College Student Condominiums

CSU Students Find Housing Scarce

2011-04-06T17:47:00.000-06:00

This spring, students at Colorado State University are facing a drastically changed rental housing market from recent years. Most of the "Move in Specials" are gone. It's harder to find a landlord who will accept a pet. And the supply of available apartments, condos and rental houses isn't what it was just a year ago.

In fact, the Northern Colorado Business Journal recently reported that the Fort Collins apartment vacancy rate fell to 4.2% (5% is considered normal) and unlike most other areas of Colorado, the median monthly rent in Fort Collins rose from $821 a year ago to $872 currently.

Three major factors in the local market are driving this trend.

First, there has been a lack of new construction of apartments, condos and homes due to the unavailability of construction loans. New construction starts are off 70% from the peak building years in the mid-2000's and not are expected to begin a recovery until 2012. This leaves Fort Collins with a large deficit of new rentals.

Second, more families have had to turn to renting as they lost their homes to foreclosure or short sales. Unfortunately, a number of families facing the financial hardship of losing their home, also experience a family breakup which creates the need for two rental properties to replace the one home they had.

Third, the population of Fort Collins is continuing to grow from the outside. Colorado State University targeted 25,000 as the number of full time students it wanted to have on the Fort Collins campus. Now, with the recession causing people to go back to school in larger numbers and with record numbers of freshman applications, CSU is looking at nearly 27,000 students to serve and forecasting as many as 30,000 students in the next few years.

All those student need a place to live and neither Colorado State University nor the City of Fort Collins currently has a plan in place to house that many newcomers. As a result, rents for students this spring have jumped from the $300-$400 per bedroom range last year to $400-$500 per bedroom and rising.

At the new rent levels, the market for buying a house or condo for a CSU student to share and rent out bedrooms to friends is making sense again. Over the long term in Fort Collins, it has been one of the few ways to make the costs of college less painful.

Student Apartments Rejected by Fort Collins

2010-11-29T15:05:00.008-07:00

Recently, the Fort Collins Planning and Zoning Board rejected a proposal by Campus Crest Development to build a 624 bedroom apartment complex targeted at students. Just 2 blocks south of the Colorado State University campus, the land on which the apartments are to be built is owned by the Colorado State University Research Foundation(CSURF) and would be leased long term to the developer. In rejecting the student housing project, called The Grove, the Planning and Zoning Board noted it does not meet current land use codes.

Potential neighbors for the proposed project raised numerous issues with the City of Fort Collins regarding the incompatibility of the apartments with the nearby homes and natural area. Citizen opposition to the project voiced concerns over the level of quality in the construction, seeming lack of "green" standards in project construction, parking issues and the developer's history of management once its apartment complexes are complete.

There is no doubt that as the enrollment at CSU continues to grow there will be a need for more student housing to be built, whether it be apartments, condos, lofts or townhomes. And Campus Crest has put forward a serious proposal to meet part of that need. But, Fort Collins can do better.

The Coloradoan reported on November 26, 2010 that the Fort Collins Planning and Zoning board found that the Campus Crest development plan "would be detrimental to the public good."

In my opinion, the apartment project appears to be a standardized plan without sufficient consideration either to the actual site or to the surrounding neighborhoods of which it would become a part. Campus Crest has made changes and improvements to its original plan but I believe more are needed to meet the high standards and expectations of city residents for new developments in our community. And Campus Crest seems to want to rush the process for City approval, submitting a new development plan while having two appeals pending on their original plan. It is my belief that rushing decisions on a project of this scope will not lead to a high quality development.

Even more troubling is the article in the Northern Colorado Business Report that uncovered as many as 20 Campus Crest sub-contractors on their Evans, Colorado apartment project who filed liens of almost $2 million in order to get paid. The report indicates that, although the sub-contractors were eventually paid, some had to settle for as little as 50 cents on the dollar for what Campus Crest owed them. For me, that's a pretty big red flag.

Students who are potential occupants of the apartments, if they are approved and built, might want to check out the generally poor tenant ratings of Campus Crest's similar development in Evans, Colorado. The link to their rating page on apartmentratings.com is here.

My opinion is that Fort Collins can, and indeed should, do better for student housing than what is currently proposed for The Grove and if Campus Crest can improve their proposal to meet community standards and expectations, then great. If not, then they won't have my support.

$8000 Housing Tax Credit for Students?

2009-05-08T09:22:00.007-06:00

In an act of unusual clarity, the IRS has listed on its web site, specific scenarios where the $8000 first time home buyer tax credit may be claimed. One qualifying scenario(S2) fits to a tee the situation of a college student and parents buying a house or condo for the student to live in during school. It clearly states that the parents do not qualify for the tax credit but if the student is a first time buyer, he or she would qualify to claim the $8000 tax credit.

"But wait", you say, "my daughter(or son) doesn't earn enough money to use an $8000 tax credit. What good is it?"

Excellent question.

