How to start investing young.

Question

Hello, I am new to this page and I am 17yrs old and interested in investing in real estate. Over the past 2 years I have been flipping cars and trucks. I have saved a decent lump sum of cash (about 10k). I am waiting to turn 18 in 2 months so I can start building credit. I was just curious on what would be the best road to take after I have decent credit. Whether its buying a house to flip or maybe a duplex. I don't know. Hoping I could find some insight on here. Thanks

Philip Cutting · Answer

Hi Cody,

Gray Maine is an interesting market.  I have lived in both the Augusta area and Portland.  Because I haven't checked the market in Gray, I can't give exact details on what is a good strategy for that market.  Tim Callahan has a REI (Real Estate Investment Group) in South Portland Maine.  Email [REMOVED] and ask about their events.  Also, try to call Lynda at [REMOVED].  She is my first real mentor.  She invests in maine, PA, MA...  She will help give you some great advice and may even invest in that area (i can't keep up with her, but I know there is a chance that she knows the area).  She and her husband are just great and would be a great contact for you.

I'm not sure 10k is enough to really invest if you have no other credit.  If something goes bad, then you are in trouble if you have no other sources of cash.  Hard money might be a good option for you, but with only 10k it might not be enough unless you have a smoking hot deal.

Being that you are a good salesman, I would consider getting your RE sales agent license.  Also after that, I would try to get a Hud property, move into it and rehab it up, then sell it after a year.  I say this because it'll be easier to get financing.

Isn't there an article on Free home Hacking here on BP?

Have you considered some wholesaling?  What is your monthly income? With 10k, you should be able to do enough marketing and driving to get some deals under contract.  If you are working on building your credit, this might be a great way (with or without a RE license) to build reserves and get to know your market!

As far as are single family homes better than duplexes in your area it would be best to take a local appraiser out to lunch.  Be careful of anyone that gives advice to one or the other without knowing your market.

Do you have a good idea on how to build your personal credit?  It can take a little while, but it's not really hard to do. Especially with you planning so far ahead, good job!!

Give us a timeline, how aggressive do you want to be? How soon do you want to buy stuff.  Do you have parents, friends, colleagues that could invest with you? I would definitely check out that REI in S. Portland.

Talk soon,

Phil

PS: Listen to the podcasts from these guys.  There are a lot of great nuggets of information!

Ed L. · Answer

Invest $600 towards getting your Real Estate Sales license.  Find a good reputable broker and don't be shy about asking questions.

You will learn a tremendous amount of highly useful information during your Agent coursework.  A lot revolves around liability and keeping yourself out of lawsuits...

As a Licensed Agent you will have unfettered access to the MLS, learn how to draft contracts and supporting docs, meet investors,  learn how to market properties, and  gain a tremendous amount of knowledge about your local real estate market.

You will also get back 3% on almost every property you buy by representing yourself as a buyers agent.  This alone more than pays for all my licensing fees and annual dues.  When it's time to sell you can also have the advantage of listing the property without the expense of listing with a Agent.   Say you buy a house for $100,000, spend $20,000 rehabbing, and re-list for $150,000.   In this scenario you can save $3,000 when buying, and $4,500-$9,000 when selling just by being your own agent.

Your broker will also hook you up with lenders, title companies, inspectors, contractors, web marketing, signage, camera advice, etc. etc. etc...

Then there's the obvious benefit of making commissions.  You can double your nest egg with a single deal.

That's my 2 cents.

Jason James · Answer

At your age I would suggest you keep working hard flipping cars and trucks or whateverelse makes you money while learning as much as you can about real estate. Find a mentor and learn, learn, learn. Save as much money as possible and then buy your first property CASH! At that point credit will be less of an issue. You could easily leverage the first property to buy more properties. Being so young and not really having the cash reserves or experience I wouldn’t suggest you jump in too deep.

I would also like to say working hard flipping cars and trucks to earn $10k is AWESOME! Not many people (grown folks) have that determination. You are doing great already!

In short take your time and things will happen for you as they should.

