College Student Saving For A Rental

Starting Out
4yFollow

College Student Saving For A Rental

William Martens
New to Real Estate · Milwaukee · Member since 2022 · 3 posts · 2 votes

I am currently in college at a school in Wisconsin majoring in finance. I have been just maxing out my IRA with extra money but I would like to use my remaining funds to start saving for a property. I would like to get into real estate investing once I graduate and land a job hopefully paying 60K+. I am looking at buying a multifamily with an FHA loan in the inner city of Milwaukee. If anyone has any overall advice for me it would be appreciated as I am new to real estate investing.

2Reply
54 views

Most Popular Reply

Rebecca KnoxBusiness Member
Specialist · Milwaukee, WI · Member since 2014 · 1k+ posts · 1k+ votes
4y

Hi William. Have you explored investing out of your IRA to buy properties or grow it using a self-directed? I think this is one of the most interesting strategies in real estate that I learned. I had never heard of the concept prior to real estate.

What do you mean by inner city of Milwaukee--53206? I was just curious why you were looking to buy a multifamily in the inner city. Is it because of price point? 

Your idea of house hacking with an FHA is a fine one employed by many as their first step in to real estate investing.

Captain Save-A-Home LLC
WebsiteView Page
2Reply
See this reply in the discussion

12 Replies

Jump to latestLatest
  • Rebecca KnoxBusiness Member
    Specialist · Milwaukee, WI · Member since 2014 · 1k+ posts · 1k+ votes
    4y

    Hi William. Have you explored investing out of your IRA to buy properties or grow it using a self-directed? I think this is one of the most interesting strategies in real estate that I learned. I had never heard of the concept prior to real estate.

    What do you mean by inner city of Milwaukee--53206? I was just curious why you were looking to buy a multifamily in the inner city. Is it because of price point? 

    Your idea of house hacking with an FHA is a fine one employed by many as their first step in to real estate investing.

    Captain Save-A-Home LLC
    WebsiteView Page
    2Reply
  • Conner Olsen
    Real Estate Agent · Austin, TX · Member since 2020 · 1k+ posts · 941 votes
    4y

    @William Martens It depends on what your strategy is. My guess is you want early financial independence, if that is the case I wouldn't contribute to an IRA when you are getting started. If you are investing in the stock market you are going to have an ROI of 8-12% over the next 40+years. If you save that money instead and house hack it is not uncommon to get 50% ROI (Craig Curelop describes his 80%+ return in his house hacking book). If you have aggressive goals of FIRE you should invest your money where you can get the best returns.

    0Reply
  • Corina Eufinger
    Rental Property Investor · Oconomowoc, WI · Member since 2016 · 996 posts · 432 votes
    4y

    Keep in kind with an FHA loan you have commit to living in the property yourself for 18 months. Also don't be surprised if it takes a few tries to find an FHA lender that will lend on a multifamily. My colleague was turned down 4 times before finding a lender near him in Iowa that would do it.

    I'm not necessarily recommending this (because these aren't their intended uses) but some people have used student loan money for down-payments and funding flips. 

    All that being said, the sooner you start the better, generally. Start studying the state laws on rentals, identify the neighborhoods you would want to invest in (and live in yourself since it's FHA), and network. Find your realtor, plumber, electrician, etc.


    Good luck!

    1Reply
  • Rebecca KnoxBusiness Member
    Specialist · Milwaukee, WI · Member since 2014 · 1k+ posts · 1k+ votes
    4y

    I was involved in a transaction where someone used Jason Wayne at Lower.com and I was pretty impressed. I actually was surprised the property passed FHA. They only do owner occupied--this was for a house hack deal as well.

    Captain Save-A-Home LLC
    WebsiteView Page
    0Reply
  • David Parathundil
    Rental Property Investor · Tampa · Member since 2019 · 49 posts · 16 votes
    4y

    I did the same thing as an 18 year old I put all my money into my Roth IRA, now I have 24k sitting there on which I can take out the 6k in profit tax free but it would've been put to much better use towards a property. To do the self directed IRA method (I could be wrong) but my lender told me that you have to use only funds from there for the downpayment so I'm doubting as young as you are have enough in there for a whole downpayment. Read my other reply to a post it contains useful information for recent college graduates.

    My advice would be read books, listen to podcasts on the material as much as possible. But first and foremost network!!! If I had started networking the way I do now at 18 I would be more successful. Just talk to as many people as you can involved in real estate, whether on the forums or through your own circle.

