Grad student develops new housing concept
College students would begin building equity right after graduation.
A grad student just may have come up with a business model that gets recent college graduates out of their parents’ basements and into their own homes.
Using architecture, business acumen and knowledge of spatial requirements related to age, Matt Cebula, an architecture graduate student at Lawrence Technological University in Southfield, is applying the theories he’s learned in the classroom to real-world issues.
Cebula said he developed a business model that takes into account various life stages, financial constraints and future plans during a studio class at the university that focused on the idea of aging in place.
“The idea is as you age, you go through different stages of your life and these different stages bring different needs, such as spatial requirements,” said Cebula.
“So, when you are out of college, you don’t need that much room, but then you end up finding a significant other, getting married, having kids, and that spatial requirement grows and you need a bigger home. It’s the major reason people move: the desire for more space.”
Using a business approach that incorporates cost savings and viability, Cebula developed a model of investing in a new home that initially would be used as a duplex in a tenant/owner relationship. As the individuals progressed through different life stages, the duplex could be transformed into a single family home and then, later, back into a duplex as needs changed.
According to Cebula, the business model would circumvent the cost of moving to a larger house when the need arose, as well as selling a home for aging homeowners. The idea of changing a single family home back into a duplex was based on experience with older individuals who wanted to stay in their home and allow the possibility for a live-in health care professional to rent the open space, he said.
According to the United States Census Bureau’s 2012 figures, of an estimated 198.1 million homeowners in the country, approximately 12.6 million did not live in the same home during the previous year.
“It’s a lot about the cost, a lot about the spatial requirement you would need at different stages of your life,” said Cebula. “You would rent out during the time you don’t need the extra space, and the rent collected would go toward the mortgage payment on the home, or any other cost that you would have from graduating college from all of the loans that you may have or other financial concerns.”
The home model uses movable partitions that allow for privacy and takes into account acoustical needs. According to Cebula, the concept incorporates financial data based on a 2,000-square-foot home and average rent of $1,200 for a two-bedroom apartment in Royal Oak, near metro Detroit. Using various fixed-year mortgage periods with correlating interest rates, Cebula calculated potential costs for the homeowner.
“Typically, rent fluctuates over time based on the economy, neighborhood, quality of the apartment,” said Cebula. “But for simplicity’s sake, I used the average and kept that over time, no matter how long the fixed mortgage loan would be.”
For a 10-year fixed mortgage with a loan amount of $280,000 and an interest rate of 2.9 percent, the monthly mortgage payment was calculated at $2,690. However, taking rent collection into account, the expense per month drops to $1,490. When lengthening to a 30-year fixed mortgage with a 4.25 percent interest rate, the monthly mortgage payment was anticipated to be $1,377. Adjusting the expense per month using the averaging rent cost of $1,200, the home owner only pays $177 per month.
“It’s kind of trying to solve the issue of eliminating costs and making it more affordable for recent graduates who purchased a new home instead of moving back home with their parents,” said Cebula. “So they can establish something of their own instead of renting, and in a way throwing that money away.”
Although the business model was developed for the studio class incorporated into the curriculum at Lawrence Tech, Cebula said he was open to pursuing it as an entrepreneurial idea.
“A big thing I was hoping to get out of it was discussion for the possibility to be able to have a partnership to make that possible,” said Cebula in reference to a business prospect.