In March 2010, Elliott Vanskike and his wife bought a 2,000 square-foot home in Madison, Wisconsin for $375,000, pondering the quality of life for their kids as well as the quirks that come with thousands of college kids literally on your doorstep.

The University of Wisconsin is a huge school, says Vanskike, 47, so when the students are here, they kind of take over. But the writer/editor, who's also an avid cyclist, loves the town's bike-friendliness. (Madison often tops national rankings for its biking system), and its cultural vibrancy via museums, music and ethnic diversity.

So while many Americans still bemoan the housing slump, houses in our neighborhood have held their value very well, says Vanskike. We're close to the university and closer still to the university hospital, which is huge.

As Vanskike has discovered, life in college towns has lots to offer, especially on the real estate side of the equation. On Tuesday morning, Coldwell Banker Real Estate released its 2011 College Home Listing Report, which ranks college towns nationwide in home affordability (seelink.reuters.com/ruq94s for full list). It reveals some bona fide bargain markets, with Memphis, Tennessee the cheapest. You can buy a three-bedroom home there, close to the University of Memphis, for a median price of $89,244.

It's striking is how reasonable and affordable these university communities are, says Coldwell Banker CEO Jim Gillespie. In a quarter of the markets, a three-bedroom, two-bath home is below $150,000 and it's like, gosh, you've got culture, you've got sports, you've got all this vitality because of university professors and research institutions.

Ranking in the middle is Madison, where a three-bedroom home lists for an average of $221,000. Median prices have risen slightly during the last 12 months, says Phil Sveum, a Coldwell Banker broker and owner, who's worked the market for the last 35 years.

You can buy a three-bedroom home in Lafayette, Indiana (home of Purdue University) for about $133,000, placing it 10th on the least expensive list. But that same size domicile will set you back more than $1.2 million in Palo Alto (home to tech epicenter Stanford) and Westwood (home of UCLA), the two California markets that topped Coldwell's rankings as most expensive. State College, Pennsylvania, the college town now dominating the headlines as the home of Penn State University, ranks No. 80, with the median home price of $202,207.

The list has an element of whimsy, as it surveys 117 of the 120 schools in the Football Bowl Subdivision. That's, in part, because Gillespie is a big sports fan, and concocted the idea six years ago while stuck on a train. He had five hours to kill and lots of housing stats to study, and noticed how many collegiate areas offered stability and value.

Then he bought a home himself on the site of his alma mater, the University of Illinois at Champaign-Urbana. Though he lives in New Jersey, he goes back to his campus regularly for football games, and so purchased a three-bedroom townhouse about four years ago for $120,000. The home has since gone up in value, he says, and gives him a unique vacation spot. Rather than check into a hotel room, we just go back to the townhouse, order a pizza and do whatever we want, he says. We've got our own place.

Gillespie says people invest in college towns for many different reasons; real estate agents often buy where their kids attend school, and then have them manage the property when they move out of the dorms and in with their roommates. I try to tell sales people in these markets to work the college students and see if they can talk to their parents, he says.

What's more, universities themselves, and the hospitals and research facilities that often come with them, host a lot of jobs. Dolores Conway, a professor of real estate economics and statistics at the University of Rochester says, Two of the top 10 employers in the state of New York are the Cornell University and the University of Rochester. Think about that.

Of course, Conway not only studies real estate, she also lives near a prominent college campus. Rochester never really participated in the housing bubble, where there was overbuilding, she says. Instead, prices here were relatively stable. And the cultural activities are wonderful. We have the Eastman School of Music.

But buying college-area real estate presents challenges unique to the setting, says Daniel R. Wildish, senior partner and founder of Wildish & Nialis, a business and real estate law firm in Orange, California.

An owner who sublets, for example, may want to consider the likelihood that the tenant may become a member of a sorority or fraternity, with the attendant late-night party bashes and often unruly behavior, Wildish says. What's more, the neighborhoods in and around college towns are not created equal, and it's important to study crime statistics.

Chicago's Hyde Park, for example, hosts the prestigious University of Chicago. But wander a few blocks off the idyllic, ivy-covered campus, and you can find yourself in intimidating urban territory.

And while prices in a given market may look reasonable, taxes and such can yield more frustration than a calculus exam. To Chicago's north, another prestigious school, Northwestern University, enjoys special status as tax-exempt -- a condition outlined in the school's founding charter of 1851. That means local residents pick up the slack, and annual property tax bills topping $50,000 are not uncommon. For a three-bedroom home at the average listing price of $385,540, yearly taxes cost roughly $8,600, or about $720 a month.

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