What Advice Would You Give To A 16 Y/o Wanting To Invest in Real Estate.

[Jordan Banks]

I’m neither going to confirm or deny if I am 16. I believe that may go against the Terms of Service with BiggerPockets. If I was 16 my plan would be to get a couple years of part time employment during school and that saving money. While also building credit as an authorized user. I can’t be authorized user because of my parents credit score. How else could I build credit coming out of high school. Coming out of high school I’d want to have around 10,000 in the bank. With little to zero investments. Turning 18 I would get a good paying factory job and create an llc. I don’t know how you would set this up or structure it. Open it in Wyoming (I’ve heard this is the best state to open in) and put the rentals under the llc? Starting out I would focus on single family homes, short term rentals, and duplexes. I have no idea how the taxes would work. Should I hire an accountant, property managers, or something else I’m forgetting. Or should I not focus on this starting off. The goal is to move into apartment buildings after say… 100 rentals. 

[Randall Alan]

Quote from @Jordan Banks:

I’m neither going to confirm or deny if I am 16. I believe that may go against the Terms of Service with BiggerPockets. If I was 16 my plan would be to get a couple years of part time employment during school and that saving money. While also building credit as an authorized user. I can’t be authorized user because of my parents credit score. How else could I build credit coming out of high school. Coming out of high school I’d want to have around 10,000 in the bank. With little to zero investments. Turning 18 I would get a good paying factory job and create an llc. I don’t know how you would set this up or structure it. Open it in Wyoming (I’ve heard this is the best state to open in) and put the rentals under the llc? Starting out I would focus on single family homes, short term rentals, and duplexes. I have no idea how the taxes would work. Should I hire an accountant, property managers, or something else I’m forgetting. Or should I not focus on this starting off. The goal is to move into apartment buildings after say… 100 rentals. 

So just because you are 16 doesn’t mean you can’t get involved in the real estate scene.  Sure, until you are of legal age in your state you can’t contract for real estate… but it doesn’t mean you couldn’t partner with a willing family member and get them excited about the potential of real estate.  Sure, things might be in their name, but if you are splitting the profits and responsibilities, whose to say you have to wait?  I would definitely stick with family though… i don’t think I would partner with someone who is not a family member given your lack of true legal status, and I would definitely still put your arrangement in writing and have your parents involved / fully informed so they can help protect your interests. 
If that is all ‘too much’, you could start by attending local real estate investment meetings.  Just being around the conversations and other investors, you will absorb a lot of information and gain valuable knowledge.  

While where to invest is a premature conversation for where you are at on your journey, I would tell you that I think investing locally is much easier to manage.  When you are not near to your investment, you are at a disadvantage on several levels.  You almost automatically need property management, which is an extra expense that you may think only costs 10% of your rental rate.   But presuming you are financing your property - that 10% of gross rent likely represents closer to 30% of your net profit on your property.  By investing locally you get to keep that percentage for yourself… and I would tell you that managing a property is really pretty easy on a day to day basis. 

Keep in mind that each rental you want to get into will likely take $25,000+ for a $100,000 property.  And an average financed rental might net you $300 a month - but a good deal might net you double that a month.   keep in mind that you are also responsible for maintaining your property… so if the A/C happened to go out - it may be a $5,000+ expense that your tenant would expect you to fix pretty quickly.  Suddenly the $300-$600  a month you are making just went away for the next 10-20 months… so it’s not always a positive cash flow situation… and it points out the need to have reserves beyond the money it takes to just buy the property.  
But the broader point is, real estate is not a get rich quick scheme.   It’s more a long term effort - but definitely can be a rewarding one.  
In the short term it’s either “figure out how to leverage “other people’s money”, or find a job and start saving your funds to get started on your real estate adventure.

I  would encourage you to read Rich Dad Poor Dad.  You can find it online or in your local book store.  It will get you excited and motivate you.  Share it with potential partners to help them see the opportunities available in investing in real estate

hope some of this helps.

randy 

[Nathan Gesner]

Quote from @Jordan Banks:

You can't sign contracts until you are 18. You can't qualify for a loan until you have a couple years work experience and established credit.

I would work with your parents to build credit. They can cosign on a small loan to ensure you make the monthly payments. Get a credit card with them, let them use it, and it will build your credit. Talk to a lender today, with your parents, and figure out how soon you could qualify for a loan, what would be required, and what you need to do to get there.

1. Start with BiggerPockets Ultimate Beginners Guide (free). It will familiarize you with the basic terminology and benefits. Then you can read a more in-depth book like The Book On Rental Property Investing by Brandon Turner or The Unofficial Guide to Real Estate Investing by Spencer Strauss.

2. Get your finances in order. Get rid of debt, build a budget, and save. The idea that you can build wealth without putting any money into it is a recipe for disaster and the sales pitch of gurus trying to steal your money. A wise investor will not try to get rich quick with shortcuts. If you can't keep control of your personal finances, you are highly unlikely to succeed in real estate investing. Check out my personal favorite, Set For Life by Scott Trench , or The Total Money Makeover by Dave Ramsey.

3. As you read these books, watch the BiggerPockets podcasts. This will clarify and reinforce what you are reading. You can hear real-world examples of how others have built their investment portfolio and (hopefully) learn to avoid their mistakes.

4. Now you need to figure out how to find deals and pay for them. Again, the BiggerPockets store has some books for this or you can learn by watching podcasts, reading blogs, and interacting on the forum. There is a handy search bar in the upper right that makes it easy to find previous discussions, blogs, podcasts, and other resources. BiggerPockets also has a calculator you can use to analyze deals and I highly recommend you start this as soon as possible, even if you are not ready to buy. If you consistently analyze properties, it will be much easier to recognize a good deal when it shows up. Find Brandon's videos on YouTube for the "four square" method of analyzing homes and practice. It doesn't take long to learn how to spot a good deal.

