About CREStudent HousingResourcesRealtor CenterPressCollege Housing GuideCRE BlogContact Us

Forbes Magazine

A+ College Real Estate

By Betsy Schiffman, Forbes Magazine

What do most college towns have in common? Ivied lecture halls, libraries, pubs, coffeehouses, fast-food franchises, bookstores, and lots and lots of student housing

The fact of the matter is that while most college kids don't spend a lot of time thinking about the monthly costs of their off-campus housing, the people who usually end up writing the rent checks--their parents--do. Considering how much average parents are already shelling out these days for college tuition and related expenses, they may want to explore reducing their outlay--or, better yet, making a little profit. How? Rather than writing monthly checks to some landlord for the privilege of having their child live in an overpriced apartment crumbling from years of successive occupancy by twenty-somethings, they may want to become landlords themselves.

You don't have to be a parent, however, to appreciate the investment potential of buying real estate in a college town.

For one thing, there is constant demand. Regardless of the economy, kids go to college every year, and they will always need places to live. Considering that room and board at a four-year private college can run up to $10,000 per year now, private housing is an attractive option for some students.

"The areas around [University of Texas] are always great investments," says Keith Husbands, president and co-founder of Husbands Company in Austin, Tex. "For parents with kids coming here, there is no better way to write off their housing costs, and they may be able to make some money off the investment. If a school has, say, 50,000 students and less than 10,000 dorm rooms, it's a perfect place to own property, assuming you're comfortable leasing to college kids."

Another upside to owning property in a college town--even for those home owners who are not affiliated with the nearby college or university--is that the local school districts may have a diverse student population because of the academic community.

"A lot of people are attracted to the Palo Alto area because of Stanford [University's] influence," says Miles McCormick, a real estate broker with Coldwell Banker, a division of Cendant (nyse: CD - news - people ), in nearby Menlo Park, Calif. "There is a tremendous economic and cultural diversity here, and a lot of people come here for the public schools. The 'hot' school district neighborhoods are usually the last to drop in value and the first to recover."

We tried to determine which college towns offer solid real estate investments by looking at the top 50 places for education, as ranked in the Millennium edition of the Places Rated Almanac (the rankings were based on such factors as the local school funding, size and popularity of local libraries, and the college options). The education scores are based on a scale of 0 to 100, where 100 is the best.

We also factored in the five-year appreciation rate (the percentage by which property values have increased), as determined by the Office of Federal Housing Enterprise Oversight. Boston came out on top, since the Places Rated Almanac ranked it the second-best place for education (after Raleigh-Durham, N.C.), and it had one of the highest property appreciation rates--properties rose by 75% over the last five years. Most of the places that made this list also happen to be large cities where the real estate is desirable to the general population, and not just to academics and students.

1. Boston, Mass

Boston is the quintessential college town, home to numerous colleges and universities, including Boston College, Boston University, Emerson College and Simmons College--not to mention both Harvard University and Massachusetts Institute of Technology across the river in Cambridge, Mass. In The Best 357 Colleges, published in August by The Princeton Review, Boston was ranked one of the best college towns--and it also boasts an impressive property appreciation rate. Still, it's not a cheap market to break into: The median home price was $366,500 during the second quarter, according to the National Association of Realtors. That's nearly double the national median, which was $183,800.

2. San Francisco, California

The city of San Francisco itself isn't really known as a college town--though it is home to University of San Francisco and San Francisco State University--but the surrounding Bay Area is rich with colleges and universities, such as Stanford University, University of California at Berkeley (located in the East Bay) and Santa Clara University. Real estate in the Bay Area has always been desirable, but the tech boom helped drive property prices up: Home values have risen 65.99% over the last five years.

3. Washington, D.C.

Known as a great college town for aspiring attorneys, lobbyists, policy research junkies and politicians, Washington is home to a number of reputable private schools, including American University, George Washington University, Georgetown University and Howard University. It's also an expensive real estate market, where home prices have risen 64.97% over the last five years and the median home price is $352,400.

4. New York, New York

Real estate values may have increased more in New York than in other cities on our list (including San Francisco and Washington, D.C.), but because it received a lower education score from the Places Rated Almanac, it comes in fourth place. New York was also rated one of the top 20 college towns in The Princeton Review's The Best 357 Colleges, although any kind of housing--student or otherwise--is exorbitantly expensive in the city, which makes it a great place to own property.

5. Minneapolis- St. Paul, Minn

Minneapolis and St. Paul did not make it into The Princeton Review's list of Best College Towns, but the University of Minnesota's Twin Cities campus is the largest of the university's four campuses, and it boasts a scenic backdrop of the Mississippi River and the hills of St. Paul. Real estate in the area isn't a shabby investment, either: Home prices have gone up more than 60% over the last five years.

6. Chicago, Ill

Although property prices in Chicago haven't appreciated as much as in other big cities, the median home price is also slightly more affordable: $263,300. Home to the University of Chicago and the University of Illinois at Chicago, as well as the Art Institute of Chicago, the city scored 98.86 out of 100 for its educational resources from the Places Rated Almanac, and the University of Chicago's library earned a place on The Princeton Review's list of the top 20 Great College Libraries.

7. St. Louis, Mo

The value of the local education in St. Louis may outweigh property values, but the city is home to the University of Missouri, Saint Louis University and Washington University. In addition, the five-year appreciation rate of 34.78% is not insignificant, and the median home price is an affordable $128,800--well below the national median of $183,800.

8. Austin, Texas

Home to the University of Texas, Austin is considered a great college town for sports, drinking, and fraternity and sorority life. After the real estate market there went through a major growth spurt, from 1999 through 2001, homes stopped appreciating at double-digit rates--in fact, they're not growing by much at all right now. Over a five-year period, home values have appreciated by more than 30%; over the last year, however, home prices have appreciated by a paltry 0.47%. There is long-term hope, though: For education the city was ranked seventh out of 354 by the Places Rated Almanac.

9. Baltimore, Maryland

Charm City may make an especially charming place to buy residential property: Its large academic community includes faculty members and students from John Hopkins University, College of Notre Dame, University of Maryland and the University of Baltimore; and the property values have risen more than 50% over the last five years.

10. Providence, Rhode Island

It may not be as big a city as Boston, nor as much of a college town, but property values actually have risen faster in Providence than they have in Beantown. Home to Brown University and Rhode Island School of Design, Providence ranked 41 out of 354 for education by Places Rated.