How to Pay for College Using Real Estate: A Definitive Guide

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Young people!

So many of you are either in your last year of high school or recently graduated and you’re trying to figure out how exactly you are going to pay for college.

If you are anything like I was, you haven’t been the most diligent student and haven’t really taken the necessary steps to position yourself as “scholarship friendly” and are now feeling a bit uneasy about the reality that you may need to go into debt in order to make your undergrad happen.

Don’t feel bad!

The vast majority of people face the same issue.

The truth is, you either need to be a super proactive individual, starting early on to make sure your grades are close to perfect and that you have a very well-rounded routine of extra-curricular activities, or you need to be someone with an incredibly powerful story of overcoming some major life setback. Otherwise, you don’t really stand a chance for scholarships!

It was this very reason why I’ve personally stayed away from getting my degree for so long. I had mediocre grades. I thought the whole high school club scene was lame, and I arrived at graduation facing the reality that I was going to have to either pay out of pocket or go into debt in order to get a degree.

So I didn’t.

But through studying, I’ve realized that there is a better way to pay for school that doesn’t rely on mortgaging your life or working 2-3 jobs to fit the bill. This is what I want to share in this post:

How to Purchase Real Estate With No (or Low) Money!

One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.

Click Here to Download

How Investing in Real Estate Can Pay for Your College Tuition

The following information is pretty powerful if you do it right. I wish someone had written this when I was looking to pay for school. So, please, be generous in sharing and passing it on. With that, let’s dive in!

The Ground Work

So there are some basic things about real estate you want to learn about before you go out and purchase your first investment property; however, we don’t have time to discuss those here. My suggestion is to begin here and go down all the rabbit holes you possibly can.

Related: Getting Started in Real Estate With Less Than $1,000

With that said, what I’m going to show you is how using real estate — moreover, being a landlord — can be an incredible means to pay for school.

The best course of action for this, in my opinion, is to purchase a small 4-unit apartment using a conventional FHA loan, so that you only need 3.5% of the down payment to get the property financed.

Initially, you are going to live in one of the units while renting out the additional 3 (living rent and mortgage-free, mind you) for the first 2 years. Then, in the second half of your studies, you are going to move out and rent out all 4 units.

You’ll be saving ALL of your net revenue in the process, and a year and one month after you graduate, school will be completely paid for.

Don’t believe me?



Related: How to Get Started in Real Estate Investing as a College Student (or Recent Grad)

How Much Does a Bachelor’s Degree Really Cost Me?

The average bachelor’s degree consists of 120 credit units. On average, school tuition costs around $500 per credit unit. So if you divide 120 units over the duration of 4 years, you get 30 units per year, and there are typically two semesters per academic year, so 15 units per term.

15 x 500 = $7,500 per semester, multiplied by 8 (two terms for four years of school), and you end up having a total payment of $60,000

My initial suggestion is to fill out your FAFSA and see if you can get any scholarships (obviously).

The next step is to exhaust the amount of federal and state student loans you can get. (There are some called “subsidized loans that the government won’t charge interest on until you’re out of school. Those are the best option and exactly what you want to shoot for, but there is a possibility that you may not qualify. Even so, with the other government funded option being an “unsubsidized loans,” typically the interest rates they charge are very minimal. For more information, click here.)

Go ahead and pay for school using your government-funded student loans.

I know it sounds counter intuitive, but this is leverage, not debt. You’ll see, just bear with me!

Before You Start College, Work Like an Animal!

So we are going to be purchasing an investment property prior to enrolling in college, right?

That means you need a couple thousand dollars for a down payment!

How? Good, old fashioned hard work!

Let me introduce you to your property. (Now, I’m in the San Francisco bay area, so the following numbers are most likely going to look completely different than properties in your market. Just look for the principles and apply them to your situation.) I’m going to show you how much you’re going to need to get started.

  • Property address: 123 Awesomesauce Lane, Oakland, CA 94605
  • You’re listing price is $390,000
  • 3.5% of $390,000 is $13,650 for a down payment

So you need to have in cash $13,650 in order to get the financing to make the offer on this 4-plex.


Work a Few Jobs… Period

If you are like how I was when I was fresh out of high school, you probably don’t have any work experience, so you may need to work several jobs in order to make this happen.

