Turning College Housing into an Investment Strategy

Forbes has released its list of the top college towns to invest in. Phoenix – Mesa- Scottsdale came in at #7. From the article:

The good news is, college doesn’t need to be so hard on the wallet–at least when it comes to housing, an area that becomes more absurdly expensive with each passing year.

Total room-and-board expenses at private undergraduate colleges averaged $7,791 during the 2005-2006 school year, up 5% from the previous academic year, according to The College Board’s annual report on college pricing trends. But consider the alternative: investing in real estate. If done wisely, this nontraditional approach could not only save you the cost of college housing, it might even help you turn a profit.

Rather than shell out a small fortune for a ratty dorm room or an overpriced apartment, parents can build equity, generate cash flow and eventually benefit from real estate appreciation–assuming they are willing to be landlords and invest some cash up front.

Rhonda Butler, sales manager at Fonville Morisey Realty’s Chapel Hill, N.C., office, near the University of North Carolina at Chapel Hill, breaks down a local example.

“Say you have a $200,000 townhouse,” she says. “You can take four students and charge them each $700 a month for rent, and suddenly you’re going to have a positive cash flow on the transaction.”

With 10% down, a 30-year mortgage and a rate of, say, 7%, monthly mortgage payments would total about $1,200, for a net of $1,600 per month.

And though home prices around the country appear to be flattening out after a few years of sharp increase, college housing markets tend to experience less ups and downs.

I ran across a real world example Here