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Homeownership 101

By Scott Brooks, USA TODAY

St. Cloud State University sophomore Parker Lahti is majoring in real estate. At 19, he's also a homeowner.

Posted 9/8/2003 11:54 AM Updated 9/8/2003 11:54 AM

Unhappy with on-campus living at his Minnesota college, Lahti is getting firsthand realty experience this fall, living in his own home. It's an investment for Lahti, who believes he can turn the experience into profit.

What they spend

How much will a kid pay for place to call home For a college student with three roommates in St. Cloud, Minn., monthly housing costs are comparable, whether renting or buying:

Buying a home: $300

Tom Lahti, Parker Lahti's father, paid $125,000 for his son's four-bedroom, two-bath home. Parker expects to split the $1,200 payment with three roommates. Utilities extra.

Renting a house: $275-$300

The average four-bedroom rental in St. Cloud, including two bathrooms, basement and garage, goes for $1,100-$1,200. Utilities extra.

Living on campus: $319

At St. Cloud State's apartment-style Benton Hall, four students share two bedrooms, a living room and one bathroom. No kitchen; meal plan extra. Students pay $1,274 per semester, which includes cable TV, Internet access and local telephone service.

Sources: Parker Lahti; Letty Meyer, Castle Realty; St. Cloud State

Other students, too with a little help from Mom and Dad are combining academics with the real-world responsibilities of mortgage payments and home repair. The houses sometimes called "kiddie condos" are turning college students into landlords who collect rent rather than pay it.

Lahti's house has four bedrooms, two bathrooms, a laundry room, a two-car garage and a basement he'll use for entertaining. And with his roommates sharing the $1,200 monthly note, Lahti says, they're getting a pretty good deal. Each will pay $300 a month, once he finds someone to fill the fourth bedroom. On-campus apartments in St. Cloud rent for about $319 a month.

College-area real estate agents say the kiddie condo market has been steadily growing in recent years. Mortgage rates, though creeping up over the past few months, have hovered near their lowest levels in 40 years. "It's as good an opportunity as there's ever been," says Jan Baldry, a real estate broker in Waukesha, Wis.

After spending a year on campus, New York University medical student Andrew Goodwillie, 24, persuaded his parents to buy him a 3-room co-op on Manhattan's East Side. The apartment, which has a doorman, air conditioning and a rooftop view of the Midtown skyline, cost about $430,000, with monthly maintenance fees just under $1,000. His dorm, he says, was "a shoe box." This is like "living in a castle." And when he leaves, his parents can rent out the apartment for "an exorbitant amount of money."

Full-time students without a job or credit history can, with their parents' support, get a condo loan from the Federal Housing Authority. Many expenses, such as repairs, may be tax-deductible.

At the University of California-San Diego, about 700 students 3% of the school's enrollment own their homes, a recent survey found. That includes kiddie condo owners, as well as older students who already own homes.

Lahti knew he wanted his own home, even before he came to St. Cloud. His parents wanted him to experience dorm life, but that, he says, was a bust. His floormates were too noisy, and the small room cramped his style.

So Lahti did a little research and pitched the idea to his father, Tom, who owns several rental properties in Wyoming. Lahti said he could find a house, fix it up and make a few bucks down the road.

His father agreed to buy the house but told Lahti the payments would be his responsibility. "It teaches him a little bit about working with tenants and paying utility bills," Tom Lahti says.

College housing officials warn that students may isolate themselves by moving off campus, particularly during their first and second years.

On-campus students learn to get along with one another and are more likely to stay in school through graduation, says Christine Schramm, University of Dayton (Ohio) associate director of residential programs. Those in kiddie condos are "truly missing out on how students need to live in a community."

Students may find being a homeowner harder than it sounds, Baldry says. For one, they have to be careful about whom they accept as renters. Students "have a reputation for being wild and messy and moving out without giving any notice," she says.

The situation also could cause headaches for parents. "When your child calls at midnight and says the bathroom shower doesn't work, you're the one who has to fix that," Baldry says.

Most experts say owners will need three to five years to turn a profit. "Generally, you're going to come out pretty good on a deal like that," says Galen Uhrich, a real estate agent in Lawrence, Kan.

Uhrich's nephews, Luke and Kyle Henry, are living in their own duplex near the University of Kansas. With both of his sons at the same school, Steve Henry wanted to avoid the costs of rent for two. Luke and Kyle's younger sister, Kaitlin, is still in high school, and may take over the house if she winds up enrolling at KU.

The family is still waiting to see whether the investment pays off. Either way, Steve Henry says, it's been good for his sons to learn how to care for a home.