Buying a House for Law School

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lovethelaw324

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Buying a House for Law School

Postby lovethelaw324 » Mon Jan 29, 2018 1:19 pm

Hi, any input would be greatly appreciated regarding my question. I am planning on attending U Alabama Law school where the rent is cheap but buying a cheap house can be cheaper monthly and also leave me with something at the end. Would buying a cheap house (80-90k) and then renting it out once I graduate to continue income be a bad idea? I would essentially be living there for free the 3 years because my mortgage payments would be around 350 each month and I would rent out the second bedroom for $400, which would still be a big savings for anyone wanting to live in a nice house with me. So really my major cost would only be the down payment. I'm not that knowledgeable on real estate so any advice would be great.

albanach

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Re: Buying a House for Law School

Postby albanach » Mon Jan 29, 2018 1:44 pm

lovethelaw324 wrote:Hi, any input would be greatly appreciated regarding my question. I am planning on attending U Alabama Law school where the rent is cheap but buying a cheap house can be cheaper monthly and also leave me with something at the end. Would buying a cheap house (80-90k) and then renting it out once I graduate to continue income be a bad idea? I would essentially be living there for free the 3 years because my mortgage payments would be around 350 each month and I would rent out the second bedroom for $400, which would still be a big savings for anyone wanting to live in a nice house with me. So really my major cost would only be the down payment. I'm not that knowledgeable on real estate so any advice would be great.


1) What's property tax like? Any other fees like HOA, ground maintenance, etc. Owning property can be expensive - do you have a reserve that can cover it? Can you cover a couple of thousand for a plummer if the bathtub leaks through the kitchen ceiling? Can you cover a new washer/dryer if the existing one dies?

2) When would you break even, assuming that to sell it will cost your 8-10% of the sale price (7% realtor and 1-3% for other fees)?

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nealric

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Re: Buying a House for Law School

Postby nealric » Mon Jan 29, 2018 5:26 pm

lovethelaw324 wrote:Hi, any input would be greatly appreciated regarding my question. I am planning on attending U Alabama Law school where the rent is cheap but buying a cheap house can be cheaper monthly and also leave me with something at the end. Would buying a cheap house (80-90k) and then renting it out once I graduate to continue income be a bad idea? I would essentially be living there for free the 3 years because my mortgage payments would be around 350 each month and I would rent out the second bedroom for $400, which would still be a big savings for anyone wanting to live in a nice house with me. So really my major cost would only be the down payment. I'm not that knowledgeable on real estate so any advice would be great.


A handy dandy calculator: https://www.nytimes.com/interactive/201 ... lator.html

In most scenarios, buying does not make sense unless you plan on living in your house for a while (usually 5+ years) due to overhead from closing costs and due to the way loan amortization works (most of the early payments are interest). Exceptions are situations where closing costs are very low (sometimes happens in a cash sale) or the market is rapidly appreciating (hard to predict), or where the rental market is out of whack (rare).

Being an absentee landlord is rarely a good idea. You want to be local to be able to check up on the place and respond to issues. Property managers can be quite expensive and aren't necessarily good.

goingnutslawschool

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Re: Buying a House for Law School

Postby goingnutslawschool » Tue Jan 30, 2018 1:06 am

My vote is don’t do this unless you plan on staying in the area longer than just getting through law school. Are you planning on setting down roots there? If your plan is to just get your law degree then get out and move somewhere else then my advise is a resounding no. Especially if you have no intention of staying in Alabama. If it were in a real estate market that is increasing every year (like the one I come from in Austin) and you see it as an investment to keep the property until it increases enough then a definite yes. Somehow I don’t see that happening there. It might just become a burden to unload as quickly as you can once you finish up.

StephArizona

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Re: Buying a House for Law School

Postby StephArizona » Tue Jan 30, 2018 1:28 am

If you have the 20% so P&I isn't an issue and you feel you can line up a roomate and it's close to campus, it might not be a bad idea. Especially if you have established credit. You'd have to make a plan for what happens happens when you move.

There are loan issues with primary residence and 2nd homes so that home could impact your future ability to buy, so that's something to consider, especially if it's classified as an investment property. Ive been looking at both options, as well, plus van conversions and tiny homes. I had a friend rent a space on a lot for their tiny home when they moved to San Fran. But renting sometimes is just worth it, especially if it's cheap.

I'd just look into all aspects and figure out the loan situation first.

totesTheGoat

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Re: Buying a House for Law School

Postby totesTheGoat » Wed Jan 31, 2018 1:31 pm

1) Do you really want to be a landlord while going through law school? Seems like a giant headache, especially for an $80-90k house. What happens when a bathroom floods the night before your finals? See, your "roommate" isn't a roommate. They're your tenant, and its your door they're going to be pounding on at 2am when they snap the handle off the refrigerator or get a condom lodged in the plumbing. You're the one they're shafting when they can't pay their rent.
2) What happens when you can't find a tenant for summer or for another semester? Can you actually make the full payments, or do you have to have a tenant in order to pay your bills?
3) What happens when you end up moving to Atlanta in 3 years for your new shiny legal job, and you have some random annoying house back in Alabama that you have to maintain and/or try to sell?
4) What happens, God forbid, when you decide that law school isn't for you and drop out during your 2L year? Are you going to keep living in that house and try to find work on campus? Are you going to have a $75k mortgage on top of whatever your primary residence costs as you move back home and try to figure your life out?

I'm not saying that this is a really stupid idea, but this is a really stupid idea. The "math" may work out in your advantage, but the risk doesn't. One of a thousand different things could go just a little wrong, and your dream of spending law school in a nice house turns into a nightmare. Pay the premium to rent, an extra couple hundred per month is worth the peace of mind that no matter where law school takes you, you're not dragging a boat anchor of a house around with you.

totesTheGoat

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Re: Buying a House for Law School

Postby totesTheGoat » Wed Jan 31, 2018 1:37 pm

I guess there's no edit button anymore.

I'm not trying to be an ass by calling it a "really stupid idea." I bought a house during law school, and I had a much more favorable situation (I had a full-time job just down the street, I bought in the suburb we planned on living in after school, the housing market was just finishing the recovery from '08). Well, we ended up selling that house after school because I got a great offer in a different city, and we ended up putting tens of thousands of dollars into the house because of a hail storm and an A/C that fried. I'm on the fence about whether I regret buying that house or not, and I was making $80-100k through law school.

The risk of home ownership when you're not pulling in an income is insane.



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