Young Investing, Is it possible to secure real - estate with no credit

Savannah, GA · Member since 2013 · 9 posts · 0 votes

Hello everyone.

I'm a student in the Savannah, Ga area and I'm trying to make my start in home investing. I'm 21 with no credit and trying to find a way to purchase my first property without going through a bank. I wanted to know if anyone has any experience or advice about creative financing and private owner financing?

Also as a college student I believe that renting rooms to students can be profitable if students are screened correctly and the home is well managed. When I start acquiring property I plan on testing testing the waters of student housing. What do you all think?

This is my first forum post so forgive me if I'm coming off as a newbie.

0 Reply

19 views

Most Popular Reply

Belinda Lopez

Specialist · Houston, TX · Member since 2012 · 579 posts · 301 votes

12y

@Duncan Taylor

Why can't he do both? I've seen investors as young as 15 and 9 years old! Their parents helped them with the basics but the kids were the ones who did the work and had the motivation and desire to make it happen. We just had a 9 year old girl as a speaker at our Women in Real Estate meeting at our Houston REIA and she knocked it out the park! She's been to several events and is learning the basics b/c as she told us she, "wants to help take care of her family." She's been interviewing several local top expert investors for school reports.

To me, the faster you start teaching yourself, the better off you are. I've got my 22 year old nephew working with me (he's a college senior) and I'm going to help him buy his first small multi-family soon. How many times have I heard seasoned investors say they wish they had started sooner? All the time! Don't quit college - yet, but don't let anyone stop you from reaching your investing goals. No money, no credit IS hard, so yes, partner with a local expert, find a mentor, join the local REIA and start learning. Good luck!

3 Reply

See this reply in the discussion

17 Replies

Jump to latestLatest

Sort by

Duncan Taylor
Real Estate Investor · Member since 2013 · 866 posts · 487 votes
12y
I am very old school and you aren't going to like the advice I am about to give you...

You are not ready to invest in anything other than your future. I know the gurus hype you can jump in with no money, no credit and no knowledge and make a million dollars while you sleep.

You need to concentrate on building a solid financial foundation. If you don't have a job you need to find one even if it something like delivering pizzas. If you can find one, you need to create one. No, buying a rental with no credit and no cash to put into the deal is not creating a job. It is probably creating a job for your future bankruptcy attorney.

In Savannah, there is someone I'd recommend you seek out. His name is Howard Spiva and he is a well establish attorney, real estate broker and investor in your area. He is very easy to find on Google or Bing. From time to time he hosts some very good local seminars. Contact his office and find out when the next one will take place. http://www.spivalaw.com/spiva/contact-us
0 Reply
Karen MargraveBusiness Member
Moderator
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
12y
@Genus Powell Welcome to BP. If you haven't done so yet, you might want to read the Beginner's Guide to Investing, under the "learn" tab at top of page.

For you to do what you want, you would need to find someone with that perfect piece of property that would work for student housing, in the price range that would work, and be willing to finance it for you.

Remember, when you have a property you're renting out to several people like that, there's more wear and tear on it, plus increased insurance, utilities, etc. When we relocated from northern California to southern California, we put 14 young women in our 4600 sq. ft. house, and gave free rent and utilities to a couple that managed the property (they lived in a 2100 sq. ft. guest house)

I'd recommend you get up to speed on your local market, learn values, do comps, talk to other investors at meetings, and take the advice given above. When you are ready to get in, you'll be prepared. Good luck!
0 Reply
Belinda Lopez
Specialist · Houston, TX · Member since 2012 · 579 posts · 301 votes
12y
@Duncan Taylor

Why can't he do both? I've seen investors as young as 15 and 9 years old! Their parents helped them with the basics but the kids were the ones who did the work and had the motivation and desire to make it happen. We just had a 9 year old girl as a speaker at our Women in Real Estate meeting at our Houston REIA and she knocked it out the park! She's been to several events and is learning the basics b/c as she told us she, "wants to help take care of her family." She's been interviewing several local top expert investors for school reports.

To me, the faster you start teaching yourself, the better off you are. I've got my 22 year old nephew working with me (he's a college senior) and I'm going to help him buy his first small multi-family soon. How many times have I heard seasoned investors say they wish they had started sooner? All the time! Don't quit college - yet, but don't let anyone stop you from reaching your investing goals. No money, no credit IS hard, so yes, partner with a local expert, find a mentor, join the local REIA and start learning. Good luck!
3 Reply
Genus Powell
OP
Savannah, GA · Member since 2013 · 9 posts · 0 votes
12y
@Duncan Taylor

