Buying a home right out of college? No thanks, said recent University of Arizona graduate Alia Arbas.
Arbas admits that she couldn’t wait to enter the real world, one without classes and term paper deadlines. But she wanted no part of the trials and tribulations that come with buying a first home. Shuffling moving boxes around in the trunk of her car, Arbas, 23, laughed at the idea of purchasing a home after she graduated with a degree in art history this past year.
"Are you kidding?" she said. "It’s simple. I don’t have any money."
After renting her home just north of downtown Tucson, for only six months, Arbas finally found a job in Aruba teaching synchronized swimming.
While it isn’t for everyone, buying a home right out of college has become a more viable option in recent years as financial institutions have made it easier to get mortgage loans.
Deborah Gregory, who teaches a real estate finance course at the University of Arizona, said that the only large obstacle standing in the way of young buyers from getting their first home is whether they can hold the property long enough to make it a viable investment.
"To break even on the house you generally need three years to cover the smaller costs that add up with the purchase," Gregory said.
Those three years aren’t an option for most graduate renters, said Gary Sax, owner of Apartment Locators in Tucson.
"College graduates lead a very transient lifestyle. They don’t want to be tied down or deal with the hassle," Sax said.
Arbas added that, aside from not knowing where she might end up landing her first job, she simply doesn’t have the money to cover the down payments and other costs that come with purchasing a home.
"With no money, it wasn’t an option," she said.
However, Gregory believes that even having a college degree and car payments are green lights for bankers to help graduates out.
"Right there that says something to the lender… If you have potential for income, what your first job is, then they kind of figure out how much you can handle," she said.
Gregory added that many government agencies offer loans to first-time buyers, especially those catering specifically to graduates who have worn the mortarboard and gown. This is an option that Tucson Realtor and UA student Dan Israel said has helped his clients immensely. Israel spent the summer selling homes to both students and graduates.
However, successfully owning a home right out of college also depends on what housing market you move to, with some areas perhaps out of reach of some students.
"It depends if you’re moving to San Francisco, Boston, some place with an inflated market, but places like Tucson and Arizona, in general, are easier because of the relaxed market," Israel said.
The young real estate agent claims that many of his clients already had a back-up plan if their careers took them to another city.
"You could always just rent the house yourself," he said.
Israel added that many cities across the nation have property management companies that will handle the day-to-day operations of the rented property, and more.
"Some [companies] will even represent you in court if that’s needed," he said.
Many of the homes Israel sold were newer and further from the university, as many houses located around college campuses tend to require more maintenance. Many first-time buyers don’t have the money to contend with maintenance costs.
Sax, who is also a licensed real estate agent, thinks that a perspective buyer who is looking at becoming a landlord must beware that appreciation is more likely attained if the home is in a higher cost area, a luxury many renters aren’t exactly looking for.
"Nicer houses are the hardest to rent," he said. "No one wants to pay the higher rent."
Becoming the landlord isn’t as easy as it sounds either. With the owner’s mortgage payments contingent upon how much money he or she is making, renting to others could become restrictive, according to Sax.
"It all depends on how much you’re paying," he said. "You basically can only rent to people who have a lower credit rating than you."
Nevertheless, renting is a great way for graduates to ease into the homebuyer market. For instance, while they’re in a lease, renters have a chance to explore the city to find out which location would be most profitable.
"Most people moving to a new town don’t know where the nicer parts of town are," according to Gregory. "There are many places that rent for six months that would give you time to do that."
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