Real estate investing while in college?

Question

Hello I am 21 years old and am about to turn 22 in November. I will be transferring from a community college to the University of Houston later in the spring and have about $7,000 saved up and hope to have $10,000 or $9,000 by the end of this year. My college is mostly covered by financial aid and my parents will cover probably around $2,000-$3,000 for the rest. I currently live at home with them and just pay my car insurance which is about $300 each month. I am reading Brandon turner's real estate investing book and was wondering should I use an FHA loan with 3.5 percent down to buy a multi-family home near campus and live in one of the units for a year and then rent the others out to pay for my expenses and start gaining equity early on in my life? I am trying to soak in as much knowledge as possible to be ready to purchase my first property, so If you have any advice or knowledge you can give to me that would be very much appreciated!

Austin V Nguyen · Answer

@Daniel Haberkost yeah I currently work part-time at a restaurant and have a credit score of 756. That is amazing man! How did you start and learn!? That is a lot of dedication for working full-time, studying for school, and then doing real estate! I salute you brother.

Daniel Haberkost · Answer

@Austin V Nguyen I was able to buy my first property at 21 before graduating college. It was one of the best decisions I’ve ever made and has put me very far ahead at a young age. I did this by working full time throughout school, paying for college myself/not taking out loans and beginning to build my credit when I was 18. Have you built your credit ? Are you working? It sounds like your tuition is covered for you which puts you in a very advantaged situation. If you put the work in over these next few years you can start your adult life in a very comfortable place.

Kaelyn Motzel · Answer

Try finding the deals and using a private lender! Maybe your parents or a family member have a 401k they can lend to you out of. Good luck!! You're on the right path with soaking in the knowledge right now!!

Theresa Harris · Answer

I just saved my money for the down payment. I had enough to pay for all of it on my own from savings and as a grad student, I got a small stipend. Mine was a 2 bedroom apt, so not a lot to do. The reasons rent prices were so high was because of the low vacancy, so finding a tenant wasn't a problem.

Daniel Haberkost · Answer

No problem, good luck!

Austin V Nguyen · Answer

@Theresa Harris Oh wow that is terrific Theresa good job starting young. How did you save up enough for cash reserves for vacancies, repairs, and other expenses? Did your parents loan you money? Did you work a part-time job? or were you just lucky enough you had great tenants who paid every month and had a low vacancy rate? That is a lot to handle while in college especially studying for exams while doing it!

Theresa Harris · Answer

They'd only need to sign for the mortgage-not make any of the payments. You'd be responsible for all of the expenses (mortgage, taxes, repairs). My parents co-signed a loan when I was in college. It was cheaper to pay a mortgage than rent. They didn't have to do anything (other than sign the loan) or pay anything. Clearly it depends on your parents and you.If they wanted you could arrange a deal that when it came to sell, if it sold higher than what you paid for it, you split the profit. You could also work a deal with any extra money left after renting the rooms...they'd probably tell you to put it in the bank to cover vacancies or unexpected repairs.

Austin V Nguyen · Answer

@Theresa Harris I just can't imagine them already supporting me enough as it is. They are paying for the rest of my college tuition, health insurance, etc. I do not want to put them through the stress of another additional expense. I might have to ask though because FHA only requires only 3.5% for financing and that is a very small amount. The only thing that could cause this plan to backfire if my rental properties are vacant, tenants are terrible, or I miscalculated my analysis. Thanks for the tip though I will definitely ask them and see.

Theresa Harris · Answer

If you can't get a loan on your own, why not team up with your parents? They will save money as your living expenses will be lower. Look for a place near campus, then rent rooms. It is a good way to decrease your living expenses. Once you graduate in a few years, you can either sell it or keep it as a rental. Once you move out it may make more sense to rent the whole house rather than renting rooms.

Austin V Nguyen · Answer

@Daniel Haberkost Yup sounds like a plan. I will soak in real estate podcasts and books like a sponge. I am also saving aggressively too living well below my means. Thanks for the heads up Daniel really appreciate the advice and piece of knowledge brother.