Thanks for your advice! I want to ensure you that my financial future is priority and one of the main reasons I'm looking at real estate at this moment. From my research Savannah is still suffering from a somewhat poor housing market and I feel now is the best time to buy real - estate, since its so affordable. I had a mentor here in Savannah that told me not to look at real estate as a form of spendable income (unless you have 20+ houses) but as a long term investment. Also thanks a million for that link I've been looking for some seminars and mentors here in the area.
0 Reply
Jeff Rabinowitz
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
12y
Learn your market, start going to your local Real Estate Investor Association meetings and meet some local investors. Want to learn with little risk? Perhaps you should look for possible investments, get them under contract and flip them to other investors for an assignment fee. If you are successful doing this a few times you will know you are finding good deals. It won't be too long before you will want to keep them for yourself. It shouldn't be too hard to find a private investor to partner with or to fund a large chunk of your deal if it is a great deal. If you have any desire to transfer to the University of Michigan and find a great deal in Ann Arbor look me up.

One of the partners on an apartment building deal I am involved in was ~25 years old when he invested. It was his first real estate investment. 4 years later he also owns approximately 10 single family houses that he rents. Age (either young or old) is only a factor if you let it be.
0 Reply
Genus Powell
OP
Savannah, GA · Member since 2013 · 9 posts · 0 votes
12y
@Karen Margrave

Thanks for your warm welcome! I want to ask you how is the student rental working for you? Does the return outweigh the potential headache or are the girls who oversee the place doing a good job at managing the property? Also how common is it for a student to pay a semester up front with financial aid? My passion is to manage and rent off-campus college housing, but only if it proves a larger return than renting to single families.
0 Reply
Genus Powell
OP
Savannah, GA · Member since 2013 · 9 posts · 0 votes
12y
@Jeff Rabinowitz

Idk if I could handle that cold Michigan weather. Haha but I never thought about connecting investors to projects. If you had the time I would love to hear more about that. I definitely need to start meeting investors in my area. Have any output on whether or not renting to students is a good idea?
0 Reply
Jeff Rabinowitz
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
12y
My landlord at U of M was a postman. He did very well with his rental home. It was a duplex and I recall he had ~8 students that he rented rooms to.

There was a guy in my class who paid for most of his tuition with a rental. His father bought it when he was a freshman. He rented it to 3 or 4 roommates and 5 years later they sold the house at a very nice profit. This was a few decades ago but I would bet it is still a good strategy on many campuses. (I would have liked to do this for my daughter but she was not inclined to be a rental manager).

It is easy to check to see if rentals are a good idea near your campus. Check the prices and see how many are for sale. If they are profitable prices will jump dramatically as you get close to walking distance of campus and you will not see many for sale except at very high prices...or if you find a special situation, a distressed seller.

Find a REIA and start going to meetings.
0 Reply
Jeff Rabinowitz
Investor/Landlord · Farmington Hills, MI · Member since 2011 · 1k+ posts · 1k+ votes
12y
Oh, connecting investors to projects is fairly straight forward. I am currently building a spec home. i knocked down the previous home. That deal was brought to me by an investor who sent out the classic yellow letters. He put the deal under contract with the home seller. I paid him a referral fee of several thousand dollars (he was paid at closing) to take his place as buyer on his contract. He did have a small earnest money deposit placed down on the deal but he got paid without ever having to take possession of the property.
0 Reply
Genus Powell
OP
Savannah, GA · Member since 2013 · 9 posts · 0 votes
12y
@Jeff Rabinowitz

Thanks for all the advice. I think connecting investors can be a great way for me to both network and learn my market. Will be attending my first REIA meeting on the 19th
0 Reply
Paul Timmins
Specialist · Rockland, MA · Member since 2010 · 7k+ posts · 2k+ votes
12y
@Genus Powell

Welcome.

Check out the Start Here page http://www.biggerpockets.com/starthere

Check out BiggerPockets Ultimate Beginner's Guide - A fantastic free book that walks through many of the key topics of real estate investing.

Check out the free BiggerPockets Podcast - A weekly podcast with interviews and a ton of great advice. And you get the benefit of having 40 past ones to catch up on.

Two Great reads, I bought both J. Scott The Book on Flipping Houses,The Book on Estimating ReHab Costshttp://www.biggerpockets.com/flippingbook

Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Locate the clubs website call and speak to the president and any vendors in advance, that will warm your reception up.

Consider checking out HUD homes for small multi's owner occupied gets first crack.

You might consider Niche or Specialized Housing like student housing. Rents can be 2-4 times more. Remember you don't have to own a property to control it. One call to the college off campus housing office you will find out where they like to live rents and what is included. Walk the streets find apartments for rent, connect with the owner to see if you can line people up for the beds and take a small amout each month its rented.