What does that look like practically?

Let’s say you could only get jobs starting at $10-12 an hour.

To factor in taxes, let’s just say you’re taking home $7.50-10 an hour.

Your first job starting out is at Wendy’s. (Don’t hate! That was my first job — and I almost got fired from it, too!)

So $7.50 x 40 per week (a full time schedule) = $300 a week, which is $1,200 a month

You work here Monday through Friday from 8:00 a.m. to 5:00 p.m.

Next, let’s say you were smart and during the final few weeks of school, you took some classes to get your security guard license (it only takes one day of training typically for you to be ready for the exam, and the Bank of Mom can probably fit the bill if you explain why you want to do it) and your background check and license has come in and you’re ready to start applying.

You get a swing shift job for a security company starting at $11 per hour, so let’s say your take home is $8.50.

$8.50 X 40 = $340 per week, $1,360 per month

Your hours are Monday through Friday from 6:00 p.m. to 2:00 a.m.

Already you’re at combined total income of $2,560 per month, which, if you’re still living at home, is something you should be able to save the majority of.

The final addition to this is on the weekend, be proactive about odd side jobs you can do, like mowing lawns, washing cars, stenciling house numbers on curbs, etc. to make a few extra dollars.

One brilliant idea is if you troll the free section on Craigslist,where you can usually find items that you can turn around to resale as-is, right back on craigslist.

If through odd jobs you can average an extra $300 per weekend, that would bring your monthly income to $3,760 ($300 x 4 weekends = $1,200), and if you saved EVERY penny, you could have your down payment in three and a half months.

Now, you may want to breathe a little bit and possibly take the first semester off and start school in the spring in order to have a life (and sleep).

I’m just trying to show you that if you’re determined, you can make it happen pretty quickly.


OK, I Have My Down Payment. Now What?

So now it’s time to sync up with a lender who is savvy with FHA financing.

Once you get pre-approved for your amount — Our example property is listed at $390,000, remember? Also, you may need your parents to co-sign in order to get approved — you then simply shop around.

Related: How I Used Real Estate to Pay for My Newborn Daughter’s College Education

So, for our example, let’s say you found 123 Awesomesauce Lane in Oakland on and it was listed at $390,000.

You thought it looked promising, so you decided to run some numbers to find out if it was worth pursuing or not.

You found out that rents in the area typically go between $1,850-$1,900 (this is realistic, I promise) and you have your uncle, who happens to be an home inspector, check out the property and it turns out to be top-notch condition, and it could easily rent out for $1,900 per unit.

Well, as per the requirement for an FHA loan, this property has to be your primary residency for a minimum of two years, so you’re going to live in one of the units and rent out the remaining three.

So $1900 x 3 = $5,700 in gross monthly income. You’ve been hanging around the BiggerPockets Forums and you know that, at the least, you want to take out 50% for expenses, repairs, etc., not including debt services (mortgage payment).

As for determining the mortgage payment, you’ll have a better idea after speaking with your lender, but I ran the numbers in a mortgage calculator online just to get a ball park, and at 5% interest, it came out to $2,426.58 per month.

So Here are the Numbers:

$1,900 x 3 units = $5,700

$5,700/2 (or x 0.5)= $2,850

$2,850 – $2,426.58 (mortgage) = $423.15 total ($141.05 per unit, per month)

So, you determine this is a decent deal, and you move in and begin school. At this point, you are now living mortgage free, going to school and working only part-time to cover your living expenses and enjoying life.


The First and Last Set of Two Years

Like we said near the beginning of this post, for the first two years, you are living in the property — one, to satisfy your FHA requirement and secondly because it’s a great money saver.

Related: How to “Hack” Your Housing and Get Paid to Live for Free

During the first two years of school, you have saved ALL of your net income from the property (24 months x $423.15), totaling $10,155.60.

Now, you decide its time to just bite the bullet and work full-time while going to school full-time, so you can afford another place (or if mom and dad are nice, they can let you move back home), so you can rent out your fourth unit.

Why would you want to do this?

Well, let’s take a look:

After you move out, your rental income increases to $1373.42 per month ($343.35 per unit, per month).

