Grad Money Matters: Got Guts? Become a Student Landlord!

(This is a guest article by Kyle Chezum*)

If you're a student, chances are you pay rent to live somewhere. Real estate is a commodity. You're always connected to it, regardless of where you are. Real estate is the ground beneath your feet. And it's not free.

You may think you have to pay rent, that it's a necessity. I'll let you in on a secret. You don't. At least, you don't have to pay it to anyone but yourself. How do you do this? Simple. Buy a house.

Crazy? Not so much. You may have read my earlier article on how to prepare yourself for home ownership, while you are still a student. Today I am here to tell you that if you are diligent, you don't even have to wait until you graduate to make your home ownership dreams come true. Buying a house now makes a great deal of sense if you have access to some capital, want to build wealth, gain experience, and have nerves of steel. If you own a home and rent it out, you can save yourself some rent money and develop a real estate portfolio at the same time. It's better than working part-time at the cafeteria, that's for sure.

Here are a few pointers to get you thinking.

You'll be investing your own rent. This is probably the best part. If you're "paying yourself rent" because you own the home, then that money is paying off your mortgage. A mortgage is like a savings account. The money you pay sticks around in the form of home equity. You're not just spending money. You're giving it back to yourself. This is much better than paying rent to someone else, which essentially means you're paying someone else's mortgage.

It's good for your resume. Employers like to see that candidates are self-starters. Imagine walking into that job interview after you graduate and describing your past work experience. "I'm a residential property manager and investor." Wow. This is good stuff.

Buy early. Most young professionals who purchase a home live there alone or with a single partner. This is a waste of space. Honestly. If you plan to purchase a home when you graduate anyway, why not buy it while you're still a student and rent out the extra space? Make some money for a change.

Research property values. All of these ideas are great, but if you buy the wrong house, you're asking for trouble. Just look at the financial mess around us! Some neighborhoods are set to decrease in value in the future, and you don't want that. And you don't want to borrow more than what you can afford to pay. Do some homework before you make a purchase. Actually, do a ton of homework before you even consider making a purchase.

Ask your parents to pay for it. This isn't a joke. Many parents purchase homes when their children leave for college with the expectation that their children, and their children's friends, will become tenants. If your parents are willing to buy the house in your name or provide money for the down payment, you'll be able to start your real estate career in no time.

Use student loans to make part of the down payment. Check with your lender first. Most student loan originators will likely allow this, because student loans can be used to pay for living expenses. Purchasing a house is definitely a living expense. Don't, however, try to use student money to pay your whole mortgage. This may not work well, unless you plan to stay in school for the next thirty years.

Rent to your friends. Managing the maintenance needs of a residential property will be much easier if you're working with your friends. Try to get your friends interested first, before you put an ad in the paper. It will be a much more comfortable experience for you.

Document everything legally. This will kill you, but it has to be done. Make your tenants sign contracts. Big contracts. Huge contracts. Outline everything that your tenants are entitled to as tenants, and outline everything that you are obligated to do for them. Make sure everyone signs everything.

Prepare to be stressed. You're a property manager. Do you know what this means? This means everything from fixing a broken washing machine to killing a spider in the backyard to telling the neighbors, again, to keep their dog off your tenants' front lawn. You will get phone calls, all the time, demanding that you take care of any number of issues that may arise. If you can't handle your classes and your part-time job as it is, don't kid yourself. You're not ready for home ownership. But if you're active, energetic, and passionate about challenges, consider investing in a home and becoming a student landlord.

It'll beat working at the cafeteria. Guaranteed.

*About the author: This guest post was provided by Kyle, a content specialist at Lender411.com. Lender411.com helps homebuyers compare mortgage rates, find local lenders, and locate the best mortgage packages available.

*Image Credit: Photograph by origamidon [via Flickr Creative Commons]

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