House Hacking as a College Student

[Daniel Kaplan]

Hey BP fam! Thought I'd reach out in the forums for some guidance before I do an internet deep dive on this. My friend and I have a combined $40,000 and are looking to house hack a quadplex for 2 years before we graduate. However, as college students, we are not W-2 employees. What methods/loan programs do ya'll recommend so that we can qualify to purchase. I am fairly knowledgable on DSCR loans, but I don't know if that will be enough projected income to qualify. Please let me know your thoughts and ideas!!!!!!!!!! I really appreciate all of you so much!

[Miller McSwain]

I just graduated, and I was able to close a month before graduation by showing my lender my offer letter. If you aren't close to graduation, you may have some options although I haven't proven them:
1. Have someone with sufficient income co-sign (parent, etc). If someone else is on the mortgage that has qualifiable income, I imagine the lender would be willing to accept that. Perhaps you can incentivize a parent by offering a percentage of cash flow, equity, etc.
2. Like you mentioned, DSCR could be a good route since they don't scrutinize over your personal finances as much as conventional. I think DSCR requires 20%+ downpayment typically though. Conventional/FHA would allow 5% or less. So perhaps look into that though.

[Max Ferguson]

Understand that you are tying yourself financially to someone here, I would personally create a partnership agreement first and foremost. This outlines the plan, if things go wrong, and exit strategy. Worst case scenario one of you gets sick/accident/etc.... and NEEDS the money that is in the property. If you can manage to purchase by yourself (parent cosign hopefully?) then that will be far more advantageous to you than partnering. 

Your market could be far different than mine, but if you two occupy two units, the DSCR loan would be hard to push through. If you plan to occupy one unit with your partner as a roommate, you may be able to pull it off.

Another avenue would be to purchase a house together, househack or additional ADU, wait a year or so then you will be in a far better position to purchase a quad.

Tons of fun stuff to consider, keep us updated and good luck! Reach out if you need help. 

[Daniel Kaplan]

@Miller McSwain So are you suggesting that the only option we have here is to have one/both of our parents co-sign the loan so that we would qualify? Also, would we then be able to refi out upon graduation so that our parents are no longer tied to our loan/property?

[Miller McSwain]

Quote from @Daniel Kaplan:

@Miller McSwain So are you suggesting that the only option we have here is to have one/both of our parents co-sign the loan so that we would qualify? Also, would we then be able to refi out upon graduation so that our parents are no longer tied to our loan/property?

 I don't think it is your only option. There are probably a handful of other options that I'm just unaware of. Definitely talk to some lenders, they obviously will have the best answers. 

But yeah, you should totally be able to refinance upon graduation and take the co-signed off the loan 👍

[Ben Bolingbroke]

Hey Daniel, 

Just an idea here, but I would look for single family houses with ADU's and mother-in-law basement/apartments instead of a fourplex. I bought three of these houses during my time in college and housed hacked. These properties have a lower price point than traditional triplexes/fourplexes yet they bring in the same amount of rental income. This will make it easier to qualify for a DSCR loan, and easier to qualify for a traditional loan in general given the lower price point.

For example, I bought a triplex with an ADU and a mother-in-law basement. Because it was technically a single family I bought it for about 500k less than a triplex of the same size that brought in the same amount of rental income.

I'd be happy to connect and share ideas anytime if you want!

[Daniel Kaplan]

@Ben Bolingbroke thank you so much for the response! When you were a college student, how did you qualify for the loan on those three houses?

[Ryan Thomson]

@Daniel Kaplan

I wish I was thinking like you in College! Here is an interesting idea. Use your knowledge and drive to convince your parents (or other co-signer) to get a home near your college. Co-sign with them and put some money down with them if you can.

Buy it as YOUR primary residence with your parents as the co-signers. This would allow you and your parents to only have to put 3.5-5% down. Then you rent out the rooms to your college friends. This will probably allow you to live for free and your parents to avoid a dorm or expensive home payment while you are in college. Not to mention you can both cash in on appreciation and loan paydown.

If you really wanted to scale, you could do this each year. Rent out the last house to a new group and move with your friends to the next house. This is a great way to scale and you only have to put 5% down if its your primary residence each time.

You obviously need to convince your parents or (someone who would co-sign and help with the downpayment) about how good of an idea this is. But if they are savvy money people and they trust you (which I bet the do), then this seems very doable. Maybe give them part of the equity or a monthly fee until you refinance and get their co-signing off the loan. 

[Daniel Kaplan]

@Ryan Thomson Genius idea! I love the idea of pitching to my parents by having them co-sign and as a result, they won't have to pay for rent for the rest of college! That way, they'll be saving 10k+ a year by not having to pay rent for me. I definitely am going to plan on doing this for my junior year and then sophomore year. Another added bonus is that my younger brother is a student here as well. I can repeat the process for him and become a 50/50 equity partner in his FHA loan. Thank you so much for reaching out and providing me with such value!!!!

[Ben Bolingbroke]

Quote from @Daniel Kaplan:

@Ben Bolingbroke thank you so much for the response! When you were a college student, how did you qualify for the loan on those three houses?

I graduated college at the end of last year! (December 2022).  The first I bought with a co-signer (parent), then used another partner on the second one and I bought the last on seller financing. 

[Ryan Thomson]

@Daniel Kaplan you are welcome!