3 Ways to Start Investing in Real Estate as A College Student

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College is undoubtedly one of the most adventurous times in your life.

You’re finally studying a program towards your dream career, while also enjoying time with friends and doing the dumbest things that you’ll forever remember as the iconic moments in your life.

But college is also the prime time in your life to start thinking and planning your financial future. After all, you don’t want to start from square one when you graduate—you want to hit the ground running.

Now, you’re probably already convinced of this, since you’re reading this article. What you may not know is how to use real estate as a way to shape your financial future. Let’s take a look.

Why College Students Should Start Investing in Real Estate

Many college students want to make money on the side. The common solution is to find a part-time job somewhere, but investing in real estate might actually be better for you, as it allows you to:

• 1. Make money while you sleep, study, and even party (passive income is key)
• 2. Invest your own money instead of someone else's (be your own boss!)
• 3. Participate in an industry where demand will never go down

These benefits are some of the reasons why many young people get into real estate investing.

The next question is how can you invest in real estate as a college student. With heavy classes, unpredictable schedules, lack of funds, and limited experience, you’ll need to identify the best real estate investment niches for your unique situation.

How College Students Can Invest in Real Estate

It goes without saying that you need to educate yourself first. You can find a lot of information here on BiggerPockets, but don’t forget to explore books, forums, podcasts, and talk to your investor friends, too.

As you go about learning new things, you’ll want to consider these 3 things:

• 1. What kind of real estate investment strategies and methods are available?
• 2. Which kind of approach piques your interest the most?
• 3. Which method is the most beneficial for your future and goals?

Only when you’ve fully immersed yourself in the industry can you begin choosing your niche.

Among the dozens of real estate investing styles and areas, we’ve listed 4 that you can consider below. These are straightforward, easy to understand, and have relatively low barriers to entry:

1. Subletting (Renting a House to Roommates)

Paying rent on-campus is not all that achievable for a lot of university students, but off-campus you can find a lot more affordable housing. And not just that—you can even make money on your housing if you play your cards right.

First, you need to find a home or suite that has multiple bedrooms. After meeting the landlord, you’ll want to ensure you sign a lease that allows you to sublet to roommates (or to be more accurate, your tenants). Let’s say you found a house that you can rent with 4 bedrooms for $2000 per month. If you split it 4 ways, your rent is $500 each. In some places, that’s a steal and many students are happy with just that. However, if you’re the landlord you can decide the rent for your roommates. Instead just charging $700 per roommate nets you $2100—and you aren’t paying any rent at all.

Another way to make some extra income as a university student is to consider subletting your room on a short-term rental platform, like Airbnb. You can do this if you’re away for a semester abroad or on summer vacation. This will require a bit more effort managing the listing and replying to potential guests, but it’s a great way to offset your monthly rent.

Subletting is one of the easiest ways to dip your toes into real estate and try out being a landlord, especially as a student. It’s low effort, low cost, and all profit.

2. Wholesaling (Middleman of Buyers and Sellers)

Wholesaling is a type of real estate activity where you find motivated sellers that want a quick, uncomplicated sale, instead of listing their property with an agent. Often the properties need work, so would probably sit on the market for months if listed by an agent. We’re putting this second on the list since it’s a great way to get into real estate without owning any real estate.

Here’s a very simple overview on how it usually works:

• 1. You find a motivated homeowner looking for quick cash.
• 2. Get that property under contract.
• 3. Sell that contract to another investor with your profit markup.

Basically, you match a buyer with a seller without owning the property. It’s perfect for college students who can use their time to do this instead of getting a low-paying job at a restaurant, etc.

However, wholesaling takes a lot of work. You’ll need to understand the market, advertise and market yourself, excel in people relations, and be prepared for the ups and downs in this business.

Nevertheless, it’s a great way to get started in the industry. Mastering the art of wholesaling means mastering the art of identifying great deals—thanks to the knowledge you’ll gain from working with experienced buyers. Wholesaling provides you with a foundation to grow as a real estate entrepreneur.

Now that you have the capital for a single-family home or duplex, you can pay off student loans or parlay your earnings into bigger investments. Let’s explore this option.

3. Rental Properties (Being a Landlord)

Owning rental real estate is how investors build long-term wealth. Of course, it’s a lot more complex than the first options on this list because you do require more funds—so it’s not for everyone.

Asking your parents or relatives for help or pulling from your savings account can help you start your real estate journey sooner rather than later. The strategy is even better if you can invest in a college town (of course, the one where you’re currently studying in) as the demand for rentals in these areas are extremely high.

You can also explore Metro Detroit, as we’ve already written a couple of Deep Dive articles about the rental hotspot. It doesn’t matter if you’re not interested in the area, the guide shows you the key factors that make a rental property investment good.

Here are a few considerations to think about:

• 1. You’ll need to structure your leases appropriately, so you won’t be left vacant during the summer.
• 2. You’ll need to afford the down payment and closing costs. You can use FHA government-issued loans, so you’ll acquire the property with a 5% discount on the purchase price.
• 3. If you don’t have the income or credit score to qualify for a mortgage, you might need to partner up with a family member or trusted friend.
• 4. If you don’t have the time to manage your properties yourself, you’ll need to hire a reputable local property management company.

The best thing about this strategy is that you’ll learn how to be a good landlord. It’s an invaluable skill, as it teaches you property management, tenant handling, overseeing maintenance and repairs, and more.

4. House Hacking

This option is somewhat connected to the earlier section. However, instead of renting out the whole place, you live in one of the bedrooms and rent out the extra space. You can ask your friends if they need a new place to live, list the rooms on Airbnb, or even get the help of a real estate agent.

Here’s an example:

• 1. You find a six-bedroom house for $200,000 near your campus.
• 2. Your parents help you cover a down payment of 20%.
• 3. You both take out a loan for $160,000 with a 4.5% interest for the standard 30 years.
• 4. Your monthly payment will be around $800 a month, on top of taxes and insurance that will cost a couple of hundred bucks. Let’s round it off to $1,000 per month.
• 5. You rent out the other rooms for $400 each month, earning $2,000 with a profit of $1,000.

Now, there will be other expenses that you’ll need to consider: utilities, vacancy rates, repairs, maintenance works, and more. But if you teach yourself how to become a rental investor as early as now, you can learn how to be a good landlord and start building your real estate portfolio right away.

Earn money, live for free, and build equity as you pay for the mortgage—increasing your ability to purchase another investment home in the future.

Build the Groundwork for Life-Long Success

College isn’t only about classes and parties. You can become a real estate investor while you complete your program and make life-long friendships, so you’ll graduate with financial groundwork already in place. You may not become a millionaire as a college student, but you can certainly get a head start in achieving your financial goals.

As you go through the last phase of your education years, ensure that you have a plan to “lay down your roots” and prepare yourself for the growth ahead. Take some time to decide on which strategy you want to pursue, and get started.

Throw that mortarboard in the air and hit the ground running!

Our team can help you pursue your real estate investing dreams. Get in touch with our expert property managers to learn what it takes to achieve financial success—one smart investment at a time.