Buying (and Renting Out) A House After College: A Good Investment?
What are your thoughts on investing in real estate (house or condo) with the means of renting it out to tenants, as opposed to moving into apartments or renting oneself?
Of course, the goal would be creating financial security for the future (albeit long term) through investing in property (renting it to residents). By doing this, remaining at home (parents/relatives, etc.) saves a chunk of expenses otherwise spent on rent and food, since most families able to tend to pool together their expenses. This, of course, could mean life and debt - I mean "death" - for some college students, especially versus some alternatives. That is just a thought, though.
What are your thoughts on how the upsides of this approach weight against the cons?
Excuse my atrocious grammatical errors. Android auto-correct is no joke.
I probably should've mentioned, I do live in Toronto, CA and not the States.
- roderick_youngLv 71 year agoFavorite Answer
Being a landlord is not necessarily an easy job. Not everyone is as neat as you. Some might trash the house. They might not pay their rent, then you'll have to evict them. Or you could get someone wonderful. Every month the house sits idle and unrented, it's bleeding money. Loans for rental property cost more than for a personal residence. And all this assumes that you have the means to buy a house. Most people don't, straight out of college. With $10k and no job history, a graduate can still buy into index funds and invest that way. Buying a house is near impossible in most areas without a larger down payment and substantial stable income. Also, a house will tie you down. If you had thoughts of moving to another state or something, home ownership will tremendously complicate things.
After working for 4 years, I got a house. My strategy was to live in it, to get the advantage of an FHA loan. I rented out rooms at below-market rates, and got 40 responses for 2 rooms, then interviewed 20 people, picking the absolute best two. And since I was living there as a housemate, I could quickly address problems that might have been hidden if I was living somewhere else. There was NOT positive cash flow coming from the housemates, and frankly, investment in a mutual fund would have paid more returns after taxes. The house itself went up in value, but much of that was because of the area (silicon valley).
- JudyLv 71 year ago
Long term this might be a good plan, especially if you're handy and can do minor maintenance and repaairs yourself, not paying someone to do it. It'll likely be a couple years or more after you're graduated and working before you can qualify for a mortgage for rental property. Do you plan on living permanently with your parents?
- Landlord365Lv 51 year ago
Being a landlord can be a huge pain in the tuckas. Some people are up for it & many are not. Read the landlord tenant laws for your state before you decide. If you think you can hack it and have the $$$ then go for it.
- 1 year ago
Sounds fine, assuming you have a big chunk of change for a down payment and the credit to actually get a mortgage right when you graduate.
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- Anonymous1 year ago
Some people have the skills and mindset for doing this. Keeping in mind that most tenants these days are total cretins, I would not waste my time or money. Even so-called 'friends' can be the worst tenants imaginable. Not my bag, but you do whatever.
- Wayne ZLv 71 year ago
I am just not have fan of having someone's first property be a rental. You are going to need a place to live someday. Plus, getting a mortgage on a rental property is tougher than an owner occupied home and the down payment requirements are much higher.
Buying a property and being a landlord always works out great on paper. However, in reality, in is not that easy.
- Non-paying tenants
- Court costs related to non-paying tenants
- Repairs (Imagine a tenant calling you at 3am in January telling you that the furnace is out)
I converted a property to a rental about 8 years ago. I sold it two weeks ago, yesterday. I am so happy to be out.
A friend of mine bought a condo to rent out. His tenant paid her first month's rent and her deposit. After that, she never paid a dime. She told him afterwards that she knows how to play the game and it would take him at least 6 months to kick her out. In the meantime, without her paying rent, he didn't have enough money to make the mortgage payment so the bank foreclosed and trashed his credit.
- Anonymous1 year ago
It's not just an investment, it's a job.
I own two homes and occupy them both - no tenants - and it's still a very expensive and time consuming thing to maintain them.
I'm not saying it's not a good investment, however there are many good investments that aren't also a job.