5. Study the market. You can learn to do this on your own or get a rockstar REALTOR to lead the way. I highly recommend a well-qualified REALTOR that works with investors and knows how to best help you.

6. Jump in! Far too many get stuck in the "paralysis by analysis" stage, thinking they just don't know enough to get started. The truth is, you could read 100 books and still not know enough because certain things need to be learned through trial-and-error. You don't need to know everything to get started; you just need a foundation to build on and the rest will come through experience and then refining your education.

You can build a basic understanding of investing in 3-6 months. How long it takes to be financially ready is different for everyone. Once you're ready, create a goal (e.g. "I will buy at least one single-family home, duplex, triplex, or fourplex before the end of 2019") and then do it. Real estate investing is a pretty forgiving world and the average person can still make money even with some pretty big mistakes.

[Marci Mayes]

@ Jordan Banks

I applaud any 16 year old who is thinking about real estate or their financial future. I recommend getting a part-time W2 job now. If you are still living with your parents, you should be able to save a lot of what you earn. This goes against the grain for most teenagers. To quote Dave Ramsey, "If you live live no one else now, later you can live and give like no one else." While you are working and saving, learn as much as you can about real estate via podcasts, local meetups, books, etc. One book that I highly recommend is First to a Million written by Dan Sheeks and published by Bigger Pockets. You're on the right path. Stick with it! Best of luck! 

[Drew Sygit]

If a 16 year old brought me a great deal, I'd do the deal and give them a cut.

So, your assignment, if you choose to accept it:

1) Figure out how to find deals

2) Find people you can trust to share the deals with

[Dan Sheeks]

Hey @Jordan Banks

Bigger Pockets recently published a book that's perfect for you! It's called First to a Million. You should check it out! www.biggerpockets.com/teen. I am the author and would be happy to answer any questions or jump on a phone call if you'd like.

I'm always happy to talk to young aspiring investors. I'm also a real estate investor and high school business teacher so working with young people is what I love to do! Feel free to DM me.

Best of luck to you!

Dan Sheeks

[Sam Yin]

To your question about REI, credit, and age... it is doable. Where there is a will there is a way.

Although at that age I did NOT intend to invest in real estate, I DID establish credit for the purposes of business ownership. I had just come to America and got into the jewelery business by 13 years old, working in the factories. One of the owners of a manufacturing company (a boss) was a 16 years old. He was also a first generation immigrant. He was from Armenia and had to help take care of his family. He had several employees (including me) and we worked all night, closing up at 130am on average. It inspired me and gave me the confidence to open my own jewelery company.

Here is how I started. I went to Bank of America (it was near by) and opened a secured credit card. I deposited $5k (earned/saved) and they gave me a $5k credit card. They held the money for 2 years and released it after. That established my credit. I ended up opening a jewelery manufacturing company.

As for real estate, I did make a purchase at 16 yrs old, almost 17, using $40k cash as a down payment on a $166K purchase. I do not remember all the details for paperwork, but it was very minimal compared to these days. The escrow/loan officer and listing Agent made it happen. This was in the 90s. So things may have changed, but I doubt it. A few years ago, I went to look at a property and the owner showed it. He said he purchased it when he was 17.

Later in the 90s, I went off into the Army and thought nothing of investing. However, at the end of the 90s, I did make another house purchase without any issues. I was already 20 years old by then. But i think my credit was very establish based on that secured card.

There has been a few reforms in the financial market due to the housing crisis and lending debacle of the 2006 to 2008 era. This may, or may not, have change those practices.

However, the basics of building credit should be the same. Find a bank that will allow a secured credit line and deposit some money. Use the credit line, pay it off timely, and build your credit. Then hustle and find a way to build, create, or raise capital.

I started to dive into REI very late in the game. Since you are here now, you have the advantage of technology and information to guide you.

Best of luck.

[Carlos Ptriawan]

Quote from @Jordan Banks:

I’m neither going to confirm or deny if I am 16. I believe that may go against the Terms of Service with BiggerPockets. If I was 16 my plan would be to get a couple years of part time employment during school and that saving money. While also building credit as an authorized user. I can’t be authorized user because of my parents credit score. How else could I build credit coming out of high school. Coming out of high school I’d want to have around 10,000 in the bank. With little to zero investments. Turning 18 I would get a good paying factory job and create an llc. I don’t know how you would set this up or structure it. Open it in Wyoming (I’ve heard this is the best state to open in) and put the rentals under the llc? Starting out I would focus on single family homes, short term rentals, and duplexes. I have no idea how the taxes would work. Should I hire an accountant, property managers, or something else I’m forgetting. Or should I not focus on this starting off. The goal is to move into apartment buildings after say… 100 rentals. 

 I have started investing since I was 18, I remember I purchased land at that time. My motivation is easy, I had a good-paying job and I keep saving money to buy real estate more and more. I purchased land at that time because that was the only thing that I can afford.

[NA Morrisseau]

Yes, I SERIOUSLY foubt that you are 16....I'd say mid to late 20's! So, your parents' have no credit score?? What kind of parenting is that? Truly sad....especially if they want YOU to invest money for THEM and their futures.  Were these parents really there for you as a child when you needed guidance the most? Especially if one parent owes like 93,000.- 100 000 to the IRS or REVENUE CANADA.  I would really watch my investments, ESPECIALLY if the parent is going to be reaping these rewards set aside for yourself!!