When the faucet leaks or stove breaks in his two-bedroom condominium, Engineering senior Chris Mikulski calls the landlord just like everybody else. But in his case, the landlords are mom and dad.

With area home values dropping, many parents are tempted to snag a piece of prime campus real estate for their kids. And though the investment can be risky, area realtors say that bargain prices and high demand for Ann Arbor housing make it worth the risk.

Some are choosing to buy dingy student home with a $200,000 price tag rather than pay monthly rent for their kids. But until the economy improves, some property-owning parents might have to keep their campus accommodations for longer than it takes their kids to graduate. Dennis Capozza, a finance professor in the Ross School of Business who specializes in real estate, said it typically takes five or six years to recoup the costs of buying a home when property values are increasing with the rate of inflation.

With local property values depreciating, Capozza said, a short-term purchase makes less sense now than it did a year ago.

“The economy is in the middle of a financial crisis, probably going into a recession or worse,” he said. “And it just doesn’t make any sense to be a buyer for a two- to four-year horizon today.”

The sale price of a Washtenaw County home declined from a median of $235,000 in 2007 to a median of $190,000 so far this year, according to the Ann Arbor Area Board of Realtors.

Mikulski said that if his plans for next year don’t involve graduate school at the University, his parents will likely sell the condo, valued at about $200,000.

Though the current market doesn’t favor sellers, Mikulski, said the decision to purchase the property in 2004 was a logical investment for his parents because both his older brothers attended the University and lived in the condo.

“I guess for my parents it was an easier choice, because it’s putting money into something, so why not do an investment and actually buy something?” Mikulski said. “Especially when you know three of your kids are going to be up here for a pretty long period of time.”

Even though the outlook for sellers is growing grim, a 20-percent drop in the price of Washtenaw County homes over the past year is tempting for parents new to the college real estate market. And savvy parents with knowledge of real estate tax codes are getting better deals and taking substantial tax write-offs for their kids’ college lodging, according to Chad Hill, head realtor for the Ann Arbor office of Keller Williams Realty.

Hill said parents who buy a property for their college students often classify it as an “investment property” when they file taxes with the Internal Revenue Service. Under this classification, Hill said, parents can qualify for up to a $25,000 real estate investors tax deduction. The tax code also allows parents to make their child the “property manager” of the home, which allows them to write off an additional $1,000 in “operating expenses.”

For a certain niche of parents, Hill said, these benefits are what make buying a run-down house more attractive than paying rent for one.

“If you’re renting, you don’t have the tax deductions and you’re just kind of throwing money away every month,” Hill said. “This way, you’re making a payment on the house and you’re building up some equity.”

In the current market, Capozza said, most parents would be better off renting, depending on how long their kids are in school.

“Almost every place in the country is experiencing declining prices,” Capozza said. “There is a handful of places that are going up a little bit, but they’re few and far between and almost any college town in the country is probably not a good place to be a buyer.”

Hill disagreed, saying the declining inventory of available housing in Washtenaw County was a good indication that housing prices will bottom out soon, if they haven’t already done so.

In August 2007, 1,062 residential properties were listed for sale in Washtenaw County, compared to 677 this August, according to the Ann Arbor Area Board of Realtors.

For Business senior Bob Gartland, whose parents bought a two-bedroom townhouse for $420,000 in April 2004, the current market means the downtown Ann Arbor property is now worth about $100,000 less than when he was a freshman — something that has Gartland’s parents considering a change of plans.

“I think they were going to sell it as soon as I graduated,” Gartland said. “But with the current state of the real estate markets, they may hold it for a while.”

Hill said Gartland’s parents’ strategy is the type that will eventually pay dividends.

“With Ann Arbor, you have one of the best universities in the county, you have one of the best hospitals in the country and you have a lot of high tech and bio-tech research jobs coming into the area,” Hill said. “So really, if the rest of the country went into the dumper, Ann Arbor is still going to have many reasons why people will need to live here.”

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