Several years ago, we wrote a blog about buying a small house or condo for your child attending VCU. That article has always been popular and carried significant traffic on the web.
And Now… We Have a VCU Student!
Since the first article is now a bit outdated and we’re currently in the works of purchasing a home for our own child headed to VCU, we think now is the perfect time to take a deeper look at the concept.
First, lets look at some pricing statistics for the past several years.
For the City of Richmond as a whole, pricing has gone up by over $63,000 in 5 years. For the areas immediately surrounding VCU, the number is a mere $55,000. Depending on which statistic you choose to measure, the annualized rate of appreciation is anywhere from 4.7% to a high of 7.8%.
Here’s Some Context:
- The cost of a VCU dorm in 2018 is $7,200
- Per our rental managers, the average cost of rent is anywhere from $600-700 per bedroom in a standard house.
- If they rent a 1 bedroom studio apartment, the number rises closer to $1,100-1,200.
- Comparable sales suggest pricing to be roughly $300,000 to $350,000
- 2219 Parkwood Avenue (pictured) sold in 2 days.
- The 3 bedroom/2 bath home was 1872 SF and priced at $325,000
- It is roughly 12 blocks from the Monroe Park Campus
So using the scenario above, you could:
- Purchase the home for $325,000 and sell it 4 years later for:
- $380,000, given only a 4% annual appreciation rate (+$55k)
- $395,000, given a 5% annual appreciation rate (+$70k)
- $410,000, given a 6% annual appreciation rate (+$85k)
- Instead of paying $7,200 in rooming costs to VCU, you received $1,300 in rent per month from two roommates
- Paid down your mortgage balance by roughly $20,000
(As a small disclaimer: The past does not guarantee what the future will look like and the type of loan you choose and interest rate you receive will impact how quickly you pay down the mortgage balance.)
Though there are some navigable hurdles, you can co-sign for your child and use a Maximum FHA loan that requires a very low down payment. There are also loan programs for non-owner occupied co-borrowers for less than 20% down. And finally, there are investor loans that allow you to purchase without requiring 20% down.
So all that said, you have options and not all of them require substantial amounts of cash.
So depending on what loan type you choose, we can help you find an originator who knows the market for investor and co-borrower loans.
But Aren’t Prices Going to Stop Rising?
Maybe if we solve the inventory problem or everyone decides to leave the city.
To solve the inventory issue, all we have to do is figure out how to build another, say, 3,000 or so houses per year around VCU (which if you aren’t detecting my sarcasm, is near impossible). Take a look at the chart below to get a sense of how incredible the inventory issue is in the City of Richmond.
And take a look at what the population of Richmond is doing:
So what we have is a really unique scenario: The rapid rise in prices is not due exclusively to a overabundance of risky buyers (a la 2008), but from a constrained supply of housing, especially in the urban neighborhoods, and a growth in population at a rate not seen in 50+ years.
Affordable and urban are the two safest and most recession proof segments of the market, by far.
So What is Available?
As much safety as the supply crunch offers, it does pose a buying challenge, and that is precisely why you need a good agent to help you.
Generally speaking, buying a home in an affordable urban segment requires immediate action when a target arises and a few contractual additions that will increase the likelihood of it being accepted (we can chat in more details about how we structure competitive contracts and how we tend to win more than we lose – we don’t want to publish all of our tricks for the world to see!)
Here is a list of the neighborhoods that surround the VCU campus and currently available housing:
- The Fan District
- Museum District
- Greater Downtown (including Jackson Ward and Monroe Ward)
- Jackson Ward
Imagine sending your child to college, and then offering them a home as a gift to get their life started, or selling the home and paying off half or more of their college costs. Yes, there is risk in purchasing a home – stuff breaks, prices do sometimes go down, roommates might break a lease – but with all of the potential upside, the risks are minimal.
We are in the process right now of doing so ourselves… What could be a better endorsement than that??