College is unaffordable and taking on student loan debt isn't a smart financial choice. If you're thinking about going to college, here's how you can do so for free.
I was intrigued by the notion of a new college student buying a house in a college town and renting out rooms to fellow students. I asked Gemini what would be involved. (OMG, I couldn't have done this in a hundred different lifetimes!):
"An 18-year-old college freshman buying a house to rent out rooms to other students is a very ambitious undertaking! Here's a breakdown of what would be involved, highlighting the challenges and considerations:
1. Financial Considerations:
Down Payment:
This is the biggest hurdle. Most lenders require a substantial down payment, especially for investment properties (which this would be considered).
First-time homebuyer programs might offer some assistance, but these are often geared towards owner-occupied properties.
Gift funds from family are a possibility, but documentation is essential.
Credit Score:
A good credit score is crucial for obtaining a mortgage. At 18, building a strong credit history is often still in progress.
Proof of Income:
Lenders need to see a stable income stream. College students typically don't have this.
Co-signers: A parent or other responsible adult with strong credit and income might be required to co-sign the mortgage.
Business Plan: Showing a detailed business plan for the rental property, including projected income and expenses, might help.
Additional Costs:
Closing costs, property taxes, insurance, maintenance, and potential vacancy periods all factor into the overall cost.
Emergency fund: Having an emergency fund to cover unexpected repairs or vacancies is vital.
Student Loans: Existing student loan debt will be factored into the debt to income ratio, which will impact the amount of money a lender will provide.
2. Legal and Contractual Aspects:
Mortgage:
Understanding the different types of mortgages (fixed-rate, adjustable-rate) is essential.
Getting pre-approved for a mortgage is a crucial first step.
Rental Agreements:
Creating legally sound rental agreements is vital.
Understanding landlord-tenant laws in your state is crucial.
Insurance:
Landlord insurance is necessary to protect the property and yourself from liability.
Zoning and Regulations:
Check local zoning regulations for restrictions on rental properties.
Some areas have occupancy limits or require rental licenses.
3. Property Management:
Finding Tenants:
Marketing the property to students is essential.
Background checks and tenant screening are crucial.
Maintenance and Repairs:
Being prepared to handle maintenance issues is vital.
Either managing repairs yourself or hiring a property management company.
Financial Record Keeping:
Accurate records of income and expenses are necessary for tax purposes.
Time Commitment:
Being a landlord requires a significant time commitment, which can be challenging for a college student.
4. Time Management and Academic Impact:
Balancing Academics and Property Management:
Managing a rental property while attending college full-time is a significant challenge.
Time management skills are essential.
Stress Management:
Being a landlord can be stressful, especially for a young person.
Key Challenges for an 18-Year-Old:
Lack of Credit History: Building a strong credit history takes time.
Limited Income: Most college students don't have a stable, high-paying job.
Lack of Experience: Property management and real estate transactions are complex.
Time Constraints: Balancing college studies and property management is difficult.
Recommendations:
Build Credit: Start building credit early and responsibly.
Save Money: Save as much money as possible for a down payment.
Learn About Real Estate: Educate yourself about real estate investing and property management.
Seek Guidance: Talk to real estate professionals, financial advisors, and experienced landlords.
Consider Alternatives: Starting with a smaller investment, such as a rental property with a co-signer, might be a more manageable first step.
Buying a rental property at 18 is a huge undertaking. It is possible, but it will require a lot of planning, hard work, and financial backing."
Fascinating! So it's definitely a heavy lift but it isn't impossible. And I do agree with Gemini, having a parent to help is huge.
I knew a girl in high school who her parents did this. They bought a house in the college town she moved to and she lived in it rent free while she went to school. We graduated high school in 2009 so I bet her parents got a real good deal on it. That said, with access to so much information these days, a 16 year old could easily watch a real estate YouTuber and learn the ins and outs of real estate investing. And if they have parents who can cosign with them, more power to them.
I also wouldn't underestimate kids. The neighbor kid up the street from my parents house started a lawn mowing business when he was in high school. By the time he graduated he had some pretty nice lawn maintenance equipment, a trailer, a real nice truck to haul it all around, and a Beemer he drove to school. If a kid can figure out how to buy $100K+ worth of vehicles and equipment, a house isn't a huge leap. Hard for sure, but doable.
HGTV's Property Brothers started exactly this way...they bought a place that needed some serious TLC, got money to fix it up from some of their renters...and the rest is history. :)
It's an interesting story, and the Scott brothers are quite entrepreneurial, getting their start at age 7 selling covered clothes hangars. Jonathon learned to build a house at age 16 by helping his father build a ranch home. By the time they entered college they had saved up tens of thousands of dollars.
In 1996, tuition plus fees in Canada was about $2400/year.
But they didn't start by buying a house. They did something even more interesting. They leased a property across from the campus which had a very low monthly payment that hadn't changed in years. They then rented out rooms to fellow students, lived there for a year rent-free, and saved the profit (about $800/month) for their first home purchase.
They bought their first home, a $200,000 property, for $250 down! They renovated it and flipped it for a reported $50,000 profit. They were destined for greatness!
Your suggestions around doing community college are so practical. In my state (NC), community college is free if attending during high school—and possibly after. And I know it is in many other states as well. That's such an easy way to get 2 years completed...which holding down a PT job or finishing up high school. It's truly a no-brainer.
