FAQ
What if I treat the house as a residence?
Always check with your personal tax adviser.
In general, if you decide to treat the house as a residence, you may qualify for more favorable financing terms, including a lower interest rate.
And you may be eligible for certain property tax exemptions.
Certain qualified expenditures may increase the tax basis of your home but probably won’t be deductible on your income tax return.
What if I treat the house as rental property?
Always check with your personal tax adviser. For rental property, you may have to make a larger down payment.
But you may be able to deduct some maintenance and repair expenses from your rental income, thus decreasing the amount that is taxable to you.
What are my options with the house after graduation?
When your child graduates from TCU, you’ll have some decisions to make regarding the house. Your three primary options are as follows:
First, your son or daughter may like to remain in the house while working in Fort Worth. In this case, you may decide to maintain the same arrangement indefinitely. Or you can choose to transfer ownership to your child.
Second, you may decide to put the house up for sale. FrogCribs can help you with this process through advertising on our site at our “For Sale by Owner” page or by directing you to reputable real estate agents.
Third, you may choose to keep the house as rental property. FrogCribs can help you here, as well, by listing your house on our “Houses for Rent” page or by directing you to rental property professionals.
Advantages of Buying a House:
- Possible positive cash flow.
This simply refers to your total monthly rental income minus your total monthly expenses (mortgage payment plus property taxes, etc.).
For example, let’s assume you purchase a four-bedroom house for your son and three roommates. If your total monthly expense is $1,200, then you need to charge each of the roommates $400 per month to break even. Any amount above that will result in a positive monthly cash flow (profit).
- Potential for profit at disposition.
This refers to the profit you make from the sale of the house when your son or daughter graduates and moves out.
For example, let’s assume you purchase a house for your daughter to live in for three years while she’s attending TCU. Let’s also assume the total cost of the house was $100,000, and you earned $1,000 per year profit by collecting rent from your daughter’s roommates. Now, even if the house doesn’t appreciate in value and you sell it to another TCU parent for $100,000, you’ve made a $3,000 profit simply by collecting rent ($1,000 per year for three year). And if the house appreciates in value at all (which you might expect), your profit will, of course, be greater.
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