Should I use my school loan for my investment property down payment ?

9 Replies

So i am defiantly going to house hack my first property, I want get and fha loan and buy a 4 plex. However i don’t have all the money for it rn. I just got my re license and will begin working soon, the money i would make in commissions would go directly to my investments, i know in the beginning it might take a while for me to start making money, maybe not but i really want to own a 4 plex, like now lol. In September i will enter my last year in college and I’m only in $2,500 in student debt after 6 semesters. Although most of my tuition is covered by state grants I have an option to take out of loan for about $6,000 that I don’t have to start paying until I graduate. I would probably use this for my 3.5% dp or just for renovation once I do own the property. I see it as i barely have any student loan debt and compared to some of my family members who graduated with 40k in student loans, at least I would be invested it not spending it or be in debt and jobless. Just wanted to see if anyone did this before, your opinion or advice. Maybe I should just be patient and save some money or this wouldn’t be such a bad idea ?

Thank you,

Sincerely Steven Betancurth

@Steven Betancurth

Hey Steve, I'm not sure about what you're suggesting. Never actually crossed my mind. Sounds creative though. Have you pre qual for the FHA already or is this just the beginning of your thought process on it??

I'd say if you can do this then it is very creative and if you're sure about ALL your numbers....... And then DOUBLE SURE......... Then maybe you can pull it off.

This is a little coy, but I'm almost certain you would get a better education doing this than college can sometimes provide lol. Real life has a way of doing that in a way the classroom doesn't, and being an investor you are faced with a number of choices and decisions regularly and through problem solving and analysis you can and will learn a great deal.

Let us know what you decide to do and how it works out if you go forward with this. If you're lucky you could make back the borrowed amount by the time loan payments start.

I went to school too, a lot of school, and I value my education, however I think that really being involved in life (investing certainty qualifies) is usually a better teacher for the teachable - in many cases....

This is a bad idea.  Don't use student loan debt to make your first investment.  Pay off your debt.  Save up a cushion.  Then invest.  

Don't know what type of student loan you have but the Federal student loan application state funds can only be used for educational purposes and any conventional lender will ask you "What's the source of the down payment money?"

If your honest they will decline you and if your not you've committed perjury and mortgage fraud. The sentence is up to 30 years for that.

I was thinking along the lines of what @Bill S. stated although I saw students spend loan money on everything but school...... Not sure how they got away with it or what ended up happening with them...... I just know it doesn't always get spent on school. 

Search the article below for "false statement" for sentencing guidelines

http://www.irs.gov/uac/Examples-of-Mortgage-and-Real-Estate-Fraud-Investigations-Fiscal-Year-

Regardless of the student loan piece, are you currently working? Will RE be your main income after school? If you do not have stable and predictable income now, I would wait on purchasing anything until you know your income can support the vacancies and repairs.

@Steven Betancurth

So you want to start a REI career by first committing loan fraud, then perjury, then mortgage fraud?

Guess it can only go up from there.

I watched a kid we know buy a home for $10k @ a tax lien auction, he subsequently spent about $3k on closing & rehab. He then sold it to an investor $5k down, holding the note @ 12% over 12 months for $20k. He admitted he used his student loan advance to fund it instead of "wasting it on tuition, beer, co-eds & cheap low rent accommodations". 

I assume he took the "creative financing" elective!!!!

I have been thinking along the same lines for my son, but using his Education Savings Account for the down payment, as it is a living expense while he he is in college.  Or at the least come up with the down payment some other way and pay the mortgage from the ESA.  

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