Lynda and Glenn Peterson, of Arlington Heights, never have paid much attention to the maddening peaks and valleys of Wall Street. But they thought that the loft that would become home for their daughter Brit, a sophomore at Columbia College, was a sure winner the second they stepped through the door.
“We did look at it as an investment for us for when she gets out of school,” Lynda Peterson said of the South Loop space. “In the long run, I think we’re going to get some of her college money back.”
Nowadays, particularly with the lackluster performance of the stock market, more parents of college students are finding this type of transaction a viable investment option, according to real estate agents.
“It’s happening more in the past two or three years, at least in the South Loop, and it appears to be continuing to increase,” said Bill White, partner with Prudential Preferred Properties in Printer’s Row.
Michael Golden, owner of @Properties in Chicago, said, “We’re seeing a few more deals, an uptick in interest. If you look at the negative returns you’ve seen from the stock market the last few years, real estate returns have been, at worse, even, and at best, pretty good. It’s definitely a great alternative, especially buying some of the lower priced spaces that have a great chance to appreciate.”
From what Golden has observed, a lot of these buyers have been around the real estate block.
“People who have generally bought have a little more real estate savvy. Maybe they have invested in real estate in the past, or have watched the market pretty carefully.”
For instance, Lee Coppoletta of Burr Ridge has bought properties for three of his daughters while they attended school. Currently, he has an option on a property downtown for daughter Jil, a sophomore at DePaul University. Construction there has been delayed.
“It’s a good investment opportunity, and if she and a couple of her friends lived there, and paid rent, it probably makes the mortgage payment and then would grow with equity,” Coppoletta said. “If we sell it when she graduates and moves, we would make some money.
“I did the same thing for another daughter who attended the University of Colorado,” Coppoletta continued. “We bought a place in Boulder, and she lived in this condo with, I think, three roommates. That helped pay for it, and when she graduated, we sold it. If I remember right, we made about $35,000, which paid for her education.”
That has influenced a number of people, especially those who had been straddling the fence, said Eric Luskin vice president of Housing Operations and Residence Life for The Scion Group, a real estate services partner to colleges, universities and other not-for-profit institutions, with an emphasis on student housing. Luskin also is former director of Residence Life at DePaul.
“I would say if someone was wavering, that the current market conditions would encourage them to put money into real estate in general, particularly in a tight real estate market,” Luskin said.
According to the U.S. Department of Education’s Projection of Education Statistics to 2011, the student population will rise from 15.3 million in 2001 to 16.533 million in 2006 and 17.688 million by 2011, and that may mean a housing crunch.
“Many schools are just now beginning to really focus on their infrastructure, let alone new construction,” Luskin noted. “It’s going to take a while to catch up, which adds more pressure to market conditions and people start thinking about alternatives when a school can’t offer comfortable, convenient options.”
Three local colleges, Roosevelt University, Columbia College and DePaul University, teamed up to build an 18-story dorm, at the southeast corner of State Street and Congress Parkway.
Chuck Lobbaka, a spokesman for Northwestern University, said enrollment on that campus has remained steady, a trend that he noted is expected to continue.
“Our freshman class is typically is 1,850 to 1,900 students. Our enrollment will stay the same and we can anticipate it over the next few years. I’ve been here 20 years and it’s still the same,” he said.
Stephen Klass, associate vice president and deputy dean of students at the University of Chicago, said the school thinks “it’s a good thing that students have the choice [to live off-campus]. There certainly is a lot to be said for the independence that off-campus living provides.”
“At the same time,” Klass continued, “we provide the kinds of programming and some amenities [through on-campus living] that [students] might not find as they move off campus. We have very close, tight-knit communities.”
But, for many parents, a weakened Wall Street has caused them to weigh campus comaraderie against the bottom line. “Right now,” said Prudential Preferred’s White, “if you have money in a mutual fund or the stock market versus real estate, real estate’s gone up probably 10 percent in the South Loop pretty religiously over the past three or four years,” White said. “I don’t know about you, but my 401(k) didn’t go up 10 percent; it went down 10 percent.”
Motivated by the idea of a good investment, or owning a second home, Frank Baloun, broker/owner, ReMax Alliance Downtown, also in the South Loop, said he’s seeing more parents buying condominiums for their student-children, rather than having them stay in a dorm.
“Because we’re in downtown Chicago, and we’re surrounded by so many different universities, there’s a need for good housing,” Baloun said. “People are coming in and saying, `We’ve always wanted to have a place in downtown Chicago.’ Now that their son or daughter is going to be attending school here, they think it’s a perfect time to purchase something and to let them stay here, maybe with a roommate.
“Then, down the line,” he continued, “either sell it after the four years or however long their son or daughter is in school, and take a gain, keep it for a second home, or rent it out and continue to [use it as] an investment. It can help pay for a kid’s college tuition.”
Condo sales are at an all-time record, according to Walter Molony of the National Association of Realtors in Washington, D.C.
In the first quarter of this year, condo sales were at annual pace of 838,000 units, up 16.6 percent the fourth quarter of 2001 and 12.3 percent from a year earlier.
“To put that rate of annual activity into perspective, last year — 2001 — was the record year for condo sales and there was a total of 746,000 sales, so the annual pace is well above the previous record,” Molony said.
Carol Dorsey, an agent with Prudential Preferred Properties, noted that “dorm prices keep going up, year after year. With the expense of dorm life, a lot of families think they can afford to make a payment on a nice piece of property.”
Rose Gallagher, of southwest suburban Frankfort, said that dorm life was not for her son, who attended the University of Illinois at Chicago and has since graduated.
“He’s very independent and did not want to live in a dorm. My decision also had to do with paying rent, versus owning a piece of real estate and having it appreciate. When you pay rent when a kid goes to college, it’s a minus,” she said.
“I made around $40,000, then I subtracted the number of years he lived there, and what I would have gotten if someone else was living there on rent,” Gallagher explained. “So the reality of it is, I probably could have gotten about $1,400 a month. I subtract it, and I made maybe $20,000.”
Gallagher might have invested astutely. Nevertheless, she harbors a regret.
“I’m sorry I didn’t buy two units and rent one out.
