Investing while enrolled in college?

[Marty146]

Here's my info

Age: 21, enrolled in college while working about 30-35 hours a week on average per month
Income: 22k-24k anually
Debt: Currently have 12k in student loans, i have about 2-3 years left before graduating. Also, I have a car loan that im stuck with 3k left to pay off.

Currently I'm doing ok. Though, I have recently implemented a new spending budget. I have plans in motion to help trim off some unneccessary expenses and cut down on the going out department. I'm more interested in planning for my future than living in the moment right now. Saving now > saving later

So here is my question, should I take on more debt or should I worry about paying off some debt now little by little while enrolled in college? Some people have told me its okay to be 21 and live paycheck to paycheck...I beg to differ,I am motivated to start now. My current plan involves taking on a mortage for approximately 38k on a 30 year loan. The house has 3 units and is completely remodeled because, since I've moved in I've done some considerable work with my roomate (we are both semi-knowledgeable in home repairs and remodeling work). Its not a gorgeous house but we have done a very reasonable amount of work to the house. The current owner wants to get rid of it so he can enjoy his retirement. All three units are rented out; if i took ownership at the current rent dues I would have 700 dollars from rent income. After expenses such as mortage payment, homeowners insurance, taxes and misc. upkeep I estimate ill be making some money from the rent income (calculations based on reasonable numbers all rounded upwards just in case).

With the extra money I'll be planning on using it to help speed up paying off my car loan now, then focus on the mortage, then I would move onto trying to keep up with some of my student loans even though I don't have to start paying them off until I graduated from college.

I'm willing to deal with the headaches of taking care of tenants and upkeep on the house at the tradeoff of some extra money. I'm young, with that comes a lot of energy and motivation for my future.

Thoughts anyone?

[grantmeaname]

You will have lots of trouble finding a lender willing to give you a $38,000 mortgage (or is that a typo?). If you need to finance it, you'll have to do so another way... perhaps a HELOC/HEL as the only lien on the property, or by taking out student loans to buy it outright (not a great option, but an option).

[Marty146]

I already have a lender whose prequalled me for the $38k. So I can start making the necessary moves.

[grantmeaname]

Oh, great!

[Tyler]

Purely personal opinion, of course.

If I'm reading your details right, it sounds like you've calculated you'll only receive a small amount of income per month from the rentals.  However, in order to make that money you'll need to manage 3 rental units on top of full time school and working 35 hours a week. The return on your time spent seems pretty low compared to your other more important commitments.

I suspect you'd come out ahead (in both money and time) if you simply focus on your school and work and apply your energy to building a career and avoiding any more loans over the next 2-3 years. You have plenty of time to look at rental investments once you graduate.   

[Marty146]

That is true Tyler. Everyone has their own personal opinion on how much money is worth earning in exchange for your time. I'd have to wait and see to get some more exact numbers to look over, before deciding it it is worth my time at all. Thanks for the input.

[Jamesqf]

I'd be asking some other questions, too.  What do you expect to be doing after you graduate?  Suppose you get a really great opportunity in another state, or even another country?  Are you going to turn it down because you need to stay where you are in order to manage your rental units?

In your situation, if I had had extra money to invest, I would be putting it in something fairly liquid, such as a dividend/income mutual fund.  I might also pay off the car loan (depending on interest rate), but not student loans until they start charging interest - and again, it would depend on interest rates: I'd pay off a 9% loan ASAP, but make minimum payments on a 3% one.

[Marty146]

Well after I graduate I intended to go ahead and start on a job search. If I found a great opportunity in another state, or even another country I'm not sure what I'd do. When I think about getting involved and possibly buying this house, or any other property, I always consider the option of eventually selling the property. If I did buy this particular property I would think about eventually selling it after increasing the value of the house some more. But who knows, anything you plan on doing rarely goes the way you actually planned.

In my situation I actually don't quite have any money to invest, or else I would be looking at an income mutual fund. But I do have the oppurtunity to gain some equity and extra income even before I start my own career.

[cosmie]

As a college student that's closer to graduating, I'd caution you against it until you answer several questions. Among them:

1. Will your degree require an internship or similar experience, which may require moving temporary? I've ran into this exact situation; I skipped overpriced student-oriented housing, but was offered a great opportunity to co-op for 6 months with a company located 800 miles away. I had to eat 4 months worth of rent in my case; for you, you'll have to worry about having someone else take care of any problems.

2. Do you plan on starting your career where you are, or move with opportunities as they come? Even if you plan to fix it up and eventually resell it, 2-3 years can be a pretty short time frame.

3. How concrete are your plans? Do you have solid career plans in mind, or are you willing to capitalize on what comes your way?

There are others, but the gist of it is: Is the potential upside from the investment worth the possible complication of future possibilities? There's no right or wrong answer, but you should definitely think about it.

For me, the freedom was important, and I decided to rent instead of look for permanent housing. So when I was given an unexpected opportunity for this co-op, which could lead to a $60k offer directly after graduation, all I had to do was eat a few months rent instead of turn the offer down because I was too tied up.

[nawhite]

It would be helpful to have more information about your student loans. If you have federal stafford loans, are you at 6.8% or 3.4%. If you have private, what are the interest rates?

You said you don't have to pay student loan payments while you're in school but unless you have federally subsidized student loans, you are still getting charged interest. It will just get added to the principle when you eventually graduate.

One way or another you have to pay for the education, so remember that any additional investments you might make have to cover a guaranteed return of your student loan interest before you break even. I would assume that in almost all cases, you would be best served by taking out fewer student loans and/or paying back the ones you have already.

[chicagomeg]

My biggest concern is your lack of a sufficient emergency fund for owning a property of this size. I think it's a bad idea for this reason, plus all the others previous posters have mentioned.