15 bedrooms/8 bathrooms for only $73k. Can a student get a loan?

Question

I’m currently a grad student in a rural, low cost of living area and I found an interesting rental property for sale for only $73,000. The property is a 4 bed/2 bath duplex. Also on the 1 acre lot is a 2 bed/2 bath trailer, two 2 bed/1 bath trailers, a 2 bed/1 bath single family home and a 3 bed/1 bath single family home. Also one mobile home hookup rented for $125 a month. Total of 15 bedrooms/8 bathrooms. They say the current rental income is $2,000 a month with one trailer unoccupied. The rent is low for the area and would be increased if the units were cosmetically fixed up. I was wondering if it’s possible to get a loan for a property as a graduate student who does not currently have a job. I do however have enough cash to pay for 1/3 of the asking price. Would any bank ever write a mortgage to someone who is a student and won’t have a job for another year but has enough cash for a down payment and can rely on rental incomes? Or would a lender ever allow me put 10-15% down on the property, get a loan for the rest but prepay a year or two of the mortgage payments up front in order to guarantee they will get paid while I don’t yet have a job?

Account Closed · Answer

@Darius Ogloza Agreed. I realized how difficult it would be to have something like this. I would need much more knowledge/experience to make something like this work. And it would be too expensive to update it enough to draw in any of the future students at my school because there are several new apartment buildings in town where we all live for $350-650 a month.

Account Closed · Answer

@Chris Coleman thanks for the reply. I figured that would be the case but just thought I’d see what someone who knows what they’re doing had to say anyway. I would potentially be able to find a private investor if I tried hard enough. I drove past it and it looks worse in person and yes an area like this is definitely challenging to find reputable tenants so this is probably not a very good first investment property.

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@Theresa Harris Thanks for the response, I still have a year until I finish my doctorate so I do not have an actual income yet. However I do have some money saved up which could easily afford to pay the couple hundred dollars a month that a mortgage would cost for a property this cheap. So basically was just trying to find out if it’s possible to get a loan in my situation. Most likely it is not possible but can’t hurt to ask. A family member would definitely be a possibility if it worked out.

Account Closed · Answer

I’m not sure where I was asking strangers for money? I was just wondering if there is a way for a student to get funding for something like this and if a bank/lender would consider rent potential into their decision. Or if currently having money available to pay possible mortgage payments despite not having an actual income would help as well. Also there are plenty of schools in rural parts of the country so that was a pretty crazy comment haha.

Account Closed · Answer

@Rick Pozos

Darius Ogloza · Answer

To your question: If the seller is willing to go of the property for $73,000, he or she is almost certainly likely to be talked into owner financing 2/3 of the purchase price (in addition to your 1/3).  Have you tried that angle?

More to the point: a "property" that has 15 bedrooms and pays only $2,000 in gross rents per month (as I read your post) is probably more of a headache than it could possibly be worth at any price.  The drama alone will shorten your life.

Theresa Harris · Answer

What will you do once you finish your PhD?  If you are going to move to another city, you might want to wait anyhow.

Rick Pozos · Answer

I have seen this type of post come up here several times. It is from a newer person with no colleagues, no information on their profile, no picture. Basically they want some money from someone who they dont even know for this "Great Deal". Maybe I am just a cynic, but for all you new investors, "If it sounds too good to be true, it probably is". Maybe I just have a scam alert built into my brain that goes off when I see posts like this.

ps they dont usually put colleges in rural low cost areas. They want to be where they can fill their classrooms with paying students.

Theresa Harris · Answer

Do you have an income that would cover mortgage payments or help you qualify for a loan?  Would your parents co-sign a loan?

Chris Coleman · Answer

@Greg John wow, there’s a good bit to unravel here.

But the short answer is, most likely not and pretty much just “no”.  Banks are not known for giving mortgages to people who are unemployed, at least not since 2008.

So then you’re looking at getting a Private Lender, which would base the potential loan on the financials of the property, as well as potentially your ability to manage it and actually make the projected returns.

Therefore, you need to analyze and scrutinize the deal to make sure it’s a good deal, and then you could present it to a Private Lender.

You say the property has “rental income” of $2,000 per month.  Is that gross rent or cash flow?  If it’s gross rent, then what is the actual cash flow after all expenses?

Will the $73K cover the cosmetics you mention, or will you actually need more money to do those renovations?

If you have a deal where you can put up to 33% of the total with your own money, manage it conservatively, and it will generate 12% or more returns for the Lender, the you should have no problem getting Private debt.

But learn as much as you can about analyzing real estate deals and make sure the numbers really work.

Also, since it’s in a rural area, make sure you can keep good paying tenants in there.

Sounds like there could be plenty of unknowns here, so just be cautious and careful.