$1,900 x 4 units = $7,600

$7,600/2 = $3,800

$3,800 – $2,426.58 (mortgage) = $1,373.42

That’s a WHOLE lot better than what you were making per month the first two years!

The last two years of school, you again save ALL of your net income, and you’ve now accumulated (24 months x $1,373.42) a total of $32,962.08 on top of the $10,155.60 for a complete total of: $43,117.68!

So, as of graduation, let’s say you finished your degree with $60,000 (as we determined above as the average tuition cost in most schools) in subsidized and unsubsidized loans. You now have $43,117.68 of it paid for, just like THAT.

Remember above I said after a year and one month after you graduated, your schooling would be paid for completely?

Let’s run the numbers:

$60,000 – $43,117.68 = $16,882.32

$1,373.42 x 12 months = $16,481.46

$16,882.32 – $16,481.46 = $401.28

One more month of $1373.42?

What happens? #DEBTFREE!


Now, Here’s the Kicker: Appreciation

Now, I’m not one for gambling, and investing based on appreciation is gambling.

However, if you are conservative in your estimation, something really interesting could happen with our little property at 123 Awesomesauce Lane.

You see, it is typical for real estate properties to go up in value over time.

Banking on this is dangerous because you never know if the market is going to tank or what-have-you, but over the long run, real estate has always gone up, historically.

Remember that the home value of your property was $390,000 when you bought it?

Conservatively, let’s say the property value appreciated around 4% per year during the 4 years you were in school.

$390,000 x 0.04 = $15,600

$15,600 x 4 years = $62,400 in additional equity, not including the amount of the loan you’ve already paid off!

So, if things were looking good, you may decide to sell the property at graduation, and chances are you’d have enough equity to cover school costs and then some!

Then all the cash flow you’ve saved up, that $43,117.68 could be used as a down payment for bigger and better real estate investment (or a killer road trip to celebrate you graduating debt-free!).

[Editor’s Note: We are republishing this article so that our newer readers can explore new options for paying for their education. We hope you enjoyed!]

Which route would you go? Banking on your appreciation or continuing to hold the property for years to come?

Be sure to leave your comments below!

About Author

Jaren Barnes

Jaren Barnes is passionate about what the BiggerPockets community has to offer and is very active in his local real estate market. Come say hi to him on Twitter!


  1. Great post Jaren! I wish I had invested more time into learning about real estate and taking action when I was in college in stead of prescribing to the status quo.

  2. I had some friends buy duplexes in Greenville, NC when it was extremely cheap 80,000 for a duplex and then the next couple of years EAST carolina University Exploded with growth and those same duplexes were 150-175k sale price. So its a great investment to keep your kids in affordable housing. Many northern parents try this technique because it was so much cheaper for their NY, PA, New Jersey kids to live and go to school out of state. Good numbers, great information.

    • Jaren Barnes

      Hi Ericka, Thanks for leaving a comment! I totally agree that buying cheap duplexes is an awesome strategy to help minimize the cost of school! (and $80,000? Man you make me want to move! lol You can’t get a mobile home in my area for that cheap!)

  3. This is a great post! It might be a little unrealistic in the part about selling things on CL for an extra 300 per week haha but overall, its great. It brings home the point of busting your behind to come up with the down payment and then making a wise investment decision, knowing that there is research behind the numbers. I wish I had the sense to do this is college too! But like most kids at that age, get caught up in what others are doing and have a little too much fun 🙂 but this can be just as effective to pay off student loans!

    • Jaren Barnes

      Hi Jen,

      Thanks for your comment! I agree this is totally a good strategy to pay off student loans!

      On the Craigslist thing, I’ve personally done it 😉 otherwise I wouldn’t of thrown it in there as a possibility. I think it depends on what area you live in, but for me (I’m in the San Francisco bay area) there are a ton of things you can pick up in the free section (Rich people sometimes under value used items) and then resell them, and people will actually buy!

      I know a Church Pastor who does this regularly and it’s not unusual for him to make a couple thousand dollars in a weekend!

