I need some major help!! I recently decided that I would like to buy a house rather than rent. The houses that I have looked at (online) are in the category "major fixer uppers" due to the fact that I am a college student on a tight budget. I would like to have roommates this fall, but have no idea where to start (besides buying the house). Any suggestions are greatly needed and appreciated!!
Graduate from college first, then get a job and then buy. You are in no position to buy now. Income from roommates won't help you qualify for loan if that is your only income coming in to pay a mortgage.
Why not line up the roommates and rent a place suitable? You may not stay in that area when you graduate. Keep your options open.This message has been edited. Last edited by: happy 9,
MzElla, First, Welcome to the Real Estate Boards!
Before I post suggestions, could you provide a bit more information such as why you think you would rather buy than rent? How many more years will you be at this particular college? How much money do you have for a down-payment and closing costs? Any idea on how you would qualify for financing since you say that you are on a tight budget? How much are these "major-fixer-uppers" (on average) and are you currently employed? Do you have any background in home renovation or would you need to hire most of it done?
Post back with more information and I'm sure you will find that the people who post here have a wealth of information to share with you....
It seems to me that you are putting the horse before the cart or vice versa LOL
No offense, but unless you have enough money to do all the things that you want to do, may as well sort of wait.
Not saying this is the case, but I have been approached by college students who are innovative and looking for a way to buy without thinking of all of the requirements necessary to buy.
The problems can be not enough income, not enough deposit, and not enough time on the job.
Some students feel their college grants/loans for housing can help, but that is not the case in my experience.
Most of these situations can be solved with parent participation. I have seen students come to resolution backed by parents who pay cash or buy the home with financing... in their name, not the student.
They buy property with the most number of bedrooms, for the rental income to cover the mortgage payment. The student gets free rent in return for screening tenants, collecting rent for parents and keeping the property in check. The lease for the tenants is more than strict.
As an incentive, I have seen the parents share in the proceeds of the property sale with the student child, upon their college graduation. In some cases if the student plans to remain in the college town, I have seen the parents deed over the home to the student.
If the parents are not in a position to help, there is the possibility of buying the property
with other college students to assist in combined income, etc.
I have been involved in many of these types of transactions as Tamps Bay is a big college town with USF.This message has been edited. Last edited by: real estate lady,
MzElla, You have received a numbers of responses. If you are serious about this situation, it might be a good idea to post back....
Real estate lady and Idaho - excellent response and I hope college student comes back to read this. Yes lots of people are or have lots their homes however we shouldn't let fear drive everything we do. Being a college student in and of itself does not mean someone should not buy a house. Carefully thought through it can be an excellent decision and opportunity. I think this person should be commended for even thinking about it. I did college and grad school plus an additional year in one city and have always regretted that no one had ever even suggested that I do that ... A small starter house. Assuming I got it for a fair price, it would have been a good investment considering I was there for 9 years. When my child goes to college we are extremely likely to purchase a small place conducive to having roommates most likely, in an effort to defray some of the expenses and maybe even come out even. I see college students in our small town paying 750 per month plus utilities for a room in a 4 bedroom house. 3k between the 4 for rent per month plus utilities. I did not realize that rents near college campuses are so ridiculous.
I would encourage this college student to think about how long he or she expects to be in the area. Will you also be going to grad school? If you are you will be in the area even longer. Many people also end up staying in or near the same town where they went to college. See if your parents will help. By your question I am assuming that you are a responsible person and would realize that the money you get from roommates is for rent and if your roommates don't pay, you are responsible for paying the rent. That said, make sure you have a good understanding of a fixer upper. Unless you are handy or your parents or someone you know and trust, you could end up with a money pit. You don't want to spend all your time and money fixing up a house. You want tobe concentrating on your studies so that you can get academic scholarships. These don't have to be paid back. I would feel more comfortable if you tried for a house that needed cosmetic improvement or minor fixes. In some areas of the country any kind of remodel or so is very expensive.
