Small inheritance! Invest, save, student loans??

[Blake King]

Hi guys! I recently was given $10,000 from my grandma, as she has liquidated some of my Grandpas "toys" as he passed away a year ago. I have about 35k in student loans, with a relatively low interest rate (3-5%). I would like to save for a down payment on a home, and I don't need a lot, especially if I do an FHA loan on a duplex. If I save it until I find a deal, where should I hold the money? I actually work at an investment firm in Seattle (Just graduated, just started), and I hate the idea of the money sitting there and not working as I continue to contribute to it! Any ideas on what I should do here? I have also thought about using a bit of it, maybe 1k to try a wholesaling mailer. I could send out a lot of letters writing them myself with that, and it would only take 1 deal to make it worth it. I appreciate your thoughts and suggestions!

[Scott Trench]

The question I'd ask myself would be this:

Is this the only cash I've been able to accumulate in my life? Why have I been unable to accumulate other cash? 

I see that you are a recent college grad or still in school. Real estate can be a risky business for folks that have no monthly savings rate and are depending on the income from tenants to cover the mortgage. It's less risky if you land a great job and can easily cover the mortgage payments with that income to get you through at first. Ideally, folks will want to have a large amount of money saved up for the down payment, a large (probably $1,000+ per month) savings rate, even after the new mortgage is taken on, and a reserve of cash left over to cover any unexpected repairs. That said, its also likely that you are in a life position to tackle repairs and such yourself, reducing your need for as large a cash buffer as someone with a career demanding 50+ hour weeks.

It might be wise to wait until you have begun your career, have a strong savings rate, and THEN house-hack. It's just a few more months and may make things much smoother for you. Either way, get in touch with a lender - you may find that you won't qualify for an FHA loan without at least 1 year of employment history to back the income.

In my opinion, you are extremely smart to be thinking this way already, and are thinking in a way that is likely to set you up for life at an early age. It might just be wise to make sure that you have a stronger personal cash flow position before going in to make this a little less risky.