Off-campus real estate still booming

A housing project in Austin is sold before it's built.

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SCOTT JAGOW: This morning, we'll get the latest numbers on existing home sales. Probably yet another sign about the cooling housing market. Buying up a bunch of homes or several apartment buildings may no longer seem like a sure-fire investment. But we're here to tell you about a place in the real estate market that's fairly certain to pay off. Here's Alex Cohen:


SANDY POPE: This is considered a loft, even though it has a separate bedroom, so when you come in your front door you've got your storage . . .

ALEX COHEN: Realtor Sandy Pope shows off a condo in Austin, Texas. This unit lists for $200,000 dollars even though it's only 750 square feet.

But it's perfect for students. It comes with a high-speed Internet connection, there's a pizza place on the ground floor, a bus stop right outside and the University of Texas campus is just a few blocks away.

POPE: Most college students they don't have cars, they have bicycles or they walk, so all of this is really close.

Places like these are in high demand. This year there are 50,000 students attending UT, but only enough on-campus housing for 7,000 of them. That means there's about seven students for every one dorm bed.

Those are just the kind of numbers you should be looking for if you want to invest in student housing, says Michael Zaransky, CEO of Prime Property Investors in Chicago.

Zaransky notes a number of factors make now a smart time to invest.

MICHAEL ZARANSKY: Universities are facing severe budget crisis and they simply don't have the money to build more dorms to meet the demand for housing of students.

And, he adds, the influx of university students will swell over the next few years as the 80 million Americans who make up the so-called "echo-boomer" generation come of age.

For those looking to invest in student housing, Zaransky advises buying west of the Mississippi.

ZARANSKY: The sun states in particular are growing very rapidly, like California and Texas and Florida. So, those public universities in those places present the greatest opportunity for investors.

But, investors should keep in mind that students aren't like other tenants and the turnover rate can be high, cautions Jim Arbury, senior vice president of the National Multi Housing Council.

JIM ARBURY: The school year starts usually in August or September. And unlike normal apartment properties where you would be leasing units all year long, if your units are not totally leased up by the start of the school year, chances are it sits vacant.

If your timing's right, though, the investment can pay off in more ways than one. For instance, Arbury says, he bought a single family home for his son when he was a freshman at Colorado State University and sold it once he graduated.

And, he adds, the profit he made was enough to cover four years of tuition.

I'm Alex Cohen for Marketplace.

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