And for the answer, we again turn the the IRS and its website. (They're batting 1.000 today). If the taxpayer does not owe $8000 in taxes, or if he or she has already paid the taxes, then the taxpayer will get the tax credit back as a refund check. Wow! That would make a nice dent in the tuition bill.

The IRS even gives advice as to how the tax credit may be claimed. If a taxpayer has filed an extension for the 2008 tax return, simply claim the credit on the return filed after closing on the house or condo and get the refund in 2009. If the taxpayer has already filed a 2008 return, an amended 2008 return can be filed right after closing and the refund will be sent shortly. The taxpayer may also wait and claim the tax credit on the 2009 tax return and get the refund in 2010.

This tax credit is only good for first time home purchases until December 1, 2009 and the first time buyer must keep the house or condo for 3 years as his or her primary residence or the tax credit would have to be repaid.

New information on the IRS website affirms that the first time buyer claiming the $8000 tax credit does not have to be the one making the payments on the mortgage loan, he or she just needs to be using the property as the primary residence.

Here are links to the IRS information.

For qualifying scenarios
http://www.irs.ustreas.gov/newsroom/article/0,,id=206294,00.html

For how to claim the Tax Credit
http://www.irs.ustreas.gov/newsroom/article/0,,id=204671,00.html

This is such a great deal for college student housing that families should take a close look to see if it doesn't make sense to own a place for their college students instead of renting for 3 or 4 years.

Checking out the HOA

2009-01-31T17:20:00.003-07:00

When you buy a college student condo or a town home, you should check out the Home Owners' Association(HOA) that runs and maintains the community. You'll want to know about the financial health of the association, what the Rules, Declarations, and Bylaws say, and if there are any critical issues facing the HOA that might affect you as a new owner.

Once you make a written offer on a condo or town home in Colorado, you are usually provided this information by the seller, through the agent representing you. In the state approved Contract to Buy and Sell Real Estate, the buyer is given a certain amount of time to review these documents and cancel the sale if they contain unacceptable restrictions. You can, however get a head start on this process and gather some of this information before deciding which condo or town home you're interested in.

Many property management firms maintain web sites that give this type of information on the communities that they manage. This is how that looks on one of our local property management firm's site.

Northfield Condominium Association

Homeowners Section

As you can see, this management company makes it easy to preview the important documents before you decide if a particular condo or town home community is right for you. You might find that your 70 lb. black lab won't meet the association's 25 lb. pet restriction, no matter what kind of a diet you put him on!

Another, less official resource, is the Neighborhood Link web site that some communities post to let their neighbors and potential homeowners in their area in on what's happening. These sites are usually posted by the neighborhood's computer/internet guru who is sometimes authorized by the HOA board of directors and sometimes not. If there is a Neighborhood Link site for the condo/town home community you are interested in, it can give you a more personal look into what is happening in that neighborhood. I have linked to one such page here:

http://www.neighborhoodlink.com/ftcollins/hillpond/

These resources can give you more details about the community than just picking a random neighbor or two to talk with, but thats not a bad option either.

What about HOA dues?

2009-01-30T22:52:00.004-07:00

Every condo and town home comes with a Home Owner's Association(HOA) that has the responsibility to care for certain aspects of the development. The dues that an HOA charges the condo or town home owners, pay for the expenses that are shared.

Most HOAs cover expenses for these items:

Monthly water, sewer and trash bills
Lawn care & sprinkler system maintenance
Exterior maintenance on the buildings and parking areas
Snow removal
Fire and liability insurance on the buildings
Professional management of the association

Additional items(if applicable) that a few HOAs also cover:

Pool and/or clubhouse maintenance
Tennis courts
Cable TV and/or high speed internet
Heating cost of individual units

HOA dues for the typical items range from $100/month to $185/month. For HOAs covering items in the second list, monthly dues at various associations will range from $150/month to $285/month, depending on what the HOA is providing. Heat and pool/clubhouse costs raise monthly dues the most. The age of the development also affects the monthly dues with older developments generally having higher dues to pay for additional maintenance.

In most cases, HOAs don't like to raise monthly dues very much and we just do not see dramatic jumps in dues. Typical increases range from $5 to 15 per month and usually do not happen every year. HOA boards work very hard to hold their costs down to avoid increases because the board members have to pay the increases, too.

We'll talk about the operations and rules of typical college condo home owner associations in the next few posts, to answer more questions that frequently get asked when considering such an investment.

Where are we headed?

2009-01-27T21:25:00.004-07:00

The National Association of Realtors just announced that sales of existing homes in December 2008 jumped by 6.5% nationally from the number of sales a month earlier in November. Now, any real estate broker will tell you that it is not normal to see a jump of any size in home sales in the month of December compared to the month before because we all get busy with holiday shopping, family gatherings, company parties, school programs and any number of other things that distract from the big decision to look for and purchase a home. And from the media reports on holiday retail sales, or lack thereof, one wouldn't have expected higher home sales last month.

