Plan for real estate investing as a full time student. Opinions?

Question

Hello BP members!

My name is John and my interest in real estate began towards the end of last year. I currently work as a GrubHub driver and listen to audiobooks and the BP podcasts all day while I am making deliveries. I've read several BP books like "The Book on Investing in Real Estate with No and Low Money Down" and "The Book on Rental Property Investing" by Brandon Turner. And I am currently reading "BRRRR" by David Greene. I decided its finally time to take action so I got the PRO membership to start analyzing investment properties and begin to connect with others in the area.

I recently got accepted into the DPT program at Winston-Salem State for graduate school, which begins in January 2022. I found myself caught between wanting to pursue my newfound interest in real estate and following through with my original plan of becoming a Physical Therapist. But why not pursue both? My long-term goal is financial independence and I see real estate the vehicle to get there, while PT can bankroll my investing. But I see no reason to wait on pursuing real estate for 3 years while I'm in school and rent like everyone else, when I could be building equity in a residence of my own. Hence, my goal for this year is to find a small multi-family home in Winston-Salem that I can house hack while attending the graduate program for the following 3 years. I reckon that I could possibly fill the remaining units with other classmates in my cohort. And if that's not possible, I would search for tenants using a more conventional approach.

I am currently working with around $20,000-$25,000 that I have been growing in the stock market from an initial investment of $5,000 in 2019. I was thinking about utilizing the 203k loan to finance repairs and purchase price for a tri or quad in the Winston area. I do have very good credit, however, my 2-year income history is spotty because I was a full-time student less than a year ago. However, my parents are willing to partner with me on the loan so I can get approved for financing. Another option would be to obtain seller-financing. The final possibility that I've considered is holding off on investing this year and just commute 30 min from Greensboro to WSSU, and continue to grow my stock portfolio. Then after graduating from grad school, I should have enough capital to use the BRRRR method for my first property.

A problem I seem to keep running into is that there seems to be a scarcity of multi-family homes on the market in Winston-Salem and the ones that I see pop up on real estate portals tend to disappear in a matter of days. I was reading some comments on other threads and I saw some BP members suggest looking for single-family homes with an unfinished basement, and renting that out or turning it into a BNB. I honestly haven't thought of that, but I am open to the idea. I have really been trying cross my t's and dot my i's these last few months by intensely researching various aspects of REI and trying think of all the possible ways I could go about this, but I believe I am falling into analysis paralysis.

I look forward to hearing feedback from you guys about the feasibility of this goal and some next steps I could take towards accomplishing this. Thanks!

Ola Dantis · Answer

@John Doss I got an idea for you since you are struggling to find a small multifamily property. Why not buy a 4 or 5 bedroom single-family home in the same area and rent out the rooms to your classmates or schoolmates as well? Yes, it is not a triplex or quad but it can still cashflow nicely, right?

Also, dude, jump on your parents being co-signer or helping you with the purchase. This is a no-brainer!

I totally agree with you on doing both: Get your PT degree + doing real estate on the side.

Some people have made dropping out of college sound "cool" OR many people say there is nothing to learn in college. I totally disagree.

Just go on any job website and search for high-paying jobs and you can't miss that section that says "Bachelors degree" is a requirement.

Thank God we have people curing diseases every day because they studied Medicine in college. Imagine a world where we all are dancing on TikTok and not going to college!

Jason Coleman · Answer

@John Doss I'm an investor agent in the Triad. You're on the right track and I don't see why you can't get started immediately with those funds and credit. Feel free to reach out if you want to go over the process and what I'm currently seeing in the Triad market. You can get conventional loans with 5% down with lower PMI. There are ways to roll PMI into the loan at closing as well. Seller financing is an option if you have the time and courage to reach out to sellers directly. Happy to show you what has worked for me with seller financing. It's rare to see a seller financed option on the MLS but they do come up occasionally. Shoot me a DM. Happy to help. The Triad population is growing at an incredible rate and that's set to continue for the long term. When you graduate 3 years from now chances are real estate in decent areas will be significantly more expensive. Like Brandon Turner says "Don't wait to buy real estate. Buy real estate and wait" haha. The entire market appreciated 10% last year and it's set to appreciate at that rate for the next 2+ years. In this post covid world, plenty of employees are now working remotely and looking for lower cost of living areas. That's where the Triad and North Carolina as a whole come into play. Multifamily does move quick but you can just as easily purchase a 4-5 bedroom home with similar if not better returns. It's a numbers game. Good luck and happy hunting.

