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I'm a student the University of Louisville and I'm debating trying to buy a house in the area. Essentially, instead of paying rent, I would be paying a mortgage. I currently only have about $5k saved that I could use for a down payment.

The plan would be to live in one bedroom and rent out the other bedrooms to college students. I think that would take care of most of the mortgage.

Then I could leverage the equity I've built in that house to buy a duplex after college. Then I would rent out the entire house and one side of the duplex.

Is this a reasonable goal or will it be impossible to get a loan with my almost non-existent income?

I know I can put estimated rental revenue as income, but I'm not sure if I would qualify.

I'm also not sure if buying a house at my age (21) is the right move.

I have a paid internship, so my income is decent for a college student, but not large by any means.

Would it be better to keep my focus on the stock market? I'm trying to diversify my portfolio and asset allocation.

Any insights?

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    How would you cope if one or more of the other college students you are renting to dropped out? Would it be easy to find replacements partway through the college year?
    – Robert Longson
    Oct 6, 2017 at 21:58
  • I figured that most leases typically run a year. Wouldn't they still be responsible for the remainder of the contract?
    – Jake Steele
    Oct 6, 2017 at 22:00
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    You plan to chase them down for the money to wherever they go to when they drop out? Do you think that will be straightforward?
    – Robert Longson
    Oct 6, 2017 at 22:01
  • No, honestly I hadn't thought of that. I figured they would be responsible for the contract. And that they'd be able to pay due to the accessibility of loans for school.
    – Jake Steele
    Oct 6, 2017 at 22:02
  • @JakeSteele it's good that you're thinking out of the box, but Robert is absolutely right. There are more deadbeats out there than you can possibly imagine (even college students, and even your friends).
    – RonJohn
    Oct 7, 2017 at 19:11

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Is this a reasonable goal or will it be impossible to get a loan with my almost non-existent income?

I know I can put estimated rental revenue as income, but I'm not sure if I would qualify.

Banks typically only count rental income after you've been collecting it for two years, and at that point the banks will count 75% of it as income for loan qualification purposes.

You'd have to qualify for the mortgage without the potential rental income. Currently that means a 43% debt (including proposed mortgage) to gross income ratio. Even if you qualify, you have to be prepared to handle repairs, HVAC/water-heater could fail on day 1, and tenants have a right to withhold rent if some repairs aren't made. You also have to be able to weather non-payment/eviction of a tenant.

You could find a co-signor, maybe go in on a house with a friend, but there are risks and complications that can arise there if a party becomes unable to pay, or deciding how to split equity and expenses.

If you had the income/capital to comfortably pull it off without tenants, then that'd be a great situation, college rentals tend to be lucrative (I'd recommend getting tenants with parental co-signers to reduce risk). If you qualify but would be in trouble quickly if one tenant stopped paying, or a major appliance needed to be replaced, then it's probably not worth the risk.

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In addition to what @HartCO and @rocketman wrote, being a successful landlord either takes a lot of either:

  • your own time, effort and money repairing broken stuff, trying to verify that you aren't going to rent to deadbeats or those who will pay but then trash up the place even when they do pay, and then track down those who don't pay even when you pre-screened them (or their parents), or
  • your money paid to a property management firm to do all the stuff that you don't have time to do since your "real" job is studying.
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buying real estate is for people with sufficient financial resources to cover market downturns. Please read about the 2008 real estate market. Investing in real estate when you are a poor college student is a sure way to become a bankrupt college student.

A single word answer to your question: No. Not reasonable.

Your best investment is completing college with as little debt as possible and the most practical experience in the market area you are interested in entering.

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