    0Reply
  • William Martens
    OP
    New to Real Estate · Milwaukee · Member since 2022 · 3 posts · 2 votes
    4y

    @Corina Eufinger Thanks for your response. I'm looking for a property less than an hour away from Milwaukee because I will most likely work in finance there. What areas would you look into for a duplex or bigger under 200k? 

    0Reply
  • William Martens
    OP
    New to Real Estate · Milwaukee · Member since 2022 · 3 posts · 2 votes
    4y

    @Conner Olsen Thanks for your response. For me, I want the safety net of the IRA as I grow older so I plan on not taking any out till I reach retirement. Other than the 6k needed for the IRA everything else will be funneled into real estate. Do you think it is worth it to invest in dangerous areas like the inner city of Milwaukee with higher returns (40% plus) or would you consider lower returns (still over 20%) in areas that are safer?

    0Reply
  • Mike Luster
    Hinton, WV · Member since 2018 · 9 posts · 0 votes
    4y

    @William Martens

    I bought my first property, a duplex, at age 19. It was owner financed with $0 down. In fact, after the termite inspection showed $1600 in damage, I accepted the property as-is and the seller gave me the $1600. So, after duplicating that many times (100+) afterward, I would say keep your cash whenever possible, and use ideas instead to purchase properties and build equity through value-add improvements.

    0Reply
  • Bob E.
    Queen Creek, AZ · Member since 2014 · 2k+ posts · 1k+ votes
    4y

    @William Martens @David Parathundil An IRA can also be a powerful tool for RE investing if you use a Self Directed IRA. Since it is a tax deferred account you can buy and sell easily with not tax implications.

    You can do private lending, buy and hold RE, and many other things. Contrary to popular belief you can get financing to make a RE purchase in your IRA, usually at a 65% LTV. If you do private lending there is no immediate tax. If you are in a regular IRA consider moving the money to a Roth, be aware of the tax implications, you might want to move portions of your money in different tax years.

    Note: If you do borrow money in your IRA your custodian will have to file a form 990T, my IRA provider charges a few hundred dollars, some charge more. I had heard for years that this was a big deal, when I looked into it I found that it was not so don't let it scare your off.

    On the private lending side I can say that we have done several loans of 30k at 10% for 7 years (pmt $498.04).  That will generate 12k in interest in 7 years and allow you to do a second lone after 5 years, stacking the income.

    0Reply
  • Zach VanDeYacht
    Real Estate Agent · Sarasota · Member since 2019 · 10 posts · 0 votes
    4y

    Good for you already looking into wanting to owner occupy. Do as much research as you can on putting your processes in place. How are you going to collect rent? How are you going to keep track of expenses? What is your plan to attract and screen tenants? Having an idea of these processes before you purchase your property will only help. If you went to school in the Milwaukee area, it may be beneficial for you to look at purchasing close to your college as you are familiar with the area. UW Milwaukee has plenty of 2-4 unit properties, although can be expensive for your first property. I went to school in Milwaukee and have lived here for years since - great place to start investing. Feel free to message me any questions starting out. Good Luck!

    0Reply
  • Jerome MorelosPro Member
    Redlands, CA · Member since 2017 · 205 posts · 88 votes
    4y

    Consume as much books/podcasts/YT videos while you're in school/saving. Live below your means and save as much cash as possible to put down on a "wedge" deal. Also, network with others during the process. 

    0Reply
  • Charles ClarkBusiness Member
    Real Estate Broker · Milwaukee, WI · Member since 2020 · 306 posts · 209 votes
    4y

    @William Martens, I hope all is well with you. Congratulations on choosing to use RE to increase your monthly cash flow, and deciding to do this while in college. I purchased my first investment property with a FHA loan and got a four unit. A year and half later, I own and manage 15 units in Milwaukee. I graduated from UW-Milwaukee with a bachelors in Finance which was a huge advantage when I started analyzing properties. You are already learning the language that most people have to start from scratch to understand. If you have a credit score above 600, you have a W2 job, and you have a couple thousand dollars for a down payment then I would say don't wait until you are out of college. Go for it now. Also, you could use your IRA as your down payment as well. Stay focus on your long term goal by taking small steps everyday.

    If you would like to chat more, feel free to contact me. 

    Beleza,

    Charles Anthony

    [email protected]414-719-6090
    Raise the Standard RE LLC55 Reviews
    View Page
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free