Buying a house may be dorm alternative

September 4, 2008 

CHICAGO -- Rising college costs are causing some parents to consider an alternate housing plan for their students: They're bypassing the dorm and off-campus apartments in favor of purchasing a condo or single-family home. In some cases, it might be not a bad idea.

"More and more people are thinking about getting a kid into a property because tuition is so high," and room and board also continues to creep up, said Rose Price, a real estate agent who works in Champaign, Ill., where the University of Illinois is based.

Room and board averaged $7,404 for public, four-year universities and colleges in 2007-2008, up 5.3 percent over the last school year, according to the College Board. For private schools, room and board averaged $8,595, up 5.0 percent from the previous school year.

Purchasing a single-family home instead of a condo lets parents have a place where their child can live and other rooms can be rented out, Price said. In her market, they're buying homes that can range between $60,000 and $200,000, she added.

Another reason parents might be interested in these college towns is that often -- unlike much of the country -- they're "recession-proof," said Brent Lipschultz, a personal wealth manager with New York-based Eisner LLP. A college town produces a certain amount of housing demand no matter what the economy is like, keeping the market healthy, he said.

Parents should consider the following:

Buying is not a bargain everywhere -- Consider the market conditions, and figure in all the costs before deciding whether to buy or rent. Sometimes, college markets are affordable to buy in because there is heavy competition for rentals, which drives rents up, said Marty Frame, general manager for Cyberhomes.

But in other markets, renting is still more affordable.

Also, consider the overall health of the real estate market before making a purchase. In the Northern San Joaquin Valley, rents continue to be low for apartments and homes. The region's depressed housing market has forced some investors to turn their properties into rentals rather than trying to sell them for a profit. Valley home prices are still falling but sales have picked up recently.

Not every kid is ready to be a homeowner -- It takes a responsible kid to take on the duties of a homeowner, Frame said. If you decide to buy a place for your college student, make sure that he or she is up to the challenge.

Being a college landlord isn't easy -- It's important to have a plan for the home after your child graduates. Considering renting it out after graduation? Make sure you have what it takes.

If you're renting to students, tenants will likely turn over every year, which involves finding new renters and making improvements on the property annually, Price said.

Your college rental property can become your retirement home -- Maybe the next inhabitant of the space isn't a renter at all. In fact, maybe it will be you.

Increasingly, retirees are seeking out college towns for their cultural amenities and access to health care, among other perks.

"Many universities are trying to attract their alumni. Some are building complexes that are geared for alumni," said Gabrielle Redford, features editor for AARP the Magazine.

Discuss housing options with your college student -- Before you schedule a single showing, make sure that this is something that your child is also interested in, Lipschultz suggested.

These are your college student's first years away from home, and they might not want this type of parental involvement.

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