Is this a smart idea?

Question

I want to attend a school in Davenport Iowa. (I'm originally from Chicago, IL) I have been looking for a property to buy in my area, but I thought it might make sense to purchase a home close to school there and live in it rent free for 3-4 years, while possibly making a little extra income. I don't have any knowledge of the area and I'm not sure this idea makes sense. I am also 37 years old not married and no kids, so I'm mature but not money savvy. Yet!

Any advice and thoughts are greatly appreciated.

Michael Pease · Answer

@Brian Campbell

@Matt Fisher

I tend to disagree with those figures. I have a duplex, probably in the area Trio would look, that was a $140,000 purchase that rents for $2,100. That generates very solid cashflow. Similarly, right across from that property I bought a house for $90,000 that rents for $1,400 and generates great cash as well including all expenses. If you're looking for more turnkey then $40,000 is probably not going to be something that you'd want to look at because it will need work most likely. @Trio Martinez, it really just depends on your situation and goals. If you want to live cheap/free for 3 years while you are at Palmer and sell when you leave there are tons of opportunities like that near Palmer. My experience with students there is they typically pay between 400 and 500 a room unless they have a unique situation.

Michael Pease · Answer

This is how I got my start into real estate, buying a place when I was 20 and renting it to roommates and the other half of the duplex to other college students. Definitely a great way to build equity by having other people pay the mortgage and expenses as well as possibly generate some extra cash. As others have mentioned, there are other things to consider. A big factor for me in your situation would be what would I have to pay in rent vs. what would I pay if I purchased a house and rented it out. What would be the upfront costs of each, the operating costs of each, and the exit costs of each. As @Matt Holmer mentioned, the QC is big enough you can pretty much live anywhere. I personally prefer the Iowa side since the property taxes are lower and the re-sale always seems to be better.

If I could go back and do it all over again I would have repeated that process more times than I did. Buying a house, moving in, fixing it up, renting out rooms and then moving out and making it a rental and repeating with a new property. It's a great strategy if you are single and willing to move often.

Matt Holmer · Answer

What school are you planning on going to?  The quad cities is small enough that you could live anywhere.

Brian Campbell · Answer

Hi Trio. I think this makes sense depending on the property you buy. You'll want to consider what your exit strategy is when you no longer want to live in the property. After you move to another location will the property cash flow as a rental or will you buy a property that needs some work, fix it up while going to school, then resell it for a profit after you have lived in it while you go to school? I would certainly be looking to purchase versus rent if it was me. Just a thought, when you get closer to pulling the trigger, you might want to get on craigslist and see if you can something that might work for you. Good luck!

Grant Berthold · Answer

Sounds like a decent idea! I look back on my college years and wish I had the state of mind to purchase a house and rent out the bedrooms to my roommates. However, I would recommend renting there for a semester, and spend a lot of time driving the neighborhoods and studying the market. Try to find a real estate agent who's also an investor and get their take on the housing situation. Good luck!

Matt Fisher · Answer

i agree with brian. You will save on rent, but you won't make much...

The number one rule in real estate: never pay retail price.

You should be able to find plenty of decent $40k houses.

Brian Campbell · Answer

If that's a 70K single family, I don't think you'll be getting a positive cash flow as a rental. You need to figure all your costs to include taxes, insurance, maintenance, vacancy, property management costs, etc. What appeals to you about the 70K house?

Trio Martinez · Answer

@Grant Berthold

@Brian Campbell

@Michael Pease

It seems like the property prices are much lower on the Iowa side than what I'm used to in Chicago.  Rent seems to be on the lower side as well; somewhere around $500 per bedroom.  I did a search on zillow and it looks like a 3 bedroom would positively cashflow.  Mind you I'm throwing around that term like I'm used to using it, but only just started hearing it on the BP podcasts a week ago.

Because I don't have any experience rehabbing, I think it will make more sense buying a turn-key home.  I noticed an extrememly cheap area that I am staying away from because I don't want to worry about the neighborhood while focusing on school.  The property I'm looking at is somewhere around $70,000.

*@Matt Holmer - The school I want to attend is Palmer University of Chiropractic

Is this a smart idea?

Most Popular Reply