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The Courier-Journal

Young Landlords

By Larry Muhammad, The Courier-Journal

Students trade rent for home ownership

Cameron Howell, a Bellarmine University sophomore and catcher for the school's baseball team, is at just 19 already a landlord.

Instead of paying rent for a dorm room or an off-campus apartment, Howell lives rent-free as property manager of a four-bedroom, three-bathroom house near Preston and Eastern Parkway, bought by his father, Doug Howell, a Frankfort, Ky., chiropractor.

Cameron Howell's tenants are other Bellarmine students, and he's learning first-hand the maintenance chores and financial advantages of owning property.

"I collect the rent, make sure the grass is mowed, do things to make sure the house looks nice, and if something gets broken, I call my parents right away to get it fixed," said Howell, a communications major.

"I've got three roommates, all ballplayers," he said. "It's our own little place."

Each of Howell's roommates pays $300 a month. That's less than the $411 a month it costs for a Bellarmine dorm room, and comparable to the $277 ($1,110 split four ways) average rent for four-bedroom units in the downtown Louisville area, according to a 2002 apartment survey by Integra Realty, a nationwide research and appraisal firm.

Doug Howell, who owns other investment property, wouldn't say how much the house cost or what he put down, but the monthly note is $780. With rent receipts of $900, that leaves $120 for repairs and allows his son to live rent-free.

"We looked at renting, at the cost to live on campus, and what we noticed was that it would be ultimately more expensive than buying some real estate and creating your own dorm," said Doug Howell.

The Howells are part of a nationwide trend involving college students who become homeowners with parental help. Many parents qualify for the Federal Housing Administration's so-called "kiddie condo" program, which allows a 3 percent down payment and tax break if they co-sign a mortgage for their college-enrolled children.

About 3 percent of students at the University of California-San Diego own their homes, according to a recent survey. York College in Pennsylvania offers recent graduates $6,000 toward the purchase of a home near campus, and the Congressional Black Caucus Foundation offered 2004 graduates of historically black colleges $1,000 toward closing costs, as part of its Student Homeownership Opportunity Program.

And real-estate professionals say they see good prospects for home-buying students, because parents support them financially, and after graduation they usually get jobs.

Louisville Realtor Marilyn Belak says, "I've had med-student clients who have a minimal amount of income. But because they're going to graduate and get a job, they can get a loan based on their potential income."

Census figures show that 23 percent of Americans under 25 owned homes last year, compared with 15 percent 10 years ago.

But Belak adds, "I'm not sure it's such a new thing. I'm 53, and when I was in college, I went to IU Bloomington to visit friends, and two of their parents had bought them houses to live in while in college. I think people with a mind for investment would immediately think of that, rather than paying $300 to $400 a month for a dorm room or apartment rent."

Ken Jordan, a Louisville building contractor, bought a five-bedroom property in Murray, Ky., to house daughters Katherine and Sarah and their two roommates, all students at Murray State University.

"This is probably the most profitable rental business I've seen," Jordan said. "You get top-dollar rent, and you're buying the house relatively cheap. The roommates' payments take care of the note, but the reason it works is because my daughters are there. That kind of close management, caring for it, means there won't be any wild parties with somebody tearing things up."

College housing officials caution that off-campus living may isolate students, jeopardize their education and cost them the benefits of dormitory life.

"The biggest advantage (to living on campus) is the connection they have more people watching out for them, pulling them into events and helping them adjust to college life and grow within the student community," said Shannon Staten, director of housing and residence life at the University of Louisville, which houses half its freshmen on campus.

"Year after year," she said, "we look at retention of students at U of L this is pretty standard across the country and what those figures tell us is that if a student lives on campus their first year, they have a 15 percent greater chance of succeeding that year, returning the second year and graduating than those who don't."

Jordan's daughter Katherine, an elementary-education junior at Murray who lived on campus her freshman year, agreed that she met more people then and could sleep later because she walked to class, but added, "I didn't have very good roommates and didn't like the dormitory experience. Living off campus, I'm in a house, I don't live in a box."

For out-of-state students, buying property alone doesn't satisfy in-state residency requirements and qualify students for in-state tuition rates, according to Kentucky state regulations. The property must be bought and taxes paid on it a year before enrollment, the student's parents must be Kentucky residents, and the student has to live in Kentucky during academic breaks, among other requirements.

Doug Howell also warned: "Pay attention to what you buy. The older the house, the more of your profits you'll use for repairs. New houses turn less profit but you net out better because there are fewer repairs."

And Ken Jordan said, "The first year, we had to replace windows, put on aluminum trim and vinyl siding. We changed faucets, redid the plumbing and electrical. We were just getting the place ready, not getting great returns.

"But you throw another daughter in there (Sarah's a sophomore), you're going to own it six years, and the last years are very profitable. And I've got a son, David, a junior at Trinity High School, and if he goes to Murray, that would be icing on the cake."