If you're looking for a safe haven for real estate investing, you just might want to go back to school.

That's the advice from investors who specialize in buying rental houses and condos in carefully-selected major college and university towns -- especially those in areas that never experienced wild price inflation during the boom years.

Take the case of Glenn Gurgiolo, the director of new media direct for the RFD-TV network in Colleyville, Texas. Glenn owns a two bedroom, two bath condominium in the West Campus area near the University of Texas in Austin.

The condo not only produces significant positive cash flow every month, but it almost never has vacancies. Gurgiolo says that's mainly because the university has close to 50,000 students in and around Austin, the condo is located four blocks from campus, students are looking for close-in rental housing year-round, and every year thousands of new prospective tenants arrive in town.

Even better: The Austin real estate market never experienced the excesses of the boom, and values have appreciated steadily for years, growing Gurgiolo's capital all the while. According to the latest federal home price appreciation survey, Austin homes gained an average 9.7 percent in the last 12 months and 29 percent in the past 60 months.

Stuart Frazier, an investor and co-founder of College RealEstate.com, says buying small-scale rental properties in university communities where the underlying economic fundamentals are solid is "one of the true oasis situations out there" in residential investment.

Not only do houses and condos make financial sense for parents to buy -- often their kids live rent-free while they bring in and manage rent-paying classmates or friends -- but in the right markets, they are outstanding capital gains producers.

For example, investors near Gonzaga University in Spokane, Washington who are using Frazier's firm's assistance, are benefiting from an average 8.8 percent annual appreciation rate plus turning positive cash flows -- thanks to the unending supply of new rental customers.

Not every college town is a winner, cautions Frazier. Sometimes universities overbuild student housing, leading to lower rents for competing private investor owners.

Managing units -- like any rental housing investment -- also requires the active attention of owners.

Bottom line, says Frazier: College town real estate is still real estate. Strong underlying local economic fundamentals are crucial. Pick close-in units within walking distance of the campus, and the odds are good that you'll have a full house -- and cash flows -- most of the year.

Published: January 4, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.