Good Luck

Paul
0 Reply
Justin B.
Investor · Gaithersburg, MD · Member since 2013 · 660 posts · 441 votes
12y
@Genus Powell

My advice comes with an assumption:
-- You have a decent financial education around real estate. I spent 3 years (not that it's required) on my financial education before I bought my first property. Know your market, understand all the pieces and parts, etc.
-- You understand the difference between no credit and bad credit. You'll find it 10 times harder to get a loan with a history of "bad" credit (late payments, etc) than if you just don't have much credit. I assume because of your age you mean you haven't built much credit, but as long as the credit you do have reflects payments on time, you'll have a much better chance of getting a loan.

You do have options:
-- Get a partner who can front the cash. This can be family, friends, or someone else (buyer beware, investing with family and friends has it's own pro's and con's).
-- Owner Financing at 100% (These deals are out there. It's how I bought my first house). The owner financed it at 100% for 1 year and then I had a bank loan me the money based off the appraisal. I had just enough equity in the house to handle the down payment. Plus it gives you a year to save up and cover any gap there may be. Again this can be risky as the bank requires certain equity so make sure you fully think it through and run the numbers.
-- Buy a house for yourself (like a 3 bedroom) and rent out the other rooms to other college students. If done right, the 2 rentals might cover the mortgage. The banks are loaning 95-100% in places for first time home buyers that are buying for themselves. Do some research.
-- Borrow the money (HML or credit card advance) for the down payment. I don't recommend this but you did ask for options so it is an "option" but I think you'll find most people on here think it's a really bad one :)
0 Reply
Kevin Brown
Rental Property Investor · Dallas, TX · Member since 2013 · 114 posts · 38 votes
12y
@Genus Powell

I bought my first rental at 21, Im now 24 and have added a few more rentals. When I bought my first few, I had no credit and not very much documentable income. I was able to get a loan by building trust with a local bank, putting 15% down, paying a little higher interest rate (my first 2 were 5.5%) and having enough cash in the bank to pacify the bank.
1 Reply
Noralee Deason
Condo Investor · Guyton, GA · Member since 2014 · 13 posts · 1 vote
12y
@Genus Powell I'm also new in the real estate investment world. I live next door to you in Effingham, and I did purchase a condo for my daughter to live in during college at GSU (much better than paying rent!). She is about to get married and move out and I will have my first rental. I am hoping to acquire another in 6-8 months.

My daughter's fiance' works in Claxton and she is still in college to become a teacher. They are both only 20, and don't have much credit. Actually, her fiance's is really messed up because of choices of his mother (long story). My daughter doesn't have much credit either and very little income, but at least payments have been made by her father for student loans in her name, which has helped her credit.

I was actually surprised that they were able to work with BB&T to get something called a CHIP loan for a condo that only required 3.5% down for owner occupants. The biggest catch was that the condo association had to certify that at least 50% of the units were occupied by owners. They found a very inexpensive condo that they are hoping to close on soon that met this requirement and they plan to hold on to as a rental unit after they save enough to build a home in a few years, after she is full-time employed.

I don't know that you can get into anything without income OR credit, but this might be a program you want to look into when you are able. The interest rate is a bit higher but they don't require PMI, which largely offsets that. I can honestly say that I got married at 18 and bought a house for $28,000, spent about $500 on paint, and sold it 3 years later for $32,000. That was in the mid-90s. It was a tiny little house, but it did appreciate and a good chunk of my tiny house payment was going to principal. If you can purchase young, I think it is a good idea, especially in this market that is just beginning to hit an upswing. Good luck to you!
1 Reply
Jeff Blanchard
App Designer · Chicago, IL · Member since 2013 · 124 posts · 31 votes
12y
Try to get even a baseline of credit going if you can, and even just $10k in the bank -- meanwhile cultivate 1 or 2 other friends to do the same, whom you trust. Find a distressed multifamily; get an FHA loan on it. Check out HomePath or other government programs that encourage investment in less-developed areas. Write a modest business plan that shows you understand the development process and take it with you when you visit lenders.

Combining these and some other creative ideas, you and your partners can start at ground zero and work your way up. Get your hands dirty while you're young and don't have as many commitments. By the time you're tired of having dirty hands, hopefully you've seen some growth and can start to afford to hire people to work with you.

And keep track of everything, even if it's just in a bunch of Google Spreadsheets. Even better, use property management software to help you develop and stick with a process.

Good luck
2 Reply
Karen MargraveBusiness Member
Moderator
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
12y
@Genus Powell Whoops! this thread kind of died off and now it's back! I want to apologize for not answer your @mention to me, apparently I missed it, as I always answer! Are you still moving forward with your strategy? How is it going? I think it's a good one I might add.
0 Reply
Noralee Deason
Condo Investor · Guyton, GA · Member since 2014 · 13 posts · 1 vote
12y
Glad to have revived the post! As a person who owned her first home at 18 and has a 20-year old now, I have a soft spot for these younger folks just starting out! I agree, work hard to get started young.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.