Long post but I wish you luck. Have an open mind. By thse same token think things through. It is not logical to say that a college student shouldnt buy a house. Fearful thinking without knowing someone's personal situation is not good. Sometimes considering something that others may think is impossible is the courageous thing that you might need to do to secure your future and education.
Idaho Resident, hello and thank you,
A little background; I am looking into buying because the market where I am going to school is still low. The fixer uppers range from $24,000-$29,900 and the small and decent houses are $30,000-$45,000 with $45,000 being at the top of my budget. I plan to be in the area anywhere from 3-5 years. I have been employed with the same company for the last 3 years working part-time during the school year and full-time during the summer. I don't have a lot of hands-on experience with home renovations, but my dad is experienced with HVAC and has a sufficient amount of tools to complete certain projects.
Do you have downpayment money in addition to a few months of savings for emergencies (like if you were to lose your job)?
Thanks, MzElla, for posting back with more information although I noticed (as did Jewel) that you neglected to say what you had for a down payment and/or closing costs and also didn't address the issue of financing? But, since you DID post back, here are a few suggestions:
Your idea might be considered to be "pie-in-the sky" EXCEPT for the fact you have been employed with the same company for three years, price range is under 45K and you intend to be in this town for 3-5 years. As such, you MIGHT very well have a good idea but you will have to be very diligent to make it work.
First, given the price of major-fixer-uppers and your lack of ability to do the same without hiring, I would suggest you find one of those "small but decent houses" for $35,000. I took a quick look and, if you put down 20% ($7K) on a $35K house so as to avoid extra PMI, the monthly mortgage - BEING VERY CONSERVATIVE - $28,000 at say 5% over 15 years would be $221.41. Sounds like a deal when you think about what you have paying for rent but wait!
That $225/mo is only the beginning. Have to add the property taxes (since you are already looking on line at these type of houses, you can easily find out what the taxes per year are) - divide by 12 and add to the $225. Next, you need to add the cost of insurance - ask your insurance agent what that cost would be (be sure to include the fact that you will be having roommates thus being a rental vs single owner residence) - divide by 12 and add to the mortgage/taxes.
With me so far? IF you have $7000 as a down payment plus the closing costs AND the ability to make the monthly payments on your own WITHOUT help from any roommates, you might have a viable idea. But, you will need far more than just the ability to make the monthly payments. You will need to have a reserve fund of $4-7K, just in case. Hot water heaters, furnaces fail and can't be repaired - have to be able to pay for new ones - in full; pipes break and plumbers' bills can add up and, with older houses like these, the electrical can become a nightmare as well. Are you ready for all of that?
Ready to be a Landlord with all that entails if you choose or need to have roommates? Ready to be a home owner - watering the lawn, taking care of the outside, buying the tools to do so and paying to keep the place running? Are you ready to give up the fun of simply being a college student with your future still ahead?
If so: you need to get your financing in order, find a real estate agent that understands your goals AND draft a "rental" agreement that all future roommates MUST sign - and it won't just include the usual - instead, add in things like food, how late friends can be at the house, "over-nights," quiet time for studying - you would be surprised how quickly good friends who become roommates fail to live up to expectations - after all, they are still just having fun and can move on in a moment's notice.
You, on the other hand, are the owner of the residence and have all of the responsibility - still sure this is something you want to do?
First of all, I admire your desire to be a homeowner at a young age! I have always felt why rent, when you can own with all the available low down payment or zero payment financing.
However part-time employment can be a problem depending on the number of hours you work ~~in qualifying.
So waste no time shopping for a home, without first contacting a lender looking into FHA, USDA and city and county subsized programs in your area. Really do your homework calling county and city housing depts. and see what kind of subsidy they offer including closing costs. Many city and counties have revitalization areas and available funds for those who qualify.
If you buy FHA, definately require the seller to pay closing costs. You will most likely know whether you can qualify or not within a day or so
If nothing else, you will learn enough here to determine what you steps needs to take to help reach you goal of homeownership whether it is in present time or future.