Raymond B. · Answer

@Cody  Harmon,

Click on the "learn tab" at the top of this page, and you could be spending many hours on the Information that is available.   Raymond

Ben G. · Answer

@Philip Cutting  makes some great points.  I'm not sure $10,000 is remotely close to enough to begin investing, unless you have more money saved up and you've allocated $10,000 out of that money to a down payment.  Then that might work.

I like the idea of starting a direct mail campaign and marketing for motivated sellers so that you can start wholesaling or syndicating to flip properties.

This should help get you started: Ultimate Direct Mail Guide

Sam Harris · Answer

The article @Philip Cutting referred to.

http://www.biggerpockets.com/renewsblog/2013/11/02...

Mike H. · Answer

At your age, you can definitely get into investing with 10k.

First thing I would recommend is buying a house or duplex  you can move into as an owner occupant. That will allow you to use loan programs that require little money down. Live it in a year or two (whatever the minimum amount is for the low down payment loan program) and then rent it out and buy another one

A duplex would be the best because then you could get your 2 years of experience owning property and could count the rent towards your income to qualify for more loans.

The real key though is that if you buy it right (70 to 75% LTV) and you get a couple years of principal paydown and appreciation, then maybe you could use that house to get a HELOC up to 80 or 85% as your primary residence before moving out.  Then you could use that money for your next investment or two.

To me that will give you your best foundation for future investing.

Thats how I was able to get started. I owned my home and pulled up a 43k HELOC that I pulled out every penny and stuck it in the bank as my reserves. Then I used hard money to buy additional houses and my reserves helped me qualify for the hard money loans and perm loans.

Mark Gallagher · Answer

You can make money in real estate with little money. You just have to keep your eyes and ears open at all times. I purchased my first home with probably no more than $500 in the bank. And someone gave me a loan to buy the house AND fix it up. I got a check for $5000 at closing to start repairs. I probably used it to pay past due bills at the time! I ended up buying 3 houses with the equity in that property before I sold it.

I just recently did a deal where a woman was looking to sell her house that she inherited. It was full of garbage, but otherwise in old but decent condition. I knew the property was worth something. But she essentially said she wanted to give it away! She didn't want to pay someone to clean it out, she just wanted to be done with it. She told me she had just paid $5000 in back taxes so if I could just give her $5000 she'd sign it over. And she did just that. I paid her $5000 and paid all of her closing expenses. I obtained a clear title policy, cleaned the property out, and put it on the market for $44,900. I eventually dropped it to $30,000 and had multiple people interested, giving me offers in the low $20s. I said whomever gets me a signed deal for $25,000 first, takes it. And that's what I got, $25,000. Minus a commission to the buyer's agent, and closing costs, there was about $14,000 in profit! Well over double my initial investment, in just under 4 months.

Moral of the story.. don't let the amount of cash on hand stop you. Read and study as much as you can, and keep your eyes and ears open at all times!

Philip Cutting · Answer

@Sam Harris  & @Raymond B.

+1

Michael Evans · Answer

It's not the amount of money you to have (you can always find money), it's about the desire and the amount of work you are willing to put into the business/  I was paid $15K to buy my first house, so I know from experience what I'm talking about.

Get educated on the topic of real estate investing from FREE sources (there are way too many free resources to pay these education vultures that want to charge thousands of dollars for what you can find online for free).  There are many roles you can play when it comes to real estate investing: bird dog, wholesaler, flipper, buy and hold, deal maker, lender, etc.  Learn what they are and which one(s) you want to be.  Be sure to join your local Real Estate Investment Association (REIA) and any other free or low cost real estate investment groups.

Connect with people in these forums and your local real estate investing groups and start participating in deals.  it's not hard, you just have to decided and believe this is what you want to do and you are going to put forth the effort to make it successful.  90% of people fail in real estate investing because they don't understand the role they want to be in and they don't put forth the effort required to be successful.  Don't be part of the 90%.  All you have to do is Believe It, Declare It, and Do It!

Bod Bless You!

How to start investing young.

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