Advice for conflicting priorities! Paying for school and a house.

Advice for conflicting priorities! Paying for school and a house.

Member since 2022 · 5 posts · 1 vote

Hello BP world! I am simply seeking advice to help sort out some conflicting priorities. I have been searching for my first home/ potential rental, although this would be a buy and hold property at first. However, I recently got accepted into a medical program for my master's degree. I will need to relocate for approximately 2 years, and I will no longer be able to work until I graduate. I have managed to save a substantial amount of money that would either A) cover my entire tuition and living expenses, or B) afford me my first long term property (with future rental potential!) I have considered the idea of taking student loans if that would allow me to invest part of my savings in a property (Conventional 30yr. at 10% down is what I had in mind). If I go down that route and proceed with buying a home, then I would rent it out while I am away. In this case, it would not cash flow, but prevent me from defaulting on my mortgage. By taking student loans, I will also still have the funds for any emergencies.  

With all of that said, my question is whether it would be wise to forgo buying a property for now and essentially pay my way through school, OR invest part of my savings prior to starting my program, obtain a property, and carry out student loans for tuition and living expenses. The obvious pro to paying my way through school is that I would remain debt free, but I would have to rebuild my savings and I would miss out on any equity gains for those 2 years. Is this a reasonable plan or am I being overly ambitious?! 

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  • Dave PoeppelmeierBusiness Member
    Realtor · Maumee, OH · Member since 2015 · 491 posts · 722 votes
    3y

    @Amy Summer welcome and congrats on thinking this far ahead! You have a few options here: 1: Simply focus and pay for your schooling. Unless you're going to be a full time Real Estate Professional, focus on your career. There's nothing wrong with bringing in a good W2 income to save money for down payments for future Investment Properties. 2: Buy a house where you're going to go to school and house hack. House hacking is where you buy a property, live in it for a little while, then keep it as a rental and buy a new house to live in. Look at the numbers on what it would cost to borrow money for Student Loans vs your Mortgage Payments. If you're going to leave in 2 years, you can keep the house as a rental there. 2(a): Buy a house where you're going to school and find some roommates to help cover the mortgage, utilities, etc. Yes, you'll still be spending money on the down payment, but at least you'll have to take out less loans because you'll have money coming in from your roommates. 

    If you're going to try something like this, you need to contact a Realtor/Property Manager where you're going to school to see if these numbers would work. There are great contacts in most every market here on BiggerPockets that can help you figure this out. The one thing I wouldn't do is buying a property where you are now and you're not going to be there, so you're going to need to hire a property manager. Then a big cost item breaks/something happens, now you're distracted from your studies worrying about a house you're not living in, etc. 

    Just my two cents on everything, but best of luck to you!

    Keller Williams Citywide | Dave Poeppelmeier534 Reviews
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    3y

    @Amy Summer

    Are you paying cash for the home? It will be difficult to get a mortgage if you are in school and are not working.

    7e investments53 Reviews
  • Member since 2022 · 5 posts · 1 vote
    3y

    @Chris Seveney I would plan to purchase the home prior to leaving my current job to start my program. I considered doing a conventional 30 yr. loan and only put about 10% down out of my savings. 

  • Member since 2022 · 5 posts · 1 vote
    3y

    @Dave Poeppelmeier Thank you for your reply! I appreciate your advice! In terms of the house hacking strategy, how would that first mortgage + my potential student loans affect my ability to get a second mortgage? I do plan on moving back to my home town after 2 years. What would be my options then?

  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Amy Summer:

    I don't recommend taking on debt, even if it's at low rates. The idea that you can carry student-loan debt while investing in something that produces a positive overall return is not wise. The debt still enslaves you and slows your growth.

    You'll need a place to live. Why not buy an investment property that provides you housing and you can rent out extra space to produce income to help pay for school. If you can't afford that on your own, perhaps someone you know will partner with you.

    The DIY Landlord Book4.7247 Reviews
  • Dave PoeppelmeierBusiness Member
    Realtor · Maumee, OH · Member since 2015 · 491 posts · 722 votes
    3y
    Quote from @Amy Summer:

    @Dave Poeppelmeier Thank you for your reply! I appreciate your advice! In terms of the house hacking strategy, how would that first mortgage + my potential student loans affect my ability to get a second mortgage? I do plan on moving back to my home town after 2 years. What would be my options then?

    That's a great lender question. In general, if you're showing cash flow from an investment property, it's fine as long as you have reserves in case something goes wrong. You do have to look at your Debt to Income ratio to make sure you don't have too much debt vs what you think you'll be making with your new career, which is what Nathan is referring to. But again, talk to a lender and they can fill you in on all of the details. 

    Keller Williams Citywide | Dave Poeppelmeier534 Reviews
  • Rental Property Investor · Carthage, NY · Member since 2019 · 72 posts · 47 votes
    3y

    Just another opinion. There is too much out there about being debt free. Too many people dont understand that there is destructive debt-debt on assets that depreciate in value such as car payments and typical overspending of plastic; And constructive debt-debt which enables one to borrow at one rate and use those funds to acquire assets that appreciate in value and return a much higher rate-such as real estate. One beauty of real estate is the leverage of debt. As for student loans-they are at such a low interest rate of what-6% or so. So I consider going into debt for math or science based degrees also a wise investment. (Per se, 12 years after graduation now, I still have not paid of my over $100,000 in business school loans. They are in good standing and dont push credit score below 700. Because why would I? I am only paying $7000 per year in interest on those while I am using the same $100,000 to acquire more property returning many times that cost of interest.) I know of no one extremely wealthy who does not understand and utilize the concept that low interest debt such as student loans or mortgages to acquire assets with positive returns can be a very good thing. Being debt free is over comfortable and scared middle class nonsense stuff. People who do not understand this within an hour of conversation such as whats in this few minute comment are usually people to strongly avoid. Understand and go into constructive debt on both. Just another opinion.  

  • Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Leverage your money, put the minimum down for both and use the cash flow from your rental to pay your college tuition. By the time you get out of medical school your property will have appreciated enough to pay your entire tuition without doing anything. Buy the property

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