Does this sound like an insane plan, or too much to handle?

Discuss various money matters here. Loans (federal and private), scholarships, lottery winnings, or other school finance related information and queries.
User avatar
HennessyVSOP
Posts: 1527
Joined: Fri Feb 19, 2016 2:54 pm

Does this sound like an insane plan, or too much to handle?

Postby HennessyVSOP » Tue Aug 09, 2016 7:20 pm

I'm hoping to buy a house before I begin law school in one of two southern cities. It feels like a better financial decision to start financing a home and building equity if I'm going to have a static income for 3yrs. (36 months of student loan **income**) rather than throwing that ~$36,000 into a rented apartment.

In both cities, the market favors buyers, with respective price-to-rent ratios of around 15 and 20. Both cities are also known for their wide availability of duplex houses.

I have enough saved for a FHA down payment on a $150,000-ish home.

Would it be crazy to purchase a duplex and rent one side in order to pay your mortgage during school? I know it's done all the time; I just wonder how much the stresses of being a landlord would interfere with school. Also, please throw other factors at me that I may not be considering or I might be forgetting.

I'm just sitting here imagining subtracting +$36k off my potential student loan balance.

User avatar
jkpolk
Posts: 1099
Joined: Thu Nov 10, 2011 10:44 am

Re: Does this sound like an insane plan, or too much to handle?

Postby jkpolk » Tue Aug 09, 2016 7:32 pm

Seems like you could pull it off. I think the biggest consideration is your commitment to wherever you're buying the house. Job market/life can be unpredictable: tying yourself to a certain city by purchasing a home is a big commitment. Time/transaction costs/hassle of selling and buying are substantial if you want to go elsewhere after school (or transfer or dropout or whatever).

Wipfelder
Posts: 726
Joined: Wed Jul 09, 2014 3:26 am

Re: Does this sound like an insane plan, or too much to handle?

Postby Wipfelder » Tue Aug 09, 2016 7:40 pm

I'd do it maybe if you were okay with holding on to the property for a few years after law school, and having someone else manage the property. Trying to do an eviction or even collecting rent and everything would be a huge time-suck during a pretty stressful time in your life.

-You're probably not going to be able to close before school starts, so your going to have to get renters and all that also while you're figuring out 1L.

-You'll probably take a loss on the property if you sell within 3 years

-It may be difficult to get a loan secured without being able to prove income or other assets (you'd prolly need a co-signor).


If this were like, June I'd say "Hell yea!" but right now, I'm thinking maybe you should rent a year and then buy next summer or something like that.....I own several rental properties and bought a house this summer to live in while law school starts. I wouldn't buy a rental right now (My 1L starts in a few weeks, probably just like yours).

User avatar
HennessyVSOP
Posts: 1527
Joined: Fri Feb 19, 2016 2:54 pm

Re: Does this sound like an insane plan, or too much to handle?

Postby HennessyVSOP » Wed Aug 10, 2016 5:19 pm

Wipfelder wrote:I'd do it maybe if you were okay with holding on to the property for a few years after law school, and having someone else manage the property. Trying to do an eviction or even collecting rent and everything would be a huge time-suck during a pretty stressful time in your life.

-You're probably not going to be able to close before school starts, so your going to have to get renters and all that also while you're figuring out 1L.

-You'll probably take a loss on the property if you sell within 3 years

-It may be difficult to get a loan secured without being able to prove income or other assets (you'd prolly need a co-signor).


If this were like, June I'd say "Hell yea!" but right now, I'm thinking maybe you should rent a year and then buy next summer or something like that.....I own several rental properties and bought a house this summer to live in while law school starts. I wouldn't buy a rental right now (My 1L starts in a few weeks, probably just like yours).


Actually I'm in the process of applying this fall - won't be matriculating til Fall 2017.
Didn't think about the potential of having to go through an eviction. Hmm.

User avatar
twenty
Posts: 3181
Joined: Wed Jan 11, 2012 1:17 pm

Re: Does this sound like an insane plan, or too much to handle?

Postby twenty » Wed Aug 10, 2016 6:10 pm

Will FHA's underwriting guidelines consider the 36k "income"? I feel like they won't.

User avatar
Nebby
amateur huffpo
Posts: 29554
Joined: Sat Feb 01, 2014 12:23 pm

Re: Does this sound like an insane plan, or too much to handle?

Postby Nebby » Wed Aug 10, 2016 6:30 pm

twenty wrote:Will FHA's underwriting guidelines consider the 36k "income"? I feel like they won't.

They won't. Loans are not income

Wipfelder
Posts: 726
Joined: Wed Jul 09, 2014 3:26 am

Re: Does this sound like an insane plan, or too much to handle?

Postby Wipfelder » Wed Aug 10, 2016 7:30 pm

HennessyVSOP wrote:Didn't think about the potential of having to go through an eviction. Hmm.


I'd have the equivalent of about 5 month's rent saved to handle emergencies/non-payers or whatever. You can assume 2% of the value of the property per year in maintenance.

Hiring a property manager is a good idea in this circumstance, they take care of everything, you cut them in on 10% of the rent. They'll handle all the legal and maintenance stuff.

Just make sure your Income per month can handle a 10% cut to a property manager, maintenance, and emergencies.

User avatar
HennessyVSOP
Posts: 1527
Joined: Fri Feb 19, 2016 2:54 pm

Re: Does this sound like an insane plan, or too much to handle?

Postby HennessyVSOP » Fri Aug 12, 2016 12:44 pm

twenty wrote:Will FHA's underwriting guidelines consider the 36k "income"? I feel like they won't.


What's the solution for this? Purchase while still working? Get a co-signor?

User avatar
twenty
Posts: 3181
Joined: Wed Jan 11, 2012 1:17 pm

Re: Does this sound like an insane plan, or too much to handle?

Postby twenty » Fri Aug 12, 2016 12:57 pm

HennessyVSOP wrote:Get a co-signor?


This is definitely the easiest way to make that happen, particularly if your parents will qualify.




Return to “Financial Aid”

Who is online

Users browsing this forum: No registered users and 1 guest