Do find out if you are able to secure leases for income~~ would that help qualify you. A duplex purchase may be an answer.
Well said, Idaho.
So many people don't fully realize that the mortgage payment is only one of many costs of home ownership.
As financial talk show host, Dave Ramsey, often says, "When you buy a home, you need to be in a financial position where the house will be a blessing to you and not a curse".
Your post beautifully sums up how buying under the wrong set of circumstances can easily turn home ownership into a curse.
I want to give a huge thanks to everyone who has given such detailed suggestions of advice. As far as the financial part goes, I will have enough for the down payment for a 35k home, but after that I will need to restart my emergency fund. I can pull off 400/month, but that will leave things very tight. I have taken the Dave Ramsey "Financial Peace" course, & that helped me buy my second car debt free, so I know what your talking about Jewel
Ella, I am glad you are considering your financial options and thinking about the future. Have to agree with pretty much all of the good advice offered by my fellow posters.
WRT your proposed home purchase, although I understand the potential benefits, I have many concerns after reading your posts. First and foremost, I wouldn't advise you to purchase anything unless you plan to stay in that area for at least 5 years. Next, you may find it difficult to qualify with a part-time job and barely a downpayment but no emergency fund. Did you ask your parents to co-sign?
We've set up many of these transactions for clients in college towns across the country. If I was advising your parents, I would strongly urge them to avoid co-signing. If they did co-sign, however, I would suggest you forward monthly payments to your parents, in advance, to allow them to insure the mortgage is paid monthly and avoid any negative effect on their credit ratings. (Alternatively, if you are responsible, I would suggest you allow them access to the mortgage company's online website to allow them to verify timely payment on a monthly basis.) In addition, I would advise them not to co-sign unless and until they've fully funded their own retirement, including health/l.t. care and have the financial capability to step in and cover any and all gross expenses (not net of possible rental income) WRT your property, both now and going forward.
Also noticed you mentioned working with your father to maintain the property and possibly complete renovations. Unless your father is truly local and retired, that sounds unrealistic to me. Yes, HVAC knowledge is valuable - however, with all due respect to your father, HVAC knowledge isn't enough. Maintenance issues and renovations require actual experience. It's not enough to purchase the necessary tools. In addition, ill-advised or poorly done/planned renovations can have significant, negative resale consequences.
WRT the proposed 35K home - yes, to many of us in far more expensive areas, that sounds terrific. I would urge you to buy in the best location possible and always consider your resale possibilities. 35K might sound great on the surface but, if the location's unsafe and/or you'll be stuck with it down the road when you're ready to move on with life and leave the college town, it's not a great deal.
What about roommates? As mentioned above, it can be touchy with friends. Have you visited the college's housing office? Checked out their listings and determined if the town has excess capacity WRT rentals or sufficient demand? What local areas are favored by students and rent up first and/or quickly each year? What happens during summer school? Can landlords require 12 month leases due to high demand or does excess capacity translate to 9 month leases and 3 vacant months? IMHO, these are important questions to consider.
I realize that, as a student, you might believe you know what's happening in the rental market. You could be surprised, however, if you actually check it out. For one thing, you might not realize all of the local areas favored by tenants and their relative popularity. In addition, some schools are known as commuter schools and have low demand. OTOH, some of the commuter schools offer little student housing themselves so an individual landlord can do very well. What's the demand v. supply?
What about bringing in young professionals as tenants? (Upscale renovations may help you, if that's your desired, targeted tenant.) Besides student housing, how many other options exist for tenants? What about local rent control regulations? Can you raise the rents after renovations? By how much? How are disputes resolved? Local agency? These are all important considerations, IMHO.
