Should I use $10,000 for college or down payment for house hack?

Question

Hello! I am currently a junior in high school and I am on pace to save up 10,000 dollars when I graduate. The college I am going to for a bachelor's degree for accounting is going to cost me 20,000 dollars. I was wondering if I should use the 10,000 dollars to partially pay for college with less debt or use the 10,000 dollars for an FHA loan for a house hack. I currently live in the Minnesota MSP area with a pretty expensive market. Thank you for your time.

David Barnett · Answer

@Austin Jacobus Am I understanding correctly that you are 100% going to college?  If so, I would use the $10k to make sure you go to college debt free.  I agree with Natalie that you should apply for as many scholarships as you can, and also agree with Dave Ramsey on his point that graduating college debt free sets one up for success right out of the gate.  I would keep a war chest of money aside until after you receive your diploma to guarantee that you graduate college debt free and then invest after your first full time job.  If you wait, you'll also be able to qualify for more of a property than if you were to try to qualify with part-time income while you go to school.

Jordan Moorhead · Answer

@Austin Jacobus why not both? If you have a steady income there are down payment assistance loans where you can get into a duplex for as little at $1000 if you qualify.

Anthony Wick · Answer

@Austin Jacobus

Fill out the Fafsa (starting Oct 1 now, not Jan 1 the following year), get free grants/work study/scholarships if you can, buy real estate and rent out rooms and units to other students to live for free, take out low interest and deferred student loans while in college, pay off students loans upon graduation before interest accrues with the profits from your real estate investing.

Now, how exactly you manage to get a mortgage loan when you’re 18 years of age and possibly don’t have monthly income or work history, I cannot answer.

Corey Hawkinson · Answer

@Austin Jacobus Lots of great thoughts here already and I agree with looking into both. Can I ask where you get the $20,000 number? What school will you be attending that is not more expensive? Is that just for tuition? If you’re uncomfortable answering any of that feel free to ignore my comment, I’m just curious as a fellow Twin Cities individual.

Richard Gonzales · Answer

I have to agree with @David Barnett, I accumulated around $25k in student loan debt (never graduated) as well as a car loan and credit cards. I used Dave Ramsey’s system to pay it all off and let me tell you, that was not a fun 3 years. You still have time to apply for scholarships. If you apply for 1 scholarship every day until you graduate, I’d say you’re chances are pretty good. Its easy to tell yourself “4 years is forever away, I’ll figure it out then,” until you have to make that first $300+/mo payment.

Basit Siddiqi · Answer

@Austin JacobusOne of the greatest returns you can have is on your own education. Return on education > return on real estatePick an affordable college with a degree that is in demand.I went Baruch which is a city college in NYC. The gross cost of the education was $16,000($2,000 a semester). I got some scholarships and financial aid and it ended up coming up to around $4,000.

Theresa Harris · Answer

@Austin Jacobus  The $20K is likely your tuition fees.  You will also have books, food and housing.  If you can get a parent to cosign a loan, using some of that money to buy a house and rent out rooms is a great way to go through college.  A bank is unlikely to loan you money if you aren't making any income-hence a parent cosign the loan.

By renting rooms in a house to others, it should cover your expenses and if you buy smart and the market does well, be able to sell the house in 4 years and come out ahead of the game.

Jessica Grewe · Answer

Can you do PSEO? Free college while you are in high school. I have a 9th grader and looking at this option.  You can take classes even online.  It's not too late. Look into summer classes too.

I'm not sure about financial aid but I would look into what would happen if you did buy a house.  This was a great point made by @Natalie Kolodij

Run numbers on a rental you would buy.  Would you make your $10,000 back before your 4 years of college is up?  Most likely YES! You can borrow the cost of college during college and for 6 months after graduating for free.

Time is money.

Do you have a bank lined up for a loan?  Would love to hear your plan for getting the loan?  Do you have a cosigner?

If you are smart enough to come up with this plan you are smart enough to do the research to figure out how to execute it.

Best of luck

Jessica Grewe

Covered by Faith

Short term rentals Rochester MN

Natalie Kolodij · Answer

You can ideally do both of these things for free.

Start applying to every any any scholarship on Fast web.

Apply for any related to accounting, state CPA societies, ect

First time home buyer programs often allow for 0% purchases ect.

Also keep in mind though- owning a house could interfere with your financial aid- I'd speak to an expert about that.

But ultimately- Save that $10k for sure.

But TRY to not need to use any of it for either school cost or the purchase of a property. Or minimally.

Zack Thiesen · Answer

I never went to college and it was the best decision I've ever made. These days its looking more and more like a bad return on investment. It too often leads to disappointment or surprise with compensation after completion, being cash-poor and/or in debt service for decades. Don't get me wrong, I intrinsically believe in the value of higher education and it's really unfortunate that it is regarded mostly as an investment. But it is an investment, and being as such, it's important to look at the return you get and how the longer term numbers pencil out.

My advice would be to save that cash as much as possible and house hack with the FHA loan and find a community college that you can possibly attend for as cheap as possible to pursue the initial coursework to make sure it's what you want to do.

A lot of my friends who went to college repeatedly changed their majors and overspent by going straight to a university. When I was starting out as a carpenter I took a night class at a local CC's vocational education program in Residential Wiring to make myself more valuable to my employer. I ended up getting a raise and went completely free after all the grants and fee waivers.

Should I use $10,000 for college or down payment for house hack?

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