James Carlson · Answer

@John Doss

Totally depends on how you want to do it. The places we try to find often have a little living area down in the basement, so there's really no shared spaces at all. (Except for maybe laundry, depending on where it is.)

If you can find a good spot for it, you can squeeze a fridge, microwave, and toaster oven in to the basement and that suffices for a lot of people -- Airbnb/short-term rental guests for sure, and even many medium-term like tenants. (See these clients of ours who house-hacked their Denver area home with only those items in the basement and did well with both tenant pools.)

James Carlson · Answer

@John Doss

A lot of great advice above. My main thought is not that dissimilar, but I would put it in terms of the KISS idea: Keep It Simple Stupid.

It's the most common thing I tell our first-time homebuyers and investors here in Denver and Colorado Springs. I think BP is awesome, but I think there's an undercurrent to this site that says you've got to "get creative" and you've got to "find a deal." In and of themselves, those are worthy goals, but I think these ideas that you've got to be super creative stop people from taking the easy first step. Getting bogged down in details and the analysis paralysis stops so many people

My opinion? As @Ola Dantis said, do a house hack. Buy a 4-5br house and rent the other rooms. I see on for sublets and roommate-seekers that the going rate is around $500/room in Winston-Salem. A cursory look at your market shows 4br homes between $150,000-$300,000. Even at that higher end, if you put 5% down for a conventional primary residence loan, you'll have roughly a $1,500 payment. Get three roommates, you're basically living for free. (Okay, there's utilities and other costs.) Get a more affordable house, and you'll actually cash flow.

If you're near the university, I bet you'd have no problem finding roommates. We own a 4br home in Colorado Springs close to Colorado College, and we have a pretty easy time filling that thing up.

If you're not a fan of other humans in your space (I'm in that group), then skip the rent-by-the-room and find a home with a basement that you can section off in some fashion. In Denver and Colorado Springs, we see homes all the time that have a back entrance that either A) goes straight down some stairs into the basement; or B) turns left or right through another doorway into the main floor kitchen. This type of layout allows you to have you own space up top and the downstairs tenants can have their own space.

Either way, skipping the multi-family and going the SFH house hacking route does a lot of good things:

• It will be easier to find a property. 
• You get hands-on experience with leases, repairs (and getting to know their costs). 
• You will save a ton of money -- even if you don't cash flow, if you have others paying the majority of the mortgage, think of the net swing between that payment and what you would pay in rent. That's money that you can stock away for your next property.

You will learn a ton about properties, tenants, and investing by doing this. Plus, you'll learn these lessons on a lower-priced property. Good luck!

Cole Simpson · Answer

I would definitely start with a house hack, its going to lower your expenses, multifamily is great but you can also do sfh and rent by the room if you can't find a multifamily, also consider converting a house to a multifamily as well

Antonio Cucciniello · Answer

@John Doss I would get a preapproval first then go and look at properties

Blaine Alger · Answer

You got a lot of really good info and it sounds like you have done your research.

Multi-fam properties go fast no matter where you are so you gotta be quick with it or go off-market. But even then it's competitive. I would get a good agent who can be on the loo out for you and send you some pocket listings.

I really like your basement idea. That is something that i have heard mentioned several times on the podcast. I am in TX so we don't have alot of basements but if we did, I would be all over that.

Best of luck to ya. Shoot me a message if you got any other questions. I am always happy to help!

-BA

Sean Rooks · Answer

@John Doss yes potentially. That would depend on the property. But there's more than cashflow that helps you, your Net worth would be going up by the mortgage paydown, appreciation and Tax benefits.

Antonio Cucciniello · Answer

@John Doss Either method can work, it honestly depends in your confidence in your deal analysis abilities...which will improve over time.

You can make an offer on a multifamily within minutes of it coming on the market if you are confident that the numbers will work. That's how I got my first one. Came up on a Sunday afternoon, I knew I had to pull the trigger right then and there.

I definitely think its a great idea to get started ASAP and not wait till college is over.  You will learn tons in the process, and you will be building your wealth while tons of your classmates are just renting.

Plan for real estate investing as a full time student. Opinions?

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