Going back to the purchase transaction, obviously we don't know if your parents funded any of your education expenses. Student loans taken out by either you or your parents? When we set up these transactions for clients, it's usually far more advantageous for several reasons to have the parents purchase the home. (Incidentally, they usually purchase a more expensive home in a good location.) Tax considerations, including the related party rules, must be considered and the parents usually charge a fair market rent to the student.
We structure these transactions differently for almost every client, depending on their parenting beliefs and financial situations, typically involving retirement considerations, estates and trust funds and student loan situations. Besides that, one of my main concerns in each transaction is the potential liability of the participants. For example, if your parents co-sign and/or purchase the home outright, what if a student is severely injured at the rental home during a party? Well, you can imagine the rest - BTW, if your parents are involved, they should carry a large umbrella policy, besides the appropriate rental property insurance.
In many, if not most of these situations, our clients actually end up gifting any bonus (either annually or at the end of the college experience) back to the student. Again, as always, depending on the tax considerations, they may compensate the student as a property manager and/or gift that, if and when the term ends successfully with no problems. By bonus, I mean anything over and above all expenses and sometimes over their expenses for your education. It all depends on their parenting style and if they want to cover all or only a portion of their child's education. (Basically all of our clients can cover college costs but many hope to build character by requiring their kids to cover at least a portion of it.)
Hope some of this is helpful to either you or someone in cyberspace. Best of luck to you -
All, JMHO.This message has been edited. Last edited by: RErocker,
MzElla, Glad you posted back once again and, as I said, there is a wealth of information here for someone willing to hear it. In fact, I think everyone who has posted a response has given you valid information that you would never find anywhere else.
Myself, I think you can tell from my earlier posts that I don't dismiss, out of hand, a college student that has a dream of becoming a home-owner before a diploma-holder. BUT, that is as far as it goes.
Please, do NOT ask your parents to co-sign any loans for you - it simply isn't fair to put their assets at risk for your dream no matter how well you (and they) think it might turn out.
Instead, achieve this goal on your own. It might take some time but, if you accomplish it, it will be YOUR ACCOMPLISHMENT! Do not put your parents in an awkward position - this is your dream and you will accomplish it on your own. Wishing you good luck - happy that we have been able to give you some ideas beyond the obvious you stated in your first post - "buy the house - then what?"
We definitely agree, Idaho. As mentioned above, my first recommendation to parents is always to avoid co-signing. However, many parents sincerely want to help their kids get started. In addition, they're frequently concerned about both the proposed locations for safety reasons and difficulty of some of these situations so they try to lend their expertise and real life experiences.
For those reasons, we often end up assisting them by insuring that the transaction is considered from a financial standpoint, instead of an emotional one. Moreover, because of the students' relatively thin credit histories and frequent cash deficits, IME, many (not all) lenders and agents automatically recommend bringing in parents as co-signers and/or partners to get the transaction closed.
I raised the issue of possible parental involvement b/c nobody mentioned it above (IIRC) and it occurs so frequently. (All of you did a great job describing the other alternatives.) Our office can easily prepare professional projections and analysis of the local real estate markets. Many times, probably far more than 50% of the time, we don't recommend any involvement in these markets for a variety of reasons. The parents have far more to lose, if things go badly.
WRT this proposed situation, I sincerely hope Ella can achieve this goal on her own. I am concerned, however, about her description of the 35K properties as major fixer-uppers and her life on a student's tight budget. It might be best to wait until she bulks up her emergency fund and/or graduates, depending on both her employment prospects and future student loan commitments, if any.
Hope you post again Ella, and provide more information. One thing I wanted to expand upon is the need for reasonable, conservative financial projections before you move forward on this transactions. So, you'll need to estimate both the annual rental income (net of estimated vacancies) and all expenses, including but not limited to contingency reserves, p&i, insurance, taxes, maintenance, utilities and miscellaneous plus estimated capital improvements/renovations.
I strongly suggest you remain conservative when you prepare your projections. Nothing wrong with overestimating expenses and underestimating income. You will definitely use your contingency reserve for unexpected expenses, if you proceed with a deal.