      I guess the heart behind it was inspiring people to be creative about finding income streams. 🙂

  4. Great post Jaren, this post applies to my situation and I really am looking forward to using this strategy. However I there needs to be menton of what can and most likely will go wrong if a senior in his/her last semester of high school decides to purchase and maintain a 4plex. Going to school full time, working and being a owner occupant is a lot for a first time homeowner to handle. I’m not at all saying this is a bad plan, I just think taking on massive student debt isn’t the time to dive head first into real estate without careful planning.

    • Jaren Barnes

      I completely agree Abbott! You definitely want to be smart and move with caution before diving head first into purchasing an investment property.

      I would even suggest possibly hiring a seasoned buy-and-hold person in your area for you to consult, who will agree to take you by the hand and make sure you’re not getting in over your head or making any mistakes.

      The purpose of my article though, was just to show that using real estate to pay for school was possible and to inspire young people to get creative about tackling school costs.

    • This was a very inspiring article!

      I am a student entering college this fall. I have been thinking about doing something similar to this, but I run into a few problems:

      I cannot get an FHA loan, because my parents refuse to cosign
      Property prices are outrageously high in Missoula, Montana
      I only have a few thousand for a down payment

      Given my circumstances, I think the only way I could go through with a property purchase is to find an owner-financed deal, a lease option, or a subject-to.

      I would love to get some thoughts on my situation!

      Again, excellent article. It was a joy to read. 🙂

      • Jaren Barnes

        Hi Jeff,

        Man go you dude! Love the mindset!

        If you can’t get a co-sign from your parents or an older “established” friend, it may be a possibility to structure some kind of partnership with someone who has good credit.

        Maybe give them a portion of the rents up to a certain amount, or an ongoing split (but if they’re only co-signing the loan and doing nothing else, I’d personally try to make their share a small amount).

        In terms of only having a few thousand saved up, what’s stopping you from taking time off from school for a semester or two, and working to save up until you have enough?

        Also in terms of area, I feel you man! I live in one of the most expensive areas in the world!

        I’d consider going a couple hours out from where you live. For example, I’m in the San Francisco bay, but I’m planning to invest in Sacramento (hopefully.. I’m still looking into it) which is about 2 hours from where I live.

        If you look for surrounding markets where the numbers work it can work out in your favor for sure!

        I’d personally caution away from a creative finance deal to cover school costs, or as your first deal in general.

        I mean, it could totally work out but it’s higher risk than I’m comfortable with, and I don’t want to be stuck with a disaster related to school debt, and you want to get your feet wet before you dive off the deep end, you know?

        Just my thoughts…

        • Hey, Jaren! Thanks for the response!

          I have thought about trying to have an established friend help out with a house loan, and I’m still considering it. I would take a semester off from school, but I have over $4000 in scholarships that I don’t want to throw away! However, I’ve got a year to go through with this type of deal, as I’m required to live on campus first year. If all goes well, I will have found a way to purchase a property by my sophomore year and make money off of that 🙂

