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The Balancing Act of Being a Renter and Landlord

By U.S. News & World Report

Millennials are often painted in the news as the generation that refuses to invest in real estate. The 20- to 30-somethings are flocking to major cities based on employment opportunities and lifestyle choices, where they inevitably end up renters due to high housing prices and the average student loan debt.

But some forward-thinking millennials are trying a hybrid approach: becoming both renters and landlords.

Being a Landlord and Paying One Too

Ashlee Dozier, a 31-year-old independent consultant for Rodan & Fields, became a renting landlord when she moved from Austin, Texas, to Atlanta in 2010.

“I originally decided to rent when I moved to Atlanta because I already owned one property,” says Dozier, explaining that she didn’t feel confident about maintaining two properties.

Like many millennials, Dozier doesn’t consider herself stock market savvy, but feels investing in real estate is a safe long-term strategy.

“I purchased the home when I moved from Florida to Texas so that I could no longer waste money by paying someone else’s mortgage, but rather put that money towards my own investment,” Doizer says.

Dave Olverson, on the other hand, felt more comfortable with the stock market than real estate landscape — until he bought his first property in Indianapolis in March 2014.

“Unlike owning the home that you live in, owning a rental is an investment that generates real income,” Olverson says. “Therefore, I treat it more like buying a much riskier index fund than finding a place to live.”

Olverson, a 31-year-old who founded the site TheNewYorkBudget.com, has lived in seven apartments since graduating college nine years ago. Like many of his millennial peers, Olverson prefers to keep his living options open by staying a renter.

“I chose to live in New York City, and so I spend a lot of time figuring out ways to decrease my cost of living,” he says.

The Financial Balancing Act

The process of being a landlord and a renter isn’t without its financial pitfalls.

“I had a tenant who stopped paying rent,” Doizer says. “Luckily he moved out willingly, and I didn’t have to go through the eviction process.”

Dozier had the savings cushion to pay both her mortgage and rent while searching for other tenants, but it certainly put a strain on her monthly budget. She recommends anyone looking to be a landlord have at least three to six months of mortgage payments saved up in case a tenant doesn’t pay or an unexpected maintenance issue occurs.

Olverson has yet to deal with the financial pain points of being a landlord, but it doesn’t make him naive.

“So far, the rent I get from my tenant covers more than my mortgage,” he says. “However, if there were a long stretch without a tenant, I probably would feel a squeeze.”

In addition to having emergency savings like Dozier, Olverson also advocates for making a 20 percent down payment and having a few thousand extra for closing costs. But investing in real estate is about much more than just affording the initial cost.

“You need to learn a lot about how to find properties, and you need to network with people in the city you want to invest in,” Olverson explains. “Buying property is not a one-person job. It takes real estate agents or companies, rehabbers, financiers, inspectors, appraisers and property managers at the very least. You need to find the right people.”

Learning through experience is important, he adds, but he doesn’t suggest leaping into real estate without a well-researched plan.

Ditching the Rent?

Paying rent often serves as a double-edged sword to financially-savvy individuals. Some view it as a way to keep options open, minimize monthly living expenses, eliminate the stress of dealing with the wear-and-tear of a home and provide the opportunity to live in an area with sky-high real estate prices like New York or San Francisco. Others consider rent nothing more than throwing away money each month without building equity. Doizer is the latter.

“Paying rent for five years, after previously owning a home and paying towards my own investment, feels like I am wasting money again,” says Doizer, who is in the process of buying a home in Atlanta that she plans to turn into a rental when she moves again several years down the road.

Olverson considers homeownership just another piece of his portfolio.

“Maybe someday I will want to own a house and live there for 20 years, but for now, I want to keep my options open,” he says. Olverson doesn’t foresee buying into New York City real estate any time soon, and he doesn’t have any plans to leave. “Owning a home elsewhere is just simply an investment to me.”

More from U.S. News

10 Ways Millennials Are Changing Homebuying

Turnkey Properties: The New Millennial Investment

8 Strategies for Investing in Real Estate

The Balancing Act of Being a Renter and Landlord originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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