Graduate student looking to invest/ options

[Nick Ritter]

Hi all,

Starting with a little background on myself, 24 year old male recently graduated from Minnesota state university, Mankato with a BS in mechanical engineering graduated in May of 2017, currently living with my parents rent free in the twin cities area employed at a large corporation with a base salary of $28 an hour (which will be increasing to about 30 in 6 months) + overtime which ends up being about 50k per year after taxes which I am calming 0. I drive a 98 Honda civic with no loan on it and insurance is $80 per month. I currently have 9k in savings and 44k in student debt.

I would like to ask the forum members on here a few questions, I would like to buy a duplex next year (2018) shopping around 200k for on in the twin cities MN BUT I am going back to school to get my MBA part time while working full time, the program costs 67k and my employer is going to pay 7k per year. Is it wise for me to take on Buying a Duplex with my first homeowners loan and renting out the entire complex and continue to live with my family while in school ? hoping this would help cover additional costs that are going to be associated with grad school and im also looking into long term investing with this and would like to own 2 rental properties by age 35. I have a realtor and she has told me to wait until the market comes back down in one year or so as of 2017 wondering if this is good advise? I have no problem getting approved for mortgages for 250k with an interest rate at 3.8% using the FHA loan

Basically im asking for advise on what I should do while going back to school and any advise in general. about how much I should pay for student loans per month is another big one i was planning to pay it off as soon as possible but others said just pay the min (~100 per month) and keep investing  etc.  

[John Woodrich]

First off, you can't get an FHA loan with the lower down payment if you are not planning to live in the property. FHA is intended for owner occupancy. You could live in one half for a year and then change your mind but if your intent is to fully rent the duplex you may be looking at some fraud. The FHA route is a common way for many new investors to get started be it right or wrong. If you are looking for an investment loan you would likely need 20% which is why many people try to game the system.

Second, if you go back to school your student loans can go back into deferral status.  This means you would not have to make a payment if you didn't want to.  Your aggressiveness in paying this off will depend on whether you have a better use for the money.  Figure your loans are likely between 5-6%, can you beat that rate investing in real estate?  If so your best bet is to keep a low payment and invest in real estate.  When you are paying they will count against your debt to income ratio so that may hamper your plans.

Third, I would personally work a few years before going back for a graduate degree.  After being in your career you will learn more and it will help you get more value out of a graduate program.  I personally chose to wait for my master's degree and was in classes with people who kept pushing through school.  They struggled a bit more in getting through the program and I am guessing less stuck with them.

Lastly, I also believe that prices will drop before they will rise.  The worst thing you can do is purchase too high, you may never win.  If you do decide to buy while you are in school I would make sure you are looking at the numbers and not just taking a realtor's opinion on a good deal.  If your strategy is buy and hold and your numbers work you may not have to worry about short term market fluctuations.  It may make sense to hook up with @Amber Gonion as they could help with the analysis, purchase, and management if needed.

Good Luck.