  5. Great post! I’ve worked in the college financial aid industry for over 20 years, and it also works if you’re a parent of a college student:
    Say your daughter wants to go to University of Oregon. In-state off-campus cost of attendance for 13-14 is $24,352. Borrow the full $24,352 in a PLUS loan (Federal education loan for parents) with a current interest rate just over 7%, and you can defer the payment of the principal until 6 month after your daughter graduates. From the PLUS loan, $9,763 goes to the University to pay for tuition/fees, leaving a $14,589 credit balance to pay for room, board, books, etc. This goes into your pocket, half at the beginning of the fall semester, and half at the beginning of the spring semester.
    Rather than having your daughter live on campus, buy a 2-bedroom condo close to school (I’m not allowed to place a link here, but I found one on Zillow for $135,000). A 25% down payment would be $33,750, with a balance of $101,250. For 30 years at 4.5% interest, your monthly P&I would be $513 per month. Property taxes and insurance will run you another $200 per month for a total expense of $713/month. Put your daughter in one of the bedrooms, and rent the other bedroom to her friend for $4000 per semester (still cheaper than if she lives in the dorms, and this way she gets a full kitchen). Charge an additional $1000 for the summer months. Take the $14,589 credit balance from the PLUS loan and the $9000 from the roommate ($23,859) to cover the annual mortgage/taxes/insurance costs of the condo ($8556) and to pay down the principal on the mortgage. Repeat for the next three years: borrowing the full PLUS loan, using it to pay for your daughter’s tuition, and using the credit balance to pay down the principal of the mortgage, and using the income from the roommate to cover the annual costs of the mortgage.
    The real estate market in Eugene has appreciated 5.1% in the past year, and is expected to do at least that this year. If the market appreciates 5% per year, when your daughter graduates, you can sell the condo for $164093. At that time, you will have paid the principal down by $7027 in monthly mortgages payments (essentially paid by the roommate), and will have collected $58356 in PLUS loan credit balance checks. If you’ve used those checks to pay down the mortgage principal, you now only owe $35,896 on the property. When you sell it for $164,093, you’ll get a check for $118,351 ($164,093 minus the 6% real estate agent commission minus the $35,896 to pay off the mortgage). Use that check to pay off your PLUS loans and use the rest to take your family on a vacation to celebrate your daughter’s graduation!
    If your daughter goes to school in an area that isn’t appreciating, don’t sell the property when she graduates. Rent the whole thing to two other college students, and use the positive cash flow to make your monthly PLUS loan payments.
    (You may only use your PLUS loan for your kid’s educationally related expenses – which include tuition, fees, room and board, books and supplies, transportation, miscellaneous personal expenses and loan fees of just over 1%. As long as you are only using the funds for these purposes, you’re good to go.)

  6. Heck we just paid about $600 per summer school class via a local college.
    Not including the cost of textbooks for courses.

    ” average bachelor’s degree consists of 120 credit units.
    On average school tuition costs around $500 per credit unit.
    So if you divide 120 units over the duration of 4 years “

  7. Justin Fortier on

    I just purchased a beautiful 4 plex for 415000 in my local market, which is way cheaper than San Francisco. And I have a huge problem with your numbers as a socal investor. I’ve been around bigger pockets since they started podcasting and never had a problem until I read this. Don’t misunderstand me owner occupied 4 units are great. But you are seriously misleading college students here and it struck a nerve. First you leave off the fact that closing costs are going to be an additional 2% of purchase price and the pmi payment is going to cut into your monthly cashflow about 400/mo at that price point. I just did this using a fa loan with 3.5% down and I needed about $32,000 to close plus an additional 3 months of mortgage payments in the bank left over to get funded (about $9000). And unless you want to fail right away you should also have some reserves. How in the HECK did you come up with bing bang boom 13k invested and you can pay for college?! Don’t forget any repairs, home warranty you may want, all monthly expenses like water, gardening, trash, insurance, property management and numerous other opex and capex which WILL arise. But hey I did it and lived to tell but I only break even at the end of the day. You should be realistic when blogging to newbies so when they get out to the REAL WORLD and talk to someone in the mortgage banking industry about they’re dream they don’t get discouraged and quit.

    • Adam Christopher

      I have to agree with Justin and say that the numbers are misleading for the reasons he suggested. I think It’s very possible to get free housing by being a landlord and also make some money when you sell, when you are done in 4 years. I bought a 4 bed/2 bath single family for 182 when in grad school. I put 20% down and my total mortgage, taxes and insurance was $950/month. I rented out 3 rooms for a total of $1050. I lived there for free. It was probably worth 220K when I finished my grad program. If I sold, I could have paid down my student loans. However, I kept it and it currently rents for $2000/month. When you first start out as a landlord you are going to make a lot of mistakes and not make that much money on your first deal. However, with experience you will get better at it and make more money. I think the example given is very unrealistic for a first timer buying a 4-unit.

  8. Connor Dunham

    4 percent appreciation per year isn’t 4 percent of value multiplied by 4 as you indicated. Closing costs can be as much as 5% especially when you use FHA loans which carry upfront PMI premium (though this can be financed). Huge holes in this article.

  9. I like the article. I’d encourage future students to consider a scaled down version of this. How about buying a 3-bedroom in a sleepy community no more than 15 minute walk from campus? Grab a couple students to be your roommates for 4 years, live there at hopefully a low cost. Let appreciation do its job and bank the profits or pay off your loans upon graduating. I certainly wasn’t thinking in these terms at 18, but I sure am now at 48.

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