultimately like to return.
For example, two couples my wife and I have known for years have recently purchased a home near Western Washington University in Bellingham. When I inquired if the homes were going to be college rental investments, I was told that both couples plan to make the homes their primary residences.
One couple who wanted to be closer to two grown daughters had signed up to do volunteer work in the Bellingham area. The other couple planned to use the home as a jumping off point for boating in the San Juan Islands and Queen Charlotte Sound.
There’s anecdotal evidence that many people would jump at the chance to sell their family home and “move down” to a smaller home in a different environment such as a college town.
Not everyone can sell their present home and move right away. However, given the lower homes prices throughout much of the country, why not investigate ways of getting the home you want tomorrow at today’s price? Homeowners over the age of 62 could consider a reverse mortgage for purchase. If the market is slow in your area, you could consider a lease-option deal.
Here are a few key components to the lease option:
The seller gives up tomorrow’s presumably higher value for money in hand today. The buyer pays a bit more than today’s value in exchange for very little cash down. Let’s say buyer and seller agree the price will be $335,000.
The seller charges the buyer a nonrefundable fee for agreeing to this option. The amount can vary depending on factors such as how eager the seller is to move and the size and quality of the house. Typically, the higher the fee, the better the buyer maintains the property.
Let’s use $3,000 for the fee in our hypothetical transaction. The fee is in addition to the monthly lease payments. And we’ll have the seller give the buyer the right to purchase the property for $335,000 at any time within the 12-month lease period. If the option is exercised, the fee could be considered part of the down payment.
The lessee has made no down payment, hence the monthly option fee is typically higher than rental market rates. The two parties agree on what portion of the rent will be applied to the down payment. Any amount can be credited.
There are plenty of potential renters (other than undergraduates) associated with a college or university that would be happy to rent a comfortable place close to campus. The number of visiting professors always is underestimated, as are the number of staffers who often are terrific rental-lease prospects.
Notes to human resource representatives have worked wonders in landing mature renters, as have inquiries posted in faculty lounges. Graduate students (some married) also form a significant renter pool.
If you want to move down the road, especially to a college town, see what’s possible today. A purchase at today’s prices could save you money. It could also provide you with a huge pool of renters until you get there.
Tom Kelly’s book is “Cashing In on a Second Home in Central America: How to Buy, Rent and Profit in the World’s Bargain Zone.”
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