Starting at 16 22 posts by 12 users

Posted: 08/06/2008 at 08:39AM

If your parents can't help you, then it may be a struggle at your age.

In the UK we have the Princes Trust that helps young business people, but that's normally people with ideas / products to sell, not so much investing in real estate.

I'd look for networking events - not just REI, but general business too, and go out there and get yourself known to local people in the industry. That would probably be your best bet for finding a mentor.

Posted: 08/06/2008 at 11:19AM

Joe, I applaud you for getting involved in this industry at your age. Most guys do not have near thart much foresight to see what a great opportunity it is. I think if I were you (and i do wish I was 16 again in some ways - if I could take my current brain back with me) I would check with your state laws to find out what the minimum ages are for various things, like real estate ownership, leasehold ownership, etc. It may be that you can control a property through a lease purchase unless one has to be 18 to enter into a lease. At your age you should be able to get insurance and have a bank account. You probably can get your driver's license if you don't already have it.

Then you could join a REI club and ask around for anyone that would work with you if you were to find good deals through marketing and bush-beating. You might be able to work hard and get bird dog and wholesale fees. Save your money and build your credit for a few years, and then at 18 you are on your own, with no barriers. Keep us informed with your progress! Good luck, Mike

Posted: 08/06/2008 at 06:45PM

I congratulate you for wanting to start so young.I'm curious, are you planning on going to college? that expense alone will likely make it difficult to save and invest in property at a young age.

Even though it may be difficult it can be done. Have you considered bird dogging? You will gain a ton of knowledge and also a little cash to fund your deals.

Posted: 08/08/2008 at 07:27AM

Joe,

Here is what I recommend to do.

1) Establish credit history. To do this, get 4 credit cards, (American Express, MasterCard, Visa, and Discover only since they can be used to buy real estate if needed, stay away from Chase, HSBC, and store brand cards) with a limit of $500 on each. I would then go out and spend $100 dollars on each of them (buy some real estate books). Once you get your statement, freeze those cards in a block of ice so you will not use it. Pay off that purchase slowly so that you can start to building credit history.

With the credit crunch, if you can't get an unsecured card, then get a secured card (where you deposit the amount of the credit line with the credit card company) and then call in 6 months asking for the line to be switched to unsecured.

2) Grow your credit line.
Every 6 months, call the credit company and ask them to double the line of credit. If the customer service rep will not do it, ask for a supervisor and ask them (supervisors have more authority).

If you do that 6 times, your line of credit should be around $32K for each card or $128K collectively.

3) Keep working and saving cash, cash is king in the business and you will need it to get started.

4) Get a mentor (who can show you the business). Offer to work for free if it helps you get the experience.

5) Sometime in 2011 when your ready to make your first purchase, create a second checking account with your bank. Ask for one of those balance transfers checks where they are offering 0% interest for 6 to 12 months from your card companies. You want the balance transfer to be where you can cash the check at your bank so that you have cash to buy your first property. Then get it refinanced ASAP and pay off the cards.

The reason for the second account, is that when go to refinance, the mortgage company will want two months of bank statements. If they see a huge increase and then a large decrease, a red flag will be made. Thus, when you apply for your refi, use your original checking account to show your assets with. Beside, mortgage companies love seeing a checking account that has been growing.

By doing this, you are using other peoples money to buy with (which is what Kiyosaki says to do), you protect your cash for future use and you will be off to a great start.

6) Your first house, keep it small (-20 to +10 of the average price of the homes in the area). This is the range that most good renters can afford to rent with.

7) Use a management company to located, place, and collect rents with.

8) You want at a minimum, $200 cash flow per front door. When factoring in cash flow, take your rent, subtract the mortgage (principal and interest), taxes, insurance, and management company expenses).

9) Continue to read and talking to other investors.

Posted: 08/10/2008 at 04:32PM

Hey Joe - you just got yourself one helluva great free education from these posts.

Only thing to add is to invest some money in a lot of great books.

Good luck!

