Student Apartments: How To Save Money and Run a Business in College
Even though most college students enter 4-year degrees, only 39% of them finish in that time. Your anticipated college costs for four years can quickly turn into tuition costs for six years.
How will you afford it, other than becoming thousands of dollars in debt from loans that you’ll likely be paying on for 20 years or more? There are other ways to afford college that you probably haven’t given much thought.
Buying a condo, for example, will not only give you monthly income to make college more affordable, but it can also give you invaluable business experience.
What Are the Benefits of Purchasing Real Estate in College?
Although you’ll need to invest a significant amount of money up front to afford a condo, the income you make can make it affordable.
A condo can provide you with income from several rooms, which can cover your mortgage costs and tuition, plus provide you with money to put in savings.
It’s much like a business. You’re investing with the sole purpose of profiting.
That, in itself, is a benefit that most college students can’t say they have. You’ll gain business experience while you move your way through college, simply by purchasing real estate.
Understand the Current Market
Before you make the leap to purchase real estate, though, you need to understand the current market for your college town.
Are there already numerous rentals available in the area? If so, your rental property may not be in demand, which could leave you losing money.
Talk to a real estate agent to learn about the projected market in a few years. The last thing you want to do is purchase real estate in an area where the market will sink by the time you graduate or anticipate to sell.
Your real estate agent can help you foresee the market by using current market trends for the area.
Figuring Out What You Can Afford
A loan officer can determine your qualifications for a mortgage based on your income and assets, and those of your cosigner if you have one.
The total of all your debts, including a mortgage and student loans, shouldn’t exceed 36% of your income, and your total mortgage payment, insurance, and taxes should be no more than 28% of your gross income.
Therefore, if you make $25,000 per year, your total mortgage and other housing costs shouldn’t exceed about $583 per month. Your total debts should stay under $750.
For a great resource on the entire condo buying process, check our comprehensive guide here.
How to Get Financed
As a young college student, the reality is that it may be difficult to get financed for real estate on your own. You’ll likely need a cosigner, like a parent, with an excellent credit history.
If you have credit card debts, it’s best to pay them off before applying for a loan. Stay on top of your credit report, too, so you can quickly take care of any issues that may arise.
You’ll need some amount of down payment for any mortgage, but an FHA loan only requires 5%, making this mortgage rather affordable for college students.
Also, Condo.Capital has published a great condo financing guide here.
Be a Responsible Landlord
To make the most of your real estate business experience, it’s important to understand what it takes to be a good landlord.
It may be best to search for trustworthy tenants who you know well, especially since this is your first experience renting. Still, draw up legal agreements to protect yourself in the event a renter doesn’t pay or causes damage to your rental.
If you treat your tenants well, they’ll likely treat you, and your rental, well. Plus, you’ll learn valuable skills that will come in handy in the future, should you choose to invest in more real estate or another business.