Buying Small Multifamily While In College

[Conner Franklin]

Hello BP, I am a college student that is about to start my junior year of college and I am just now moving off to a college town (Auburn, AL woot woot) this year. My first two years of college were spent at the local community college in my hometown and now that I am moving the popular question comes up, “Why not just buy your own house instead of renting?” I’ve always been one for investing and I’ve been studying real estate for probably about a year now, and plan on doing it once I graduate, but I can’t help but to think: “Why not start now?” I absolutely love the idea of house hacking, and my plan is to buy a small multifamily and live in it while I rent out the other units. Unfortunately, I am a poor college student. I do have an apartment rented for the Fall through Summer (August 2017 - July 2017) of my junior year, so I have 1 full year to make up my mind and get a plan together. The college has a pretty good co-op plan from what I understand, (Alternating semesters of work and school -- gives the student a full year's worth of full time work experience before graduation) so if I can get a job through that I will be in the college town for a total of three years, Junior, Senior, plus an extra for work. Long term plans are to own a number of SMF rentals, and progress into buying full apartment complexes. Thankfully I have two lovely parents that are paying for my Bachelor’s degree, plus rent, plus a monthly allowance for groceries – I am very appreciative. My question is this: Should I just focus on my degree and start investing as soon as I graduate, and have a full time job, or should I try to get a part time job in college and buy a SMF when I save enough for a down payment? Bonus questions are, how should I prepare myself to be able to acquire a FHA loan? I have zero credit history, how do I earn enough of credit to buy a house?

Thanks so much for any replies, I have already learned so much from BP. I think this is a great tool for investors. 

[James Rodgers]

First of all - War Eagle. Auburn alum class of 2014 here. 

Second - Should you wait until graduation or start now investing. Good question. I wish I had known what I knew now when I was in your shoes. No, you are not in a hurry, but don't put off investing for the "one day" when you know everything. Being in school can create the illusion that you are incomplete until someone hands you a degree, or until someone hires you based upon that degree. NOT TRUE. I learned to be an engineer from Auburn but how to be an investor from BP, and I think most people will tell you that it was not a standard, formal education that made them successful investors. AND I think you are spot on with the house hack approach while in Auburn. 

That being said - I wouldn't advise getting into an investment property until you are in complete control of you own personal finances. I wouldn't think FHA would even lend to you when your income is mostly given to you by family, and I'd be surprised if you would be able to manage a property without their opinion weighing heavily on every choice you have to make. You want absolute freedom to structure your investment how you see best; you are the educated one when it comes to REI, you don't want to get into something with relational strings attached.

Third - In terms of preparing your credit for an FHA loan, a good mortgage broker would love to guide you on how to prepare for a loan if you plan on working with them when you do purchase.

Here if you need me. 

James