The Best VCU Housing Option – Buying a ‘Dorm’
I would like to offer the following debate to the parents of VCU students and their Medical School counterparts who are coming to Richmond this summer (or who have already arrived) and who need to make a decision about VCU Housing…
You should buy a house or condo.
Now I understand that my position on this is not without bias. I am a Realtor who sells a lot of property in and around both the VCU Campus and the MCV/VCU Health Systems Campus. It benefits me when you buy. It does not really benefit me when you rent. I am now done disclaiming my conflict of interest.
That being said, it does not mean that I am wrong about what is the most prudent decision regarding VCU housing options.
I am not going to give you the rent vs. buy calculator argument because we (Realtors) can all tweak the numbers until we can get it to show what we want it to. Depending on inflation, appreciation and tax effects, I can get one of those things to spew out some amazing numbers. Those are interesting tools and they have their place. This is not a debate for the rent vs. buy calculator.
My argument is more macro in nature and relates to the following set of circumstances:
- Prices are down 20-30% depending on your market and asset type
- Interest rates are being held down (somewhat artificially) by the Fed and are still hovering around 5%.
- College tuition and college room and board is going up despite the rest of the economic world moving the other direction.
Renting a property for roughly $1.30 per SF per month (which translates to about $1,200-1,400/mo for the typical 2-bedroom apartment in City of Richmond in or around the VCU campus) or buying a property for about $190-210 per square foot yields about the same monthly cash payment at the end of the day.
Which one gives you some upside? It is pretty obvious that buying has the promise of upside.
I know that the counter argument is simply that many are not sure that the pricing declines behind us.
The facts are as follows:
- On January 1 2009 there were over 400 condos for sale in Richmond, VA
- On January 1 2010 there were less than 200 condos for sale in Richmond, VA
- On January 1 2011 there were still roughly 200 condos on the market in Richmond, VA.
- No new projects have come to the market since the adjustment in 2008.
- Inventory in 2013 has been somewhat constant hovering around 100-130 units on the market at any one time
Life, at least financial life is about managing/pricing/understanding risk. Betting large sums of money on risky endeavors with no upside is not smart. Betting medium sums of money with a low cost-of-capital in a market that has balanced itself with no competition coming on line sounds like a pretty decent bet to me.
Don’t let the national media scare you off. While extremism and negativity sells, I have yet to see report on the college-driven housing market on 60 Minutes. As a matter of a fact, the student housing market is one of the healthiest housing sectors in the market and owning a home that is underpinned by a rental option to students is a way to remove a great deal of risk from the equation.
If really do have a VCU housing decision in your future, lets discuss the options.