More interesting news:
Existing home inventory, homes with "For Sale" signs in the front yard, declined 11.7% in December.
Regionally, in the West which includes Colorado, sales of existing homes for December 2008 jumped 13.6% from November 2008 and they were a whopping 31.6% higher than December 2007!
The median price of a home sold in the West region was 31.5% lower than one year ago in December 2007. But remember, the West region also includes places like Phoenix, Las Vegas and California, where home prices were severely over-inflated.

Late last week the Federal Reserve(the Fed) announced that it had purchased $19 billion(that's with a B) worth of troubled, mortgage backed securities from Fannie Mae, Freddie Mac and Ginnie Mae, the folks who buy mortgages from lenders all across the country. By buying the up delinquent mortgages, the Fed has provided new money for Fannie Mae, Freddie Mac and Ginnie Mae to buy new, good loans from lenders like Well Fargo Home Loans, Countrywide Home Loans and lots of others. And the Fed has $500 billion(with a B) to spend doing this so more mortgage money is available to purchase and refinance homes. Thats why the 30-year fixed rate mortgage is down near 5% now and that's good news for buyers. HOWEVER, this action by the Fed, combined with the Economic Stimulus Package that congress and the new President want, could very well lead to inflation, and home prices always seem to lead the way in inflationary times. So, my prediction is that within the next two years we will see the start of a significant rise in the price of homes and condos again. That's what happens when the government prints too much money!

FHA Kiddie Condo Loans

2009-01-26T17:05:00.006-07:00

One of the misconceptions that the major media outlets are perpetuating right now is that there is a lack of money for mortgage loans. Every bank and mortgage loan officer that I speak to, says that they are receiving call every day from would be mortgage borrowers asking if any money is available to buy an home or refinance a loan. And every one of those loan officers wants to get the word out that mortgage money is not only available, they have rates lower than we have seen in my lifetime, and I'm heading away from 50!

Probably the best alternative for parents of college students who are thinking of buying a property for their student to live in during school, is the FHA "Kiddie Condo" loan. This loan is available to anyone with reasonable credit and is not income limited in any way. It comes with a minimum 3.5% down payment, although you can make a larger one if you wish. The Kiddie Condo loan gets the borrower an owner-occupied interest rate instead of an investor interest rate and requires that the student who will live in the condo or town home be on the deed to the property and on the loan. This is how the loan qualifies for an owner-occupied interest rate. The non-occupying co-borrowers, that's mom and dad or any other blood relative of the student, actually qualify for the mortgage. The loans can be your choice of either fixed rate 30 year, 15 years, or adjustable. There is FHA mortgage insurance on the loan, which is currently tax deductible, just like mortgage interest.

FHA Kiddie Condo loans do require that a condo be in an area where the development is FHA approved & the owner occupied ratio to all owners be above 50% but a town home does not have the same occupancy requirement.

With current FHA mortgage rates in the low 5% range for a 30 year fixed loan, there is no reason to buy into the media hype of catastrophe in the mortgage markets. But, it's still a good idea to do your homework before you sign on the dotted line, just to be sure you are getting a competitive rate and closing fees.

To buy or not to buy, that is the question

2009-01-24T12:36:00.007-07:00

I get a lot of questions from parents of CSU students about the wisdom and practicality of owning a condo or town home for their student during the college years. Usually, they want to know if owning is a better choice than renting, and my "it depends" answer is rarely what they expect. But lets take a moment to look at the pros and cons.

Renting is certainly easy in some respects. Houses and apartments are readily available in the current market, although that can change rather quickly. You can find some really cheap places to live, too, although they may be on the ugly side. And if you are not sure you will be in school or in Fort Collins for at least 2 more years, renting can make good sense.

However, renting also has it's drawbacks. Most of the apartments are more crowded than condos and town homes resulting in more noise, partying, neighbor nuisances and some forms of crime. Student renters also tend to move every year which is a sizable task and with each move come the risk of losing that damage deposit to the landlord who never thinks you left the place in as good a condition as when you moved in. Three deposits lost in three years adds up!

Now, owning a college condo or town home has a couple of drawbacks, as well. Your student can't just decide to move after a year if he or she decides the unit or location isn't a good fit so taking time to make a wise choice is highly recommended. And students who leave college early could force an early sale or rental of the unit.

Owning a condo or town home for a college student has the big advantage of making the housing part of the college expense tax deductible for most parents. It also provides more choices for the environment and location you would like your student to live in. Most often, condos and town homes are nicer & more secure places to live and may have more amenities than a typical rental. Your student can also begin to take some responsibility of ownership of the condo or town home and learn to manage both money and people by selecting the roommates and negotiating rents, which help make the mortgage payment. If a student owns the condo or town home with parents, he or she gains a more established credit rating, as well. Finally, owning a college condo or town home has historically been a very good investment in Fort Collins, with the price of residential property increasing at an average annual compound rate of 6.1% over the last 33 years. Many parents sell the unit for a profit after their student's graduation while others opt to keep it as a rental indefinitely or until another of their children come to CSU.

I'm always available to answer more questions on kiddie condos, as they are called, so if you have others that I haven't addressed, post a comment or shoot me an email. I'd love to hear from you.