Current Law School Student - Invest?

Question

Hey everyone!

First post here on the Bigger Pockets forums after discovering the podcast a couple of weeks ago.

I’m from Fort Lauderdale, Florida and start Law School in Miami in August. Luckily, due to my $35,000/year scholarship, I only owe $7k per year x 3 years.

I graduated undergrad with no debt and have around $35,000 saved up from a business I ran throughout my senior year. My goal in the future is to work in law and invest my money into real estate.

My question is, am I better off staying out of student debt and paying my tuition in cash over the next 3 years with the money that I have saved up or should I use that cash now as a down payment on a single-family and most likely have to take out loans?

I’m living at home so my only expenses are school. If I decided on purchasing a single family with $20-30k down, there’s a chance I wouldn’t need to take out any student loans over the next three years.

I don’t plan on having a job my first year of school but my 2nd and 3rd I’ll definitely be working part-time somewhere.

Let me know what you think. Any advice/input is greatly appreciated!

-  Zach

Account Closed · Answer

Ya can't get a loan without a job, law student or not.

Craig Anderson · Answer

The info. I am getting, through the Wall Street Journal, in this summer 2020, is that the effects of the COVID-19 virus invading the U.S. in 2020, has the U.S. entering a Recession. And some are even predicting that a crash in housing prices, will occur, in the next 6 months to 2 years from now, as the U.S. goes further into Recession in the next few months from now. So maybe it would be a strategy to wait for the said predicted crash, to then make buys in real estate.

Ebony Calloway · Answer

I would say using the 30k to purchase a property may not be the best because then you don't have much in reserves to pay for something that breaks or PITI if you currently don't have any income. If you do have income to pay at least the PITI and repairs maybe start with 20k down or less if you plan on living in the property and have some sort of steady income to pay for the new home. You could also purchase the house and then get roommates to offset some of the cost of owning a home or maybe even live for free.

Marc Winter · Answer

@Zach Cohen,

Congratulations on your finances to date.  Several issues come to mind:  student loans are very easy to get; bank mortgages without income are impossible.

I'd keep your nest egg intact, and shift thinking from buying a house to controlling a house.  Think lease with option.  No income necessary, and with the right to purchase in x years at a price set today.

Scott Mac · Answer

Hi Zach,

Your getting $35,000 a year for free for 3 years--that's a pretty good deal.

The new Tesla factory in Austin is projecting worker pay at $35,000 a year, and they have to pay tax out of that.

As long as a working won't mess up the free $35,000 after tax it's probably a good idea (but right now you don't have any idea how challenging law school will be for YOU personally time wise).

You will probably need to invest in a professional wardrobe pretty soon, and if you're anticipating going with a big firm that can take a good sized bite out of your savings.

Good Luck!

Account Closed · Answer

A lender generally will allow 1/3 of your monthly income towards a loan, rule of thumb. So, if you make $2,000 a month you *might* get a loan that has a payment of $735 PITI. At 4% interest on a 30 year fixed that is about a $100,000 house with 20% down.

Zach Cohen · Answer

Thank you all for your input.

I forgot to mention that if I did decide to purchase a rental property, I would get a part-time job on the weekends beforehand so I am able to get a loan.

Ideally, I was considering working for the next year during school so that I would be able to get a loan and put down about $20k on a single-family. Due to my low expenses because of my scholarship and living at home, I think a part-time job would help me cover my expenses throughout the next three years even if I decided to purchase a property.

I guess the question ultimately comes down to this:

If I work part time and still have $30k in the bank a year from now, would it be wise to purchase a rental property with about $20k down and $10k in reserve or should I just wait until I graduate and am working full time as an attorney?

Thanks in advance.

Current Law School Student - Invest?

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