When Their Hearts--and Deeds--Belong to Daddy : Student Condos Becoming a Trend

It is not as daffy as crowding into telephone booths and probably less tasty than swallowing goldfish, but it’s the latest craze sweeping the nation’s college campuses--student condominiums.

In this calculated age of computer students and business administration majors heading toward yuppie-dom, the trend of students and their parents buying condominiums rather than renting apartments is growing in popularity.

Developers have been quick to seize upon the phenomenon.

“It’s happening in all the college towns around here,” said Nanette Fields, a real estate broker in Chapel Hill, N.C., home of the University of North Carolina. “Only freshmen are promised dormitory rooms (at UNC). If parents are going to be making investments anyway, this is a logical thing to do so their child can take advantage of it.”

‘Kiddie Condos’

Fields refers to the condominiums as “kiddie condos.”

Parents looking for a tax break--or simply searching for a way to avoid throwing money down the often deep rent hole in college towns--purchase the condominiums for their sons and daughters in college. Once the kids are out of school, the parents either sell the condos, hang onto them as rental property or keep them as retirement homes for themselves.

Some of the student condos are apartment conversions, but others are new units built as condominiums with college roommates in mind with bathrooms in each bedroom and fireplaces to spice up the deal.

Chapel Hill is one of the hotbeds for this type of real estate transaction--real estate offices flood parents of college students with slick brochures for condos with lots of facts and figures pointing to the advantages of investing in a condominium--but the trend is spreading nationwide.

At the University of Texas in Austin, real estate agent Cari Aratoon says there were only a handful of condominium projects near the campus four years ago but such projects number more than 100 now.

Says David Williams, president of the Midstates Group in Atlanta, which handles student condominiums in Chapel Hill and Auburn, Ala.: “The parents are not only putting their child up for four years for free, but they also are getting an equal amount of money in the write-off category. This is cutting the cost of education.”

The rush was triggered in part by a 1981 change in Internal Revenue Service regulations that allows a homeowner to rent property to a relative and take investment tax deductions as well.

The good points of apartment living, particularly the low maintenance, make condominiums more attractive than single-family homes for students.

Fields, who works for Norman Block Realtors, said parents can purchase condos in Chapel Hill for as little as $40,000. Nicer ones run in the $60,000 range, she said.

In Austin, realtor Aratoon deals with more expensive property but finds the market is still eager.

Some of the condos Aratoon handles are pretty fancy by student standards--they can come complete with spa, pool, covered parking and all the appliances, including a microwave oven--and can run around $110,000 for a two-bedroom unit.

“We get freshmen and sophomores coming in here carrying their books and asking for information about buying condos,” said Aratoon, a 1978 graduate of the University of Texas, who is the president of Condo Connection. “Then they wait to find out what daddy’s accountant says about it all.”

Comparable to Apartment Rent

If those prices sound steep, Aratoon said it’s not unusual for apartments close to campus to rent for $800 or $1,000 a month.

“But if the student gets a roommate or two, that lowers the price for the roommates, and it’s good for daddy, too,” Aratoon said. “It works out well for everybody.”

Aratoon said most of her clients are professional people--accountants, lawyers and entrepreneurs--but Fields and Williams said that the parents buying their condos come from all walks of life.

“From doctors to factory workers, they’re all very interested,” Williams said. “As long as you’re a credit-worthy parent, it makes no sense not to do it.

“We’re also getting a number of calls from simply investors. It seems to be a nice market for them, too.”

Fields said she recently sold a Chapel Hill condominium to a North Carolina graduate who is a Navy jet pilot nearing retirement.

“He’s renting it out now to students, but he bought it so it would be here when he’s ready to retire,” Fields said. “Then there are some who say they’re going to keep their condos after their children graduate and come up and use them on football and basketball weekends.”