Invest in your education: invest in a house

By Ae Jung Yoon

The Daily

Tuition, textbooks, late night pizza and your first house: the four don’t always seem to go together, especially for college seniors. Yet for business major Phil Herron, buying a house became a reality after graduating in 2007.

Like many other cash-strapped students, Herron wasn’t able to buy a house with money out of his pocket.

“Basically, no one can afford a suitcase full of cash. You’re going to have to have somebody co-sign or there’s no way to get in [the real estate market] until you’re 35,” Herron said, “But your resources are more than what you’re making.”

Herron invested in a house in the U-District with his parents as co-signers. But even with the help of his parents, the mortgage companies checked his credit, income, how much he would put toward the down payment and all his assets.

“It’s all about familiarity. Knowledge is power,” Herron said. “Do a lot of research. I build custom homes so I’m familiar with real estate.”

Many students aren’t custom homebuilders. But for that, and everything else, there is the Internet.

“There is a site called Zillow.com. It’s a real estate Web site and it gives you its estimate for every house that’s for sale,” Herron said.

Investing in a house can sound like an overwhelming process, especially without a secure job. However Bob Dawson, a lecturer for Introduction to Law, believes that buying a home young can be one of the best things a person can do.

“There’s really no better time,” Dawson said. “It always seems expensive, and it’s still going to seem expensive even when you’re 30 or 40.”

Dawson, whose personal experiences have led him to invest at a young age, often encourages his students to do the same.

“If you start early, the financial rewards are likely to be substantial,” Dawson said. “I’m not talking about stuff [you] see on TV, like Flip This House, where they go in, buy it and fix it up and try to sell it in a month. Now that’s risky. I’m talking about a good solid buy, holding onto it and selling it after it’s gone up in value.”

Although this may sound like a simple notion, there is a lot more to it than just holding onto a house and selling it.

“The first thing they have to do is research the market,” Dawson said. “I think the way you do that is to look at a lot of properties. Go in and see what they’re asking for, and after a while you’ll get a pretty good idea.” But just because the price seems reasonable certainly does not mean that it is a good investment. Buyers must be wary of the actual condition of the property.

“The next thing they ought to do is, if they’re thinking about buying a piece of property, make sure to have it inspected,” Dawson said. “You hire inspectors and pay them and they go around and check the wood to see if [it’s] rotten, check whether the pipes leak, make sure everything is up-to-date.”

Although some problems might be difficult to deal with, others may actually be reason to invest in a property.

“I usually recommend that somebody buy a house with surface problems such as painting, roofing, superficial work,” Dawson said. “The value of the property is fair. Then you buy it and fix it up, and if it looks better, it’s worth more. I think $50,000 is very reasonably achievable in four years. $100,000 is a little more work.”

Four years is a college career; that is precisely why Dawson encourages investing young, as young as your freshmen year in college.

“Look, [you’re] coming to college and renting for four years. At the time it might be expensive but buy a little house, live in it, rent it out, have a roommate and during those four years, fix it up. Then sell it. When you’re a senior, you can gain $50,000-100,000,” Dawson said.

As young buyers, however, many might fall into traps that can result in a huge setback for future investments. But Dawson feels that with enough caution and research, one can easily avoid these traps and make a valuable investment.

“I would suggest title insurance that says that the person you’re buying it from actually owns the property,” Dawson said. “I would also suggest hiring a lawyer before you sign off on it, for about $600. They can spot a lot of problems.”

Another cautionary aspect of investment is finding the right kind of mortgage.

“There are people who start looking for a mortgage company where the interest rate is one-tenth less than somebody else, in a sense it destroys their credit reliability,” said Jorgen Embreus, a real estate agent for Century 21 North Homes. “Every time they go to a mortgage person, the less chance for them to get a mortgage because there is some doubt about this person. The interest rate is going to be higher every time he or she goes to a different mortgage company.”

A good real estate agent will point you toward the right mortgage companies, Embreus said. Despite the daunting prospect of investing in a house, there is little doubt that real estate investment is a practical possibility.

“Investing in real estate is a positive investment for sure, provided there is some time allowed,” Embreus said. “In the long run, you can’t find a better investment.”

[Reach reporter Ae Yung Joon at editor@thedaily.washington.edu.]