Good Idea or Disaster?

**Tyyrus** · 02-08-2010, 10:43 PM

Hello all,

I have a question about some things, and would really like to get the opinions of people who know what they're talking about to some extent. Firstly, I'll introduce myself. My name is Ryan and I'm currently a college student about half done with my degree. I will be switching schools and moving across the country next semester (Back to my original coast. I went to the west coast for college and I'm deciding I like the east coast much better). Another important thing to know is that my girlfriend is doing this with me. In any case, I'm thinking about a couple things.

Firstly, dorm prices are far too expensive for having no fiscal return whatsoever. For me and my girlfriend to get a dorm for a year, it would cost along the line of $10-12,000 for the two of us. (About $2,500- 3,000/semester each for what we were looking at.) We would be spending that money and would have done nothing but hand money to our schools. And we wouldn't be able to live there over the summers. An apartment would cost about the same amount per year, except that we could live there during the summer.

So, we are thinking about buying a very cheap house together. By very cheap, I mean that I know it will be run down. I just need it to be livable to the extent that it has running water somewhere in the house, heat, and electricity. I don't even care, really, if the entire place has plywood floors or no paint on the walls. We just moved out of a place that used to be owned by a compulsive hoarder (We got to stay there basically for free), and we're used to living in very trashy, rundown places when we need to.

So let me lay out the plan in a bit more detail: We're looking at spending about $15-20k on a house. As I said, I know it'll be run down, but our criteria are very low. We would probably live in the house for two years, and then try to resell it. My credit score is decent, and we can get cosigners for a loan if need be, but in all honesty, the entire cost of the house might be able to be split up between our student loans. So me and my girlfriend would be putting a healthy amount of work into whatever house we moved in, and as I said, we don't need a place that's pretty by a long shot. Whatever is cheapest is at the top of our list.

By the time we graduate, assuming we put in work, we'd honestly just like to be able to sell the house for as much money as we have paid. We're not looking to make a fortune. It'd be nice if, having put some work into it, we got a small profit, but I'm not counting on it. Is this setting myself up for disaster? I would be hiring people to look at the house and make sure that there were no very expensive and important problems with the house, like foundation problems or large plumbing problems.

I don't pretend to know all the costs of owning a house. I know I'll have property tax, a down payment, and everything. I'm also quite poor, so ongoing costs could be a problem. But we're willing to even take a little bit of a loss if necessary. The way I look at it:

I buy a house for, say $18,000. It's run down, no real flooring, running water in only half the house, paint peeling off all the walls, overall a dump but structurally sound for the most part. In other words, not condemned. I put, say, 15-20 hours of work into the house per week, mostly on projects that require more labor than cash. So as the two years I own this house goes on, say I put another $5,000 and a lot of hours into renovations. I also have a couple friends and family members who would be willing to come and help for free once in a while.

Is it reasonable to expect to be able to sell it after that (With the housing market hopefully on the upturn) for, say, $25,000? That would pay for the cash I put directly into the house, and it would give me a $2,000 profit. Even selling it for $20,000 would be acceptable to me, as long as I got at least what I paid for out of it, not necessarily including renovations. In the end, I know I might lost money, but let's say my net loss is $5,000. I'd still have gotten housing for a year for a net of $5,000, and that's less than half the price of normal housing. It's just a much larger up-front, returned cost.

So yeah, there's my question: As long as I'm willing to put up with bad conditions, is buying a very cheap house and working on it over a couple years viable? Or is the entire idea a very poor one? Again, I can't stress enough that I'm not really looking to do this for a profit. I'm not trying to be one of those "Make $10,000 in a weekend" house-flippers. It's mostly for a place to live for a couple years, and if we got a profit out of it, that would be great and could go towards a more stable and permanent housing investment.

Thanks ahead of time, I hope I haven't rambled on way too much. What do you think?

**Chrisopher Moltisanti** · 02-09-2010, 03:34 AM

Look, owning a home (regardless if it's run down or in the hood or both), is a lot of work. You're still in school. Do you really think you'll even have 15-20hrs a week to pour into this place that's "run down...but liveable"? Do you really think living in squalor won't effect your attitude? Your morale? And ultimately, your grades?

If yes, do you really want to live in the hood? 99% of the time, that's where you'll find the properties you're looking for. If you're only going to stay there a few years (while probably dodging bullets), I don't see the point in putting your life at risk. Ok, "It's not in the hood Chris". Fine. Again, the hours involved in fixing it up to make it liveable isn't worth it. Make a profit? You're going to need a few more people on your team that play ball if you want to unload it to HUD in a few years. If you can't locate them, you'll be throwing your money away the next few years because you won't make a profit if it's in the hood: and it WILL be. If you insist it won't be in the hood, then plan on staying a little more than a few years to even get a 2% return due to the economy and upticks take longer than that when coming out of a recession.

You're planning on being a landlord when you get out of school? There are hundreds of reasons I can think of not to do this and jerks like Carlton Sheets won't tell you about all the pitfalls. Secondly, if you choose to buy, the bank is going to want to know a few things: Do you work? What's your income? How long at present job? Are you going to combine your income with someone else for this mortgage? Down payment? How much? Go through all of that to live in the hood? No thanks. To prove to yourself that you can do it? Get your degree first, then if you want to risk it all, go ahead: you'll at least have your degree when you move out (if you make it out), of that barely liveable tenement.

Good luck and think about what I said.

**Greg** · 02-10-2010, 05:50 AM

The very first question you need answered is whether you can get a loan or not. Talk to a couple of lenders in the area and see if you can get a loan.

**joshthomas80** · 02-13-2010, 12:40 AM

I'm gonna go out on a limb here and assume that this scenario is going to be a disaster for you. My advice?

Wait until you've got the time and energy to invest what it takes, especially if it's a dump.

**mWoods** · 02-17-2010, 06:41 AM

In my opinion, not worth the hassle. I can understand not wanting to "give" money to the university for housing but how's that any different than buying a home and not making a profit on it after 2 years? The tax benefits of owning a home in that price range are minimal if you are looking to deduct interest and taxes. Factor in the cost of renovations and I am afraid you will be regretting that decision. If you have 15 to 20 extra hours I suggest you work part time somewhere.