Buying a home in Law School Forum

[MOLaw]

I've been considering purchasing a cheap home/condo. I'm a little nervous about it so I want some advice.

Reasons why I think its a good idea -
1. Avoiding expensive rentals
2. Avoiding crappy landlords/tenants
3. Being able to have a companion pet
4. Decorating however I see fit
5. Ability to take a sledgehammer to a wall if I get too stressed (jk)

Cons -
1. Paying a loan with a loan
2. What if something breaks?
3. Being a crappy landlord after I leave school and put the place up for rent
4. ...YOUR ANSWER COULD BE HERE.

Any advice is welcomed!

[NorCalOldGuy]

we've considered the same question. we already own a home, and just sold a rental property, and will not be buying initially when we move for school...

it depends on how bad the rental market is where you are looking.

would the purchase be in cash? (edit, i see no, that you would have a mortgage). if you can get a great rate on the mortgage, that is very cheap money still, even w/ recent slight interest rate hikes...

if not, remember that one of the major advantages of having a mortgage is that the interest in tax-deductible. but if you're in school, you may not need that deduction or be able to utilize it

[heythatslife]

Since you talk about buying a "cheap home/condo," I assume this is not in a major job market (i.e. not NYC/LA/CHI). Also it sounds as though you'll have law school loans on top of whatever debt you're taking on to fund the purchase. In that case, DON'T.

Home purchase and ownership has hidden transaction and maintenance costs that are not immediately apparent when you only compare mortgage payments to monthly rent. I recall from reading somewhere that the break-even point is usually something like at least 5-7 years in most places in the country for where you start to get ahead by ownership over rental. The exact number of years may be off, but it was definitely way over 3.

You don't know where you'll end up being employed after graduation. You will appreciate the flexibility of not having another several hundred grands of debt hanging over your head and an immobile/illiquid asset when you have to up and root to start your career upon graduation. Being an absentee landlord is something you should avoided if you can help it, as it's not just a hassle but also very expensive and will eat substantially into whatever rent you expect to extract by leasing it out. Yeah, rental hunting is a pain but buying/selling is just as stressful and time-consuming if not more. Also, as NorCalGuy said, not having substantial income during law school eliminates most tax advantages of home ownership anyway.

[Civilservant]

How exactly do you plan on getting approved for a mortgage as a student with no full time income?

[merde_happens]

How exactly do you plan on getting approved for a mortgage as a student with no full time income?

Yes, this. The banks aren't going to approve you for a mortgage whereby you're paying the mortgage with student loan money. And if they do, please let me know so I can sell my house because that's recipe for round 2 of the 2008 financial crisis.

[MOLaw]

How exactly do you plan on getting approved for a mortgage as a student with no full time income?

I have a full-time job now. Making decent money with good credit. I would purchase before I quit my job for LS.

[MOLaw]

How exactly do you plan on getting approved for a mortgage as a student with no full time income?

Yes, this. The banks aren't going to approve you for a mortgage whereby you're paying the mortgage with student loan money. And if they do, please let me know so I can sell my house because that's recipe for round 2 of the 2008 financial crisis.

Round 2 of 2008 financial crisis is just around the corner anyways. Regardless of my activities

[MOLaw]

we've considered the same question. we already own a home, and just sold a rental property, and will not be buying initially when we move for school...

it depends on how bad the rental market is where you are looking.

would the purchase be in cash? (edit, i see no, that you would have a mortgage). if you can get a great rate on the mortgage, that is very cheap money still, even w/ recent slight interest rate hikes...

if not, remember that one of the major advantages of having a mortgage is that the interest in tax-deductible. but if you're in school, you may not need that deduction or be able to utilize it

Didn't even think tax-deductions! This is why I come to you all for these things

[MOLaw]

Since you talk about buying a "cheap home/condo," I assume this is not in a major job market (i.e. not NYC/LA/CHI). Also it sounds as though you'll have law school loans on top of whatever debt you're taking on to fund the purchase. In that case, DON'T.

Home purchase and ownership has hidden transaction and maintenance costs that are not immediately apparent when you only compare mortgage payments to monthly rent. I recall from reading somewhere that the break-even point is usually something like at least 5-7 years in most places in the country for where you start to get ahead by ownership over rental. The exact number of years may be off, but it was definitely way over 3.

You don't know where you'll end up being employed after graduation. You will appreciate the flexibility of not having another several hundred grands of debt hanging over your head and an immobile/illiquid asset when you have to up and root to start your career upon graduation. Being an absentee landlord is something you should avoided if you can help it, as it's not just a hassle but also very expensive and will eat substantially into whatever rent you expect to extract by leasing it out. Yeah, rental hunting is a pain but buying/selling is just as stressful and time-consuming if not more. Also, as NorCalGuy said, not having substantial income during law school eliminates most tax advantages of home ownership anyway.

Tampa/ Gainesville Florida are the cities that am considering. The places I'm looking at are under $50k and can bring around $600-$700 in rental market... but then again, you are correct about the employment after graduation. Ugh I wish I just had rich parents or I could hit the lotto.

[Lacepiece23]

I own rental properties now that I'm out of law school practicing. I'd say that unless you really know what you're doing, this is a terrible idea. Most of the reasons have been outlined above, but I wouldn't start my first rental while in law school.

The only way I would do it is if you FHA'd into a duplex. If you don't know what I mean by the last sentence I'd forget the rental idea.