WRT resale in possibly 5 years, you can both examine local real estate trends and talk to local area experts. Again, keep your projections conservative. If you do buy, definitely purchase in the best location possible. We typically consider multiple scenarios and prepare multiple projections, including at least one projection that assumes no appreciation and/or negative appreciation, depending upon the local market trends and other RE factors.
You also may want to do a separate projection and consider purchasing a property but avoiding the hassles and pitfalls of roommate situations. It wouldn't preclude you from cleaning up the property (painting and other light renovations) or upgrading the property (if you wanted to) to make it attractive to an investor and/or another student's family upon resale.
Hope this helps someone out there. Best of luck to you, Ella. Let us know how you decide to proceed, if you have a chance.
All of the above, JMHO.
RErocker, You and I are definitely on the same page. So, MzElla, what page are you on now that you have received the wealth of information I thought would be forthcoming once you posted back with the additional information. Let us know....
I am carefully considering everything everyone has commented about, and I am trying my best to follow the advise. I contacted my bank and I am qualified up to 50k on a conventional loan, but I am going to stay between 35-45k. I am still trying to figure out the best options for a mortgage.
I contacted a buyers agent to set up a time to go and view the houses that I have found from my online search, but I'm not sure if using a buyers agent is the right thing to do.
Thanks for posting back MzElla. I'm curious as to why you're hesitating to engage a buyer's agent to guide your home purchase?
In comparison to the listing agents for the properties you're interested in, a buyer's agent would work for YOU, not the seller. That means your needs and concerns are your agent's priority whereas the seller's needs/concerns are the listing agent's first priority.
Of course, the listing agent of the property you want to buy will be more than happy to assist you (and be a "duel agent" of both the seller and you), but you'd be better served to have your own representation.
Okay, thanks Jewel. I just wasn't sure if there was some hidden information that I didn't know about buyers agents. But now I feel comfortable with continuing to work with the agent.
MzElla - another suggestion, and I had the book and learned alot - I would go buy "Housebuying for Dummies". It gives alot of information, and really is laid out well. I found that I learned elements I hadn't considered.. It can be an overwhelming experience - especially the first time, so the more information you have, and the clearer it is to you, the better... Best of luck..
Fantastic advice from everyone, of course, and I simply cannot come close to the words of wisdom spoken here.
So instead I'll say, wow, how exciting! Totally thrilled for you, OP, and please keep us in the loop as to what houses you've looked at and your decisions.
So the house I found is a foreclosure for 34,600k, how do I get a lower price, and what are the steps for buying a foreclosure?
Excellent questions that your buyer's agent can help you with.
You are working with your own agent, right????
I am working with a buyer's agent, but she seems a little hesitant to deal with foreclosures.
Yeah, foreclosures are different.... But, she needs to step up (and she should have resources she can access).... Also, get that book - or work through the internet - there is TONS of information on buying foreclosures, and you should be able to arm yourself with lots of information to get you up to speed.... Dealing with a short sale myself, I've learned that patience is not easy for me - and I'm sure there are weird things about foreclosures, as well (probably sold as is, and probably depends on the bank as to how painful it will be). Good luck!
Thanks, and yes, the book just came in, so I've got some reading to catch up on.
MzElla, glad to see you posting back and updating us with (1) you have a new "buyers" agent" and (2) you are looking at foreclosures. That can be good or really bad. You know I have championed you for going forward with your dream so hope you won't think that I am being a "No way, Sally," here but forewarned is forarmed.
If your agent isn't conversant with dealing with foreclosures - well, then you are going to be at a disadvantage dealing with them. I know you have found a "possible" - let us in on that one. Many eyes here are pretty good at spotting the benefits/drawbacks of a property but it is up to you.
