House-Hack for College at 16?

[Will Huang]

Hi, so I haven’t been posted on here since a while aago.

But anyways, I was a bit too overcondifidnet, wholesalingdidn't work out. But right now, I've just turned 16, and I'ved saved around $25,000 from various jobs and oppuruntiies. I'll need to contribute $12,000 to my ROTH IRA over the next 2 years, but then the rest I want to save for college living expensives, and for my first house hack.

I want to purchase a house near UPenn, and have my dad cosign it, but I’ll pay. Long story short, I’ll just list my questions:

1.) I want to get an FHA loan, but I can't move in myself until 6 months after I close the deal. Is that fine?

2.) If I purchase a house, I’ll only be able to pay 2-3 months of the mortgage comfortably without tenants. Is there a way to find tenants before I close on a house? Can I just like post on Craigslist and whatnot before I close?

3.) If I don’t have an employment or income historuy, but my dad is co-sigining on the loan, is that fine or will it impact the loan I’m approved for?

Right now the plan is:

Analyze deals for a few months

Become an authorized user on my parents credit cards

Get pre-approved for a loan

Close on a deal, 5% down, before I apply for financial aid (primary residence isn’t considered)

Any other advice/notes?

[Brenden Mitchum]

Hey @Will Huang, welcome back!

Sorry to hear about wholesaling not working out. Sounds like you are a student and work at least one job so no surprise that wholesaling didn't work (that's a pretty time intensive endeavor). 

Congrats on saving $25k at age 16! I think I might have had $2k in the bank at that time and thought that was a ton of money haha Plus, it sounds like you have a couple more years until you head to college so plenty of time to save more!

My first question is regarding putting half of that into an IRA over the next two years. You need to do this? Putting cash in an IRA isn't a terrible idea because you can pull your initial investment out without fees/penalties. However, definitely don't rely on it too heavily as an "investment" vehicle if you're passionate about real estate, a much better place to put your money. 

Too answer your questions:

1. Current FHA occupancy rule is that you must move in within 60 days. Chat with you lender as the time gets closer to see if there is some flexibility or a loophole there.

2. If you only have enough reserves to float 2-3 months mortgage, don't purchase a home. Better to rent the first semester and save more, then purchase the second semester. If your parents would be able to help out then maybe but if it's all on you, be sure to have at least 6 months reserves (PITI + repairs/maintenance). The last thing you want is to ruin your credit right at the start just to add 6 months to your investment career that will already be about 2x longer than most. DO NOT LIST THE RENTAL BEFORE YOU CLOSE.

3. How in the world did you save $25k without any employment history?? You don't have to answer that but wow! Basically, all the underwriting will be on your dad. As long as his credit is good and his debt to income is solid, you'll be fine. Start the conversation with your lender early on though.

Two questions on your plan: 1. You're heading to college at age 16?? 2. Why put 5% down when you could put 3.5% down?