When in college, the last thing you are probably thinking about is investing. Time spent not up all night studying or working at a part-time time job is taken up with the little social life you have. But ever think about how much money you will spend over your academic career on rent and having nothing to show for it upon graduation. One day I wondered if there was a better way and begin to do some research on the home prices in my area and in real estate investing and I learned a few interesting facts.
The total rent you (and possibly roommates) pay for rent every month on your apartment or house is in most cases equal to or higher than a mortgage payment at this time of low interest rates of the house with very little down. What does this mean, you are most likely paying off someone else’s mortgage while they earn a little profit and huge equity on the property. This certainly seems like you are losing big money renting and its true. If a person takes out a mortgage for a house with as little as 5% down for 20 years and then pays for the mortgage and other associated costs , in 20 years, he would own a house for that small initial down payment. Even selling the house for the price that he bought it , would be an incredible profit (even though he will make an even larger profit for reasons I will mention later).
So after looking through some of the realtors websites, I found some houses at 150k or less which had 5 bedrooms, even a couple with the houses already split into apartments with own kitchen, bathroom and electrical meter in each apartment. These types of houses are the best investments. After using some online mortgage calculators and a bit of number crunching , I found that in some cases I could pay for more than the mortgage if I had 4 tenants in the house, I myself could live “rent-free” there. That’s a pretty good deal , especially if those tenants were some reliable friends and you wouldn’t even be dealing with strangers.
This sounds pretty good right ? , but what about your done college in say 5 years and you want to then go and get a house with you and your special someone. Well , you have two options , both which would show you how good of an investment buying a house is. The first option is selling the house , Well guess what all those payments that your tenants payed gave you a nice equity on the house. Every case is different about what you can make , but in may case , I could make $30,000 dollars profit from the equity earned over just 5 years after me living for “rent-free” all that time. That would be a nice payment on my student loans. The Second and more profitable option is to continue to rent out the property as long as you wish before selling. After the mortgage is paid off , then all those rent checks are pure profit and you now own a house after paying very little out of your own pocket.
And it gets better, on average, it seems that houses go up in value 5% every year , so you can imagine the profit you could be making in 20 years time. Anyways I hope I have at least inspired you to do some research on the topic and see if its the right investment for you. Also, remember this little fact , 76% of the world’s millionaires are real estate investors.