 Near-campus
real estate is a good investment
|
 Dear
Steve,
I am looking to purchase a property very close to a university -- probably to rent out. Slightly more than half of the owners there are renting out their homes. What long-term effect on value and resale do all these rentals have and what other potential issues are there to consider?
-- Mandy
 Dear
Mandy,
The long-term effects in this case are generally good -- if not
great. In fact, if you buy right, you may be purchasing a hedge of sorts against
the rocky housing markets of the present and future.
Statistics
seem to favor investment potential for homes in college communities at present,
particularly with oversupply issues still dogging the housing sector and average
times on the market ballooning to months instead of weeks. College enrollment
is expected to rise 15 percent over the next decade, according to the National
Center for Education Statistics. And yes, some institutions are responding to
increased housing needs by building new dorms, while developers are hustling to
construct apartments in nearby infill sites -- if they can find them. But the
housing stock in mature college communities will always be limited, especially
if there are such elements as medical schools, research labs or technology facilities
that draw additional nonstudent employment. Unlike some neighborhoods,
where a disproportionate number of homes that are converted into rentals may signify
an impending downturn, that's generally not a worry in college neighborhoods.
In fact, you are placing yourself in a community where there is a constant churn
of demand every semester. But you'll most likely pay a premium for your house.
While there's little hard and fast data on the subject, Realtors estimate that
homes in the immediate vicinity of colleges fetch an average of 25 percent more
than similar homes in noncollege communities. There are some
potential negatives of being a landlord to college kids, as you might well expect.
Even the most fastidious college students have little motivation -- other than
the anticipated loss of a damage deposit -- to keep the place orderly, especially
if they are moving on next term. There are often issues with noise, parking and
parties (beer busts and, umm, beer recycling) that could attract unwelcome attention
to your house. If you don't plan to live in the area and check on the place regularly,
hire someone who can. You might find your place packed full of unauthorized "subleases"
if you're not careful. And of course, screen your tenants thoroughly. But that's
not always easy to do with college kids because they have no rental history. Before
you buy, know that some communities and neighborhood associations try to keep
the percentage of for-rent homes at bay or place special restrictions on new owners.
Discuss this thoroughly with your agent and even city zoning officials. As
for resale potential, the law of supply and demand is generally in your favor.
No matter how bad the overall market is, someone will likely want your home. Potential
buyers range from instructors, school administrators, staffers and visiting professors
to other home investors who know they'll have a captive rental market. And
here's more heartening demand data: Last year, a National Association of Realtors
survey of second-home buyers showed that 8 percent bought a home for their college
children to live in while at school.
As always, proceed with caution. Good
luck to you. To ask a question of the Real Estate Adviser,
go to the "Ask the Experts" page,
and select "Buying, selling a home" as the topic. | 
