Should I take this deal as a college student with my savings?

Question

Hi guys,

This is my first post on Bigger Pockets after having been following the site and podcast for two years, including taking classes and learning all the general entrepreneur stuff from my dad all my growing up. I just turned 20 and am in my senior year of college now, with $8,000 saved up for real estate so far. An opportunity just came up on the market right on a corner block directly across from a block where my dad currently owns 3 properties, so it is conveniently placed as well as just dropped by 30% this week from $60,000 down to $40,000. I believe I can pay it off in 3 years minimum to 5 years maximum based on my conservative trajectory income from it as an air BnB (my market is currently just beginning to grow rapidly and air BnB's are maxing their fills). I unfortunately do not have a credit score yet as all my business ventures have been out of my home doing graphics and I unfortunately hadn't invested in a credit card to be building that up. Working on getting one tomorrow as well as talking with the bank to see what they could negotiate in the possibility of having my dad co-sign a loan as they've done a lot of business with him before. I don't think I could qualify for an FHA as I won't be living in this house.

My main questions are first, should I be considering investing in real estate while still in college? I generally have about 40 hours to spend on business or other activities a week.

And second, does it seem like I am jumping the gun on this deal? I was considering the deal back when it was priced at $65,000, so the recent drop I believe excited me and makes me want to act fast. I know that waiting another year to accumulate more income would make for less risk, but I’m not sure that the market is gonna keep this deal around for much more than another month or two, and with the rising city I think the prices are gonna start rising pretty fast. As well as since I have been researching for 2 years I don’t feel that I’m being overly quick. But maybe for my age I am.

Clarifications are I have renovated two buildings for my dad, as well as have a decent idea of renovating this one myself for $6-8,000 provided the inspection comes back clean. The renovations needed are mostly just paint, a few drywall wall holes, and new windows.

Any holes you can shoot into my thoughts are appreciated. I definitely don’t want to make a stupid decision, but if this is a good deal then I would love to act on it.

Drew McCluskey · Answer

@Tanner Barnes just got pre-approved for the loan with my dad as a co-signer. I agree, he’s a great resource! Should be getting an inspection in the next few weeks.

Account Closed · Answer

@Drew McCluskeyI would definitely buy the property if I were you and make my backup plan college housing. My only two concerns would be AirBnB regulations in your town (Do any exist, does it seem likely that future regulations will be put in place? Lastly, does it have to be registered in some way with your town?) and about having friends do labor for you. Chances are nobody will care about this property as much as you, and since your friends aren't professional cleaners they don't have as much of a reputation to uphold if they slack a little. It might be worth paying a professional to lessen the strain on your friendship in the event they don't hold up their end.Good luck!-Zack

Taylor Chiu · Answer

@Drew McCluskeyCongrats! Sounds like you are taking a great first step into your own REI journey.

Marci Stein · Answer

Absolutely go for it. Even if you have to let it sit until you graduate, it’s an investment in your future.

Jake DeAtley · Answer

@Drew McCluskey Dont forget to consider furnishing costs. You may be able to boot strap and source used furniture from craigslist, facebook, etc, but its still going to cost you a few grand at a minimum to get everything you need. and more like $5 or $6K to do it right with new furniture. Of course thats a really rough ball park, but make sure you are considering that.

Theresa Harris · Answer

Will you start using it as a long term rental or a BnB? If you are doing a BnB, it will take a lot of your time. What are you planning on doing once you graduate in a month? short term rentals have additional costs (cleaning, furnishing, etc). Do the numbers make sense from a rental perspective?

Tanner Barnes · Answer

Go for it, having your dad to talk to as an already seasoned investor is even better. Plus with him co-signing with you he's not going to let you or it fail. He will be there as a mentor to help you and make sure the property is worth it.

Theresa Harris · Answer

@Drew McCluskey Sounds like it should be good. Plus if local rules change on short term rentals, you have the college nearby.

Drew McCluskey · Answer

@Theresa HarrisI have run the numbers as well for long term renting and it makes sense. It won’t have as much profit as the BnB, but it could still pull in a net of 170-250 a month, and it is only 3 blocks from a college with around 10,000 students which just expanded their size, so that market is growing. I have a couple friends who live directly across from the house who are very eager to make some extra money, and so the extra time needed for cleaning and resetting the house I plan on shifting over to them for a set fee after the first year or so once I have a more full schedule of BnB renters. For this first year though I want to invest more of my time running it due to the fact that I currently have more time than I have money, so the trade makes more sense To me starting out.

Drew McCluskey · Answer

@Will Dixon it was foreclosed on in a bundle of 17 houses. The other ones they’re able to sell for more as they’re duplexes and triplexes, but this one since it needs renovation I believe they just want it off their hand. They could give this property away for free and still make a lot based on how much of a deal they got the other houses for on the courthouse steps with this bundle. Roughly 40K per house, and that’s quadplexes in there as well with renters already in. Thank you for the encouragement! I’m excited for it, but also definitely a little nervous as I’ve never bought anything near so expensive. Thank you to everyone else as well for the advice and encouragement! I’ll keep researching as much as possible.