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

[Hennessy]

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.

[jkpolk]

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]

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).

[Hennessy]

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.

[twenty]

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

[Nebby]

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

They won't. Loans are not income

[Wipfelder]

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.

[Hennessy]

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?

[twenty]

Get a co-signor?

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