Real estate trends: College town real estate
If your child is on his or her way to college, you're already thinking about the big checks you'll have to write. There's little you can do about tuition at a top college or university, but what about the "room and board" part of the equation?
One of the hottest real estate trends is college students who opt out of living in the dorms and instead are paying "room and board" to their parents in the form of a mortgage payment.
For those with the right amount of cash and a viable credit score, college town real estate might be a really interesting idea - whether your child is going to school there or not.
The folks at Coldwell Banker are on top of this real estate trend, focusing on middle-aged parents with college-bound children. According to the website scholarships.com, the average cost of room and board fees at a four-year college or university runs nearly $10,000 per year. Off-campus apartment housing can strain your budget even further, and in either case, there is no return on your investment. Once spent, that money is simply gone. With these figures in mind, a growing number of savvy parents are selecting another option.
With the comparatively low cost of buying a home (Coldwell Banker reports that almost two-thirds of the nation's top college towns boast a median sale price of less than $250,000 for a four-bedroom, two-bath property), a growing number of concerned parents are opting to purchase a home for their students to live in while completing their education. Labeled "parent investors" by Coldwell Banker's network of real estate agents, 64 percent of the agents surveyed reported encountering this type of buyer.
"Our survey suggests two types of investors see value in college towns," said Jim Gillespie Chief Executive Officer of Coldwell Banker Real Estate. "Long-term investors take advantage of the steady stream of renters, including students, professors and university officials. 'Parent investors' buy homes for their child to live in while attending college. Roommates provide rental income for the mortgage, and the hope is that students care for the home and it appreciates over time."
Of course not all college towns are created equal when it comes to housing inventory or price appreciation (or depreciation), and some are certainly more affordable than others. Last week, Coldwell Banker released its College Home Listing Report (College HLR).
At the most affordable end of the spectrum were homes on and around the Ball State University campus in Muncie, Ind. Judged to be the least expensive locale to buy a single-family home, a four-bedroom, two-bedroom property carried an average listing price of just $105,000 in 2010. If you think about room and board running an average of $10,000 per year, purchasing a property that can be rented or sold after the kids have graduated seems like an attractive prospect.
At the other end of the spectrum, buying a home with the same dimensions near the Stanford University campus in Palo Alto, Calif. runs a cost prohibitive (for most of us anyway) average of more than $1.3 million. That seems like an awful lot to cough up for what is basically temporary housing. Of course, the property could be leased or sold once the kiddies have graduated, but an expense like this would give most parents pause.
In fact, five of the top 10 most expensive college town markets can be found in the state of California: The aforementioned Stanford, UCLA in Los Angeles (average cost $833,087), USC in L.A. (again, $833,087), San Jose State University ($650,111) and UC Berkeley ($636,958).
At the same time, four of the least expensive campuses for home purchases can be found in Ohio: University of Akron ($139,711), Ohio University in Athens ($141,964), Kent State ($153,662) and University of Toledo ($155,286).
If the home is cheap enough and the return on investment is there, buying a home makes more sense to many parents than throwing money away on renting an apartment or dorm.
More on MoneyWatch:
-- Foreclosure victims get new help from feds
-- New mortgage rules offer help for struggling homeowners
-- Housing market stumbles, again
