By Jane Bigelow and Fred Hibbert

As thousands of families send their children off to college for the start of the school year, many face increased housing costs, on and off campus, as well as a shortage of housing options. The situation is prompting a growing number of parents to consider an alternative to traditional dorms or off-campus apartments: buying a second home for their children’s stay at college.

Whether it makes financial sense depends on a number of factors, from living costs in a particular college town to tax laws to the emotional makeup of the student. There are pluses and minuses about making this kind of an investment and you would be well advised to talk to your financial advisor before making such a move.

On the plus side, parents purchasing a home for their offspring may obtain tax advantages and lower monthly housing costs, a start to good credit history for their son or daughter and, at the very least, less moving mania in between school terms since the student wouldn’t have to vacate his or her own property.

At the same time, don’t forget that there are many expenses associated with buying, selling and maintaining a home. In addition, real estate is cyclical and values can rise and fall. If you only hold the property for a few years you may not get enough appreciation to offset the costs.

Questions to consider before buying:

Are property values in the area around the college appreciating?

Research the city or town where the school is located to see if it has suitable housing at a reasonable price. Check up on other properties in the area to see if they are appreciating to gauge whether or not this is a good investment. A local real estate professional can give you a clearer understanding of rental demand and home-price appreciation in that market.

How many family members and friends plan to attend the same college?

If a family has several children bound for the same college within a certain period of time, it may make economic sense to buy a home instead of paying rent.

How can owning a home help with tuition fees?

Sometimes out-of-state students can establish residence by having their parents purchase a home, which may enable them to avoid paying out-of-state tuition fees.

Will there be a steady supply of tenants?

A home with several bedrooms makes it possible for a student to have friends move in and pay rent. This can generate income above the mortgage payments, which could make a nice return on the purchase price.

Parents should do their homework up front before making this type of investment. If they do, they should pass this test with flying colors!

Jane Bigelow and Fred Hibbert manage Coldwell Banker Northern California’s two Los Altos offices.