Posted: 08/11/2008 at 07:05PM

Alex,

I understand the underwriting issue when someone is young- so are you suggesting using the credit card for the down payment then going to a lending institution to refinance the entire property, including the down payment?

Just curious since I am young as well and want to learn tips regarding the various methods of financing property. I am getting ready to graduate college and have no job but do have a credit card from a few years ago that I built credit with ( and has a decent limit) that I could possibly put to use. Feel free to answer through PM so the thread stays on topic- I like to ask alot of questions.

Posted: 08/12/2008 at 06:48AM

Gary,

The young man can get a parent to cosign for the card. I would think his parents would be willing to do that especially if he were to put cash up front for a secure credit card to establish history.

Cassey,

I think your still on topic.
There are several ways to finance a property.
1) Traditonal mortage where you apply at a bank.
2) Seller Financing where the seller becomes the bank. Seller do not always require a down payment, often do not report your note to the credit agencies, and can work with you if your late with out dinging your credit. Sellers also gain the benefit from what I understand of lower taxes since they are not getting a lump sum payment.
3) Short term seller financing where the seller becomes the bank on a limited basis until you get pernament financing. It is easier to refinance a note with a bank than it is to get original financing. seller financing is a great way to get a property with little to no money out of pocket.
4) Hard Money Lender. Hard money is expensive, but the key is to not look at the cost, but to [/u]look at return on investment[u]. If you are having financing issues, and you have a great deal, work the numbers with hard money cost to see if the deal works. If it does, make sure you have an exit strategy for the loan (refinance, quick cash sell) and do the deal.

I would also seek out a mentor while your in college to help you get your mind set.

Hope this helps.

Edited: 08/12/2008 at 06:59AM by

Posted: 08/12/2008 at 10:43AM

Joe,

Here a few links of various companies that offer credit to people who are at least 16.

http://www.elancard.com/cgi_w/cfm/ElanCard/PersonalCards/YoungAdultVisaClassic.cfm
http://www.integrabank.com/creditcards/visa_young_adult.html
https://www.alaskausa.org/service/help/4u/youngadult.asp?t=v
http://www.centurybank.com/creditcards/youngadultvisacard.html

The key words I used were "Young Adult Credit"

Just be sure to read the card agreement, ask questions if you are not clear on something, and to not abuse the credit.

I would also recommend reading about credit at bankrate.com and fairissac.com Fair Issac created the FICO score and they are in the process of revamping the scoring with something they are calling Fair Issac 08.

Good Luck

Posted: 08/12/2008 at 02:17PM

Jeff,

Joe asked how he can get started. One part of my recommendation is that he establish a credit history early, since under current credit scoring guidelines, length of credit, from what I understand accounts for 15% of score. Not to mention, if he uses it correctly, he has a backup reserve to draw upon.

Most investors, unless their parents were investors, start investing when they are in the 30th's or later. Given that most people get their first credit at 18 while in college in the form of student loans or a credit card, by the time they are 30, they have 12 years of credit history to draw upon to help them get a loan.

Joe is asking how he can get stated at 18. If he does all his due diligence, reads, gets summer work working for an investor, realtor, or someone in the industry, and goes to get his first loan, what do you think is going to happen to him?

If there are any mortgage brokers out their following this thread, please speak up and say what you think you could do for Joe? To make the question fair, lets give an example. Joe will be 18 with no credit history. He finds a home worth $100,000 after repairs for a $50,000 price requiring $10,000 to rehab. Joe plans to pay out of his saved up funds up to 3% to10% down, and 10,000 to fix the home (assuming only cosmetic work, paint, carpet, fixtures, landscape) regardless if he provides the labor. Therefore Joe has approximately $2,000 to $5,500 to pay closing cost, mortgage payments during rehab, insurance, appraisal, home inspection, and any overruns the rehab might have.

He might qualify for an FHA loan under those conditions? I don't know.

Joe, who appears to be a bright young man is looking for advise as to what he can do now so that he can be ready to invest when he is 18.