I was intrigued by the notion of a new college student buying a house in a college town and renting out rooms to fellow students. I asked Gemini what would be involved. (OMG, I couldn't have done this in a hundred different lifetimes!):
"An 18-year-old college freshman buying a house to rent out rooms to other students is a very ambitious undertaking! Here's a breakdown of what would be involved, highlighting the challenges and considerations:
1. Financial Considerations:
Down Payment:
This is the biggest hurdle. Most lenders require a substantial down payment, especially for investment properties (which this would be considered).
First-time homebuyer programs might offer some assistance, but these are often geared towards owner-occupied properties.
Gift funds from family are a possibility, but documentation is essential.
Credit Score:
A good credit score is crucial for obtaining a mortgage. At 18, building a strong credit history is often still in progress.
Proof of Income:
Lenders need to see a stable income stream. College students typically don't have this.
Co-signers: A parent or other responsible adult with strong credit and income might be required to co-sign the mortgage.
Business Plan: Showing a detailed business plan for the rental property, including projected income and expenses, might help.
Additional Costs:
Closing costs, property taxes, insurance, maintenance, and potential vacancy periods all factor into the overall cost.
Emergency fund: Having an emergency fund to cover unexpected repairs or vacancies is vital.
Student Loans: Existing student loan debt will be factored into the debt to income ratio, which will impact the amount of money a lender will provide.
2. Legal and Contractual Aspects:
Mortgage:
Understanding the different types of mortgages (fixed-rate, adjustable-rate) is essential.
Getting pre-approved for a mortgage is a crucial first step.
Rental Agreements:
Creating legally sound rental agreements is vital.
Understanding landlord-tenant laws in your state is crucial.
Insurance:
Landlord insurance is necessary to protect the property and yourself from liability.
Zoning and Regulations:
Check local zoning regulations for restrictions on rental properties.
Some areas have occupancy limits or require rental licenses.
3. Property Management:
Finding Tenants:
Marketing the property to students is essential.
Background checks and tenant screening are crucial.
Maintenance and Repairs:
Being prepared to handle maintenance issues is vital.
Either managing repairs yourself or hiring a property management company.
Financial Record Keeping:
Accurate records of income and expenses are necessary for tax purposes.
Time Commitment:
Being a landlord requires a significant time commitment, which can be challenging for a college student.
4. Time Management and Academic Impact:
Balancing Academics and Property Management:
Managing a rental property while attending college full-time is a significant challenge.
Time management skills are essential.
Stress Management:
Being a landlord can be stressful, especially for a young person.
Key Challenges for an 18-Year-Old:
Lack of Credit History: Building a strong credit history takes time.
Limited Income: Most college students don't have a stable, high-paying job.
Lack of Experience: Property management and real estate transactions are complex.
Time Constraints: Balancing college studies and property management is difficult.
Recommendations:
Build Credit: Start building credit early and responsibly.
Save Money: Save as much money as possible for a down payment.
Learn About Real Estate: Educate yourself about real estate investing and property management.
Seek Guidance: Talk to real estate professionals, financial advisors, and experienced landlords.
Consider Alternatives: Starting with a smaller investment, such as a rental property with a co-signer, might be a more manageable first step.
Buying a rental property at 18 is a huge undertaking. It is possible, but it will require a lot of planning, hard work, and financial backing."
Fascinating! So it's definitely a heavy lift but it isn't impossible. And I do agree with Gemini, having a parent to help is huge.
I knew a girl in high school who her parents did this. They bought a house in the college town she moved to and she lived in it rent free while she went to school. We graduated high school in 2009 so I bet her parents got a real good deal on it. That said, with access to so much information these days, a 16 year old could easily watch a real estate YouTuber and learn the ins and outs of real estate investing. And if they have parents who can cosign with them, more power to them.
I also wouldn't underestimate kids. The neighbor kid up the street from my parents house started a lawn mowing business when he was in high school. By the time he graduated he had some pretty nice lawn maintenance equipment, a trailer, a real nice truck to haul it all around, and a Beemer he drove to school. If a kid can figure out how to buy $100K+ worth of vehicles and equipment, a house isn't a huge leap. Hard for sure, but doable.
HGTV's Property Brothers started exactly this way...they bought a place that needed some serious TLC, got money to fix it up from some of their renters...and the rest is history. :)
It's an interesting story, and the Scott brothers are quite entrepreneurial, getting their start at age 7 selling covered clothes hangars. Jonathon learned to build a house at age 16 by helping his father build a ranch home. By the time they entered college they had saved up tens of thousands of dollars.
In 1996, tuition plus fees in Canada was about $2400/year.
But they didn't start by buying a house. They did something even more interesting. They leased a property across from the campus which had a very low monthly payment that hadn't changed in years. They then rented out rooms to fellow students, lived there for a year rent-free, and saved the profit (about $800/month) for their first home purchase.
They bought their first home, a $200,000 property, for $250 down! They renovated it and flipped it for a reported $50,000 profit. They were destined for greatness!
I had no idea that's how Property Brothers got their start. Very cool!
Your suggestions around doing community college are so practical. In my state (NC), community college is free if attending during high school—and possibly after. And I know it is in many other states as well. That's such an easy way to get 2 years completed...which holding down a PT job or finishing up high school. It's truly a no-brainer.