The student loan bubble is now one-trillion dollars, and it’s showing no signs of popping soon. Graduates may now question making the leap into home ownership, as lenders can place liens on their homes if the loan is defaulted. The domino effect is that these outstanding loans affect the real estate market in that:
1. College graduates will delay home ownership.
2. Real estate investors have a more stable market for filling rentals.
Advice To Students:
Should you clear a student loan, or proceed with a real estate investment?
It’s up to students to decide whether they’re earning sufficient and steady income to tackle both the loan and home mortgage at the same time. In instances where one’s dream home comes with the price of living beyond one’s means, it may be wise to save up for some time, and also search for ways to earn more.
The big question is what if the mortgage payments average the same as rent? Well, as true as this may be, what truly deters purchases are the hidden costs of home ownership. These include taxes, maintenance, insurance and association fees.
Financial experts will tell you that renting for a few more years until debts have been decreased will secure a better long-term fixed-rate mortgage. Renting also lends more time to stock up an emergency fund.
Advice to Investors:
There are over seven million students who are now in debt, and while this topic deserves an article of its own, investors are basically getting a readily available market to service – which is providing rental units to debtors.
Until student debts are cleared, or higher salaries are earned, there will always be a market to tap into. These estimates show that there will be enough rental orders in the marketplace to fill up wholesale supplies of real estate. The tactics used in early investment will also mean the difference between languished vacancies or year-round tenancy. In a snapshot – investors should select purchases in vital locations, or units that will always be marketable.
An average investor may be deterred by the housing meltdown in years past, but smart investors will be lean enough to learn the tricks to stay ahead – even during a recession. In fact, Jason Hartman advises that you anticipate and plan for these meltdowns in the market, as they’re sure to come at least once every decade.
The other good news is that the need for shelter is universal, just as is the requirement for food and clothing. As individuals will always need a roof over their head, investors will always have people bulldozing their way to the door of their rental property. That being said, whereas home ownership for most people is a once-in-a-lifetime event, investors on the other hand should think of increasing wealth through multiple deals.
As students delay home ownership, investors should become proactive to whittle out the best investment deals – while they last. (Top image: Flickr | Alan Cleaver)
The Commercial Investing Center Team