When parents buy the dorm

When Emily Overturf was just 19, she sat in a restaurant and watched with confusion as her stepdad carved the number "235" into a pumpkin with a butter knife. It was the address of the house he and her mother had just bought for her, he explained as he handed her a small box of keys.

It was Halloween, but mom and dad weren't too scared. The house was just a few miles from their own, and Emily wouldn't be moving in until the next year, 2001, when she'd be a junior at Ohio's University of Dayton.

Buying real estate near campus has strong appeal for parents, even the ones whose kids go further afield for college. Rather than write a check for rent or dorm fees, families who can muster the down payment see an opportunity to build up equity. And with college-cost increases outpacing inflation, more are feeling pressed to make every education penny count.

"In previous years, it was real savvy-type parents who were more interested in helping their kids make an investment ... [but] in recent years, interest rates have really driven the trend more than anything else," says Christopher LeVally, a developer and real estate agent in Scottsdale, Ariz., near the teeming campus of Arizona State University.

Interest rates for mortgages still hover near 30-year lows. Add to that the dismal stock market, high returns in certain housing markets, and high rents in crowded college towns, and suddenly a home purchase for a student starts to look like the yellow brick road.

For many families, the plan works with no more glitches than an occasional call home for advice about finding a plumber. But experts caution parents against expecting to quickly turn a tidy profit after graduation.

"If you only want to own property for four to five years, that's a short window for it to appreciate in," says John Sestina, a financial planner in Columbus, Ohio, who has seen the popularity of these purchases come and go in his 38-year career.

"The real problem with real estate, and with these units in particular, for college kids, is that most people have no concept as to how to evaluate whether they are making money or not," he says. Mr. Sestina sees a tendency to underestimate the costs of upkeep and the risks that the property might lose value. Often, he says, "the reward is not worth the exposure."

Nevertheless, if parents don't go into it thinking they're guaranteed a big return, they may be able to save some money, or at least break even.

The practice may also have the added benefit of giving their child a leg up in the "real world."

For Ms. Overturf, the Halloween house has been a living laboratory for the business major she'll be finishing later this year.

"A lot of people in accounting classes didn't understand what was going on, because a lot of them had never paid bills or even balanced a checkbook," she says in a phone interview during a break from her camera-shop job. "I could understand it a lot easier because I had done it."

At first, she says, she wanted everything in the cute yellow house to be fixed up "now, now, now." But she learned to be patient as she split her time between studying, working, and tending the yard.

Her stepdad helped her remodel the basement right away so she could bring in two friends as roommates. Their rent checks covered the mortgage, and the roommates got a deal, too, says Overturf's mother, Jeaneen Parsons, who works in public relations at the university. Instead of paying $4,200 per school year to live in a large house in the neighborhood affectionately known as the "ghetto," each roommate paid $2,250 and had her own bedroom on a quieter side of campus.

"We thought it was the best way for [Emily] to learn about handling money - just do it. It's not really a sink-or-swim thing when your parents cosign for you," Ms. Parsons says. Yes, there's been an occasional nervous call from the small, local bank as the due date for the mortgage check was approaching, she says, but never any real problems. And the place has turned out to be a good starter house for Overturf and her new husband.

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