Would you consider posting the MLS number of the property you are considering? Know you have your new agent BUT, according to you, she's not really comfortable with that type of situation. Post the MLS number - many eyes removed from the immediate decision can be helpful ... let us help. This message has been edited. Last edited by: Idaho Resident,
Sorry, MzElla, but that isn't an MLS number - maybe a zip code? Please post back with more information about the property in which you are interested. We can only help if we have the right information! Keep us updated!
ETA: If you aren't sure of the MLS number, just post the full address and we'll be able to locate the listing from it.This message has been edited. Last edited by: Idaho Resident,
this is what I got:
This looks like a cute house with a terrific price. Just about the price of houses in my area 40 years ago. Now such a house in my town would be about 200K
There are more photos on realtor,com
The basement looks like it could be damp or that could just be the way the picture was taken. If it is damp check out why.
What is the neighborhood like?
MzElla, I think this one has some real possibilities!
The pluses? The price, of course, that recently dropped from $34,650 to $29,650 which is well within your budget, 3 bedrooms and more than 1 bath (although I am confused about that as some sites say 1 full and 1 half/ others say 2 full?), laundry available in the basement (are the appliances included - probably quite old if they are anyway), the generous off-street parking and the old garage which you would probably use for storage for a lawnmower, tools and all the other "pesky" things home owners need!
The drawbacks? Basically the age of the house - you would need a thorough inspection to find out exactly what you would be dealing with should you buy it. I would be most concerned about the roof, heat (furnace), plumbing and electrical. And, obviously, there is a lot of "cosmetic" work that needs to be done - specifically, paint and new flooring (carpet or tile) throughout but those you could handle DIY.
My other questions are: Is this near your college where other students would want to locate - I know you are planning on having roommates? And is it an area where young women would feel safe walking/biking around in the day-time or coming home alone after dark from evening classes or a date? I did see on one site that the highest percentage of population in the area was from age 20-24 so I would presume that it is a popular area for college students.
Is this the foreclosure you were talking about and is your new agent feeling more comfortable about helping you in that area?
I liked some of the old woodwork and the archway and can see a lot of potential to fix this house up with flowers/landscaping all around and that back yard is definitely a bonus. So have you toured it in person yet? What do you think?
PS. If all of your answers are positive, I would make an offer ASAP although CONTINGENT ON INSPECTION before an investor/college landlord thinks the same!This message has been edited. Last edited by: Idaho Resident,
The house is 85 years old.. and most of everything is original with a few, and I mean only a few newer features. I love the layout, there are 3 bedrooms and 1.5 bathrooms, well sort of because the main bathroom is exceptionally tiny with no shower(small bathtub), and with the half bathroom the prior owners did their own installation and they did a terrible job adding the bathroom wall.
It's hard to tell if the basement leaks because of the drought in the area.
My biggest drawback about this house is the location, the other houses that surround it are not taken care of and the area is kinda slummy. But at the same time, many of the other houses that I have viewed deal with this same problem.
Hmmm - just thinking here. Okay, MzElla, I know you have your financing in line for the purchase but are you going to need roommates to maintain it?
If so, the bathroom situation might be a problem. No problem if there is just you but with roommates - especially women? Just a heads up there!
The other matter - more serious - is when you describe the area as "kinda slummy" and yet say many of the other places for sale are the same. I know what you mean - I lived in college towns years ago and get it. BUT the bottom line is would you feel safe living there? If you even hesitate to answer, then the answer is that this is not the house for you...
If you aren't sure, ask around. Ask classmates, professors and the people you meet everyday if they would live there? There are many things to consider when buying your first house but one thing remains constant with real estate - location! Check it out before taking the next step.
It's cute. Needs a bit of work, IMO, but cute.
This is your biggest problem. When it is already a problem area it could get worse and become less desirable. This means that the value of your home will decline. If so, you could lose the money you have put in to it.
If all the houses you have looked at are in this kind of area, I would suggest you wait just a bit longer and save so you can get into a better area. One where you will not lose the money you have spent. (as well as feeling safe, being able to attract roommates, etc).
shop on...location, location, location. Always buy for resale.
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