Junior in College - Feasible to buy a property this summer?

Question

I am currently a Junior in college and looking to purchase my first property as soon as possible but also considering the value of waiting until I am settled into my first job out of college. I go to college in New York City (so clearly not looking to invest there) but I live in Portland, Oregon and I will most likely be living here over the summer. My goal is to purchase small multi-family real estate (duplex, triplex, fourplex) and ideally for my first deal to be a house hack.

By working during college, I have accumulated $50,000 in savings and investments but I will realistically be able to deploy $25,000-30,000 toward real estate this summer. If I am in Portland, I could house hack a property to live in during the summer but my understanding is that I wouldn’t qualify for an owner-occupied FHA loan since I would not live in the property for the majority of the following year due to school.

Is there a workaround to this problem (such as partnering with another investor who would live in the property for a year)? Is it worth investing in Portland? Should I seek deals out of state? I am really open to any and all feedback about what my plan of action should be and I appreciate all advice. I’m also looking for peers to work with and bounce ideas off of so so connect with me if you want to talk more about starting out in real estate investing. Thanks!

Mathew Wray · Answer

Mor ing William, definitely some good advice on here and things to think about. Here's a few more for you:

1. Don't underestimate the power/value of a low interest rate. Waiting will get you higher rates which will reduce your purchasing power for the same payment. Over the life of a loan that lower rate is far more important than a purchase price. For that reason alone, I'd get moving on the process.

2. Momentum. Like Warren said, it felt like a stretch but the process of doing was invaluable to him.

3. Inflation is real and will chip away at the value of your savings (really impressive to have done that while in college) and continue to drive up prices. Locking in a fixed purchase price now will save you money in the long run!

4. Make sure you check in to PDX rules on STR's as the city is pretty specific about them and how they operate here.

5. Start working on your mindset around what a deal is in the Portland market as an FHA buyer. No defeatism and that doesn't mean you should just run out and buy a property that doesn't fit your long term goals, and knowing what is happening on the ground can help you prepare.

Best of luck!

Mathee

Warren Marshall · Answer

Hey Will, I was able to get a first time home buyer mortgage when I was in college.  I needed to get a Co-Sign from my parents however I was able to take advantage of the low down payment.  It was a bit of a stretch at the time but 8 years later and I'm glad I did.  Couple things I would do differently is:

1. Get an experienced investor to double check my numbers. I didn't include Cap Ex, Vacancy allowance, or management fees so I've had a lesser return because of that.

2. I would seriously look at Airbnb Potential when analyzing properties. I'm not confident in the Portland tourism market but I have both long term rental duplexes and short term rental single family homes and the STR's cashflow 5-6x the LTR's.

3. On your first one don't get to into a fixer upper unless you've got twice the time and twice the money needed and talented free labour.

Good luck and let me know if you have any questions,

Warren

Anthony Johnson · Answer

Hey William,

I just closed on a 4-plex in Portland and if you're considering the owner-occupied route, I'd suggest going with a 5% conventional loan instead of FHA (like I did). Good small multifamily deals are hard to come by right now and a conventional loan gives you a stronger offer and less requirements. I did it with a local bank and I have an investor friendly agent I can recommend if you're interested. I can't speak to how they enforce the owner-occupied requirement though - I plan to live in one of the units for a year.

Portland is a good place to invest in my opinion. You get a hybrid of cash flow and appreciation, and prices aren't as crazy as San Francisco or Seattle (i.e. other west coast cities). There are many more tenant-friendly laws you need to be aware of though, so make sure you do your homework beforehand.

AJ

Grant Schroeder · Answer

Welcome @William Hammond!

William Hammond · Answer

Thank you for that advice, Warren! I have seriously considered STRs and will do some more research on their viability in the Portland area. From content that I follow, I have definitely gotten the impression that fixer-uppers are always a bigger beast you anticipate so I was wary of that idea. However, I am concerned about getting a good deal on a property without some sort of value add which in my mind would mean a property that needs some sort of fixing. I will definitely reach out if I have further questions!

Chris Webb · Answer

Hi @William Hammond, as @Anthony Johnson suggests I would look at a 5% conventional for financing. Also talk with a lender to be sure of the requirements for the loan. If you are a student and it is your primary residence it should not be an issue, even if you are living in NY. I would talk with a lender on your lending options first.

Allan Smith · Answer

You will thank yourself a thousand times over by getting a rental property ASAP. The sooner the better because it can be making you money and equity in the meantime.

Portland is as good as any Market, certainly a healthy Market. I would not overthink the thing about moving away, just get an owner-occupied Loan and that will be your primary residence even if you stay in New York during the semester. If you didn't feel comfortable with that, ask Banks about what they would suggest. I can tell you that the only other bank product I know is going through the commercial department, and they don't let you live in the house.

William Hammond · Answer

Thanks for the advice, Allan! I wasn't aware that I could still consider a property my primary residence while living in New York but that makes sense. If this was a triplex, for example, would that mean that I would have to have one unit not rented out that would be considered my residence? As you said, I am sure that talking to lenders is the best way to get even more information about my options.

Junior in College - Feasible to buy a property this summer?

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