What would you tell your 18 year old about Real Estate Investing?

30 Replies

I'm curious about something and I think it can provide some insight to new investors also.  Basically if you had an 18 year old who came to you today and expressed interest in RE investing what would you tell them? This doesn't pertain to me since I don't have any kids. 

Would you say move on to something better (doctor or lawyers or such)? Go to college and get a degree in RE?  Get a degree in a somewhat related field such as marketing or finance? Would you tell them to house hack while in college? Would you let them PM in a house you bought near their school?  Lend them money to start buying while in college? Partner with them? 

Skip college and start working in RE?  Construction, RE sales, HVAC repair, plumbing, or electrician?  

Would you tell them to do flips?  Buy and holds? Invest for appreciation? Forced appreciation?  New construction? Wholesale? A combination? 

Would you tell them to take on debt?  

Would you tell them to wait until it is a better time in the RE cycle to buy?

Would you tell them to invest in a certain area?  Your area? Somewhere else?

Would you tell them to do multi-family? Single family? Duplexes?

Please share your thoughts on this.

Thanks!

I think that depends a lot on the kid. I am 21. I grew up in a home where my dad always owned his own company. My wife and I actually just had a talk the other day about when we have kids if they want to do REI what we would say. We both agreed that it would probably be best to teach them the work from the ground up. I would let them work part time in various areas of the company so they got a good understanding. They would learn some of the rehab skills, the pm skills, public speaking/negotiating, how to handle contracts, and most importantly I would help them learn to be self-sufficient. As far as college goes I think that is a personal choice. My wife is working towards her Doctorate in Psychology. I on the other hand have worked full time since I was 17. I may go to college later but for now am perfectly happy doing my REI and allowing my wife to do her thing. Just my 0.02

I'd tell them to follow their passion, but having an education wouldn't hurt their real estate investment career. On the other hand, our son that is now 26 works with us. He is extremely intelligent and picks things up quicker than most. He taught himself all of the programs that he uses to draw plans and renderings, in just a few months, plus goes to the City Planning and Building Departments to flush out what he needs to get the job done.

However; he has been on jobs and in meetings since he was a baby. He knows how to run equipment and how to work with people, so that's given him a huge jump. 

As a mom I wanted him to go to school and get a degree as an engineer, project manager, or something, but he hates school. Pushing him to do something he hated seemed pointless. He's good at what he does, and hopefully will make money doing it. If not, he can go get that degree. For now the experience he's getting, and all that he's learning is an education unto its own. 

What would I tell my 18 year old, or any 18 year old who isn't my kid?  I ask that because there is a difference in what i would tell them.

First off, we don't have any kids (yet, but hopefully soon), so this doesn't apply to me (yet) either.  However, we plan to raise our kids not unlike how I was raised - help paint/clean/etc. when we have vacancies, help answer the phone when we get calls for units for rent, etc.  We will also teach them lots about money, leverage, etc.  That is how I learned some of the basics about being a buy and hold landlord and having a goal of financial independence.  My husband and i are buy and hold investors.

You can see that I didn't have quite the typical upbringing - I already knew some of the underlying fundamentals about landlording.  We also had my parents available to ask lots of questions when we wanted to start investing ourselves (before I knew about BP!).  You can therefore see that a child raised with that kind of mindset about money, hard work, sacrifice, goals, etc., might get a different answer than some random 18 year old who asked about getting into real estate.

Anyway, if it was my kid with that kind of background knowledge, and they asked us about wanting to invest in real estate, I would teach them more about why we like multifamily properties, debt, buying low, etc.  I would tell them that we wished we had bought a multifamily first (instead of a house) so that we could live in one unit and rent out the other(s) and be even farther ahead.  I would tell them that they are going to college, for a good/useful degree (no liberal arts, sorry), and that's not up for debate (mom says, LOL), because you need a job in order to be able to save up for a down payment and get a loan.  I'd recommend against a degree/career that would require extensive money and time (like becoming a doctor), because that would cost them dearly as far as being able to invest while young.  I'd show them how to analyze potential deals, teach them about screening tenants, explain what is and isn't worth doing when turning a unit, etc.

If it was any other kid without that kind of background knowledge, I'd have to ask them what they mean about wanting to invest in real estate, ask what they know about it, then I'd start with the basics of what we do and go from there.

What you've asked is quite a big question, and I'm sure I could go on for pages, but that's the basic idea.

Originally posted by @Cal C. :

I'm curious about something and I think it can provide some insight to new investors also.  Basically if you had an 18 year old who came to you today and expressed interest in RE investing what would you tell them? This doesn't pertain to me since I don't have any kids. 

Q:  Would you say move on to something better (doctor or lawyers or such)?  

A:  Why can't they do both?

Q:  Go to college and get a degree in RE?  Get a degree in a somewhat related field such as marketing or finance? 

A:  Why can't they do both?

Q:  Would you tell them to house hack while in college? Would you let them PM in a house you bought near their school?  Lend them money to start buying while in college?

A:   Maybe. 

Q:  Partner with them? 

 A: Yes...already doing it.

Q:  Skip college and start working in RE?  Construction, RE sales, HVAC repair, plumbing, or electrician? 

A: Why can't they do both?

Q:  Would you tell them to do flips?

A:  Yes

 Q:  Buy and holds? 

A:  Yes

Q:  Invest for appreciation? Forced appreciation?  New construction? Wholesale? A combination? 

A:  Yes...to all, but especially Cash Flow

Q:  Would you tell them to take on debt?  

A: I would teach them about debt, and how it is their friend, not their enemy.

Q:  Would you tell them to wait until it is a better time in the RE cycle to buy? 

A:  I would teach them to invest at any time. The cycle dictates the strategy used, not the act of REI.

Q:  Would you tell them to invest in a certain area? 

A:  Yes

Q:  Your area? Somewhere else?

A:  Depends on the Market...(see above)

Q:  Would you tell them to do multi-family? Single family? Duplexes? 

A:   SFH...for now.  Again...see above.

Please share your thoughts on this.

A:  My 15 year old is already doing all of the above...with me.  

Thanks!

@Joe Villeneuve  I'm not trying to exclude anything, just trying to get the thinking juices flowing.  

@Joe Villeneuve   I think you missed my Willie and Waylon reference "Would you say move on to something better (doctor or lawyers or such)?"  :)  

@Cal C.   Actually we did not wait until our kids were 18, to talk to them about Investing. We have been asking them to help out and do their part.   Our older son is 15 and we started  to train him on updating our spreadsheets (tax prep/rent-roll) and both of them start helping out with cleaning painting vacant units etc. 

As far as career goes we have been telling them:  they should go for what ever they enjoy doing BUT in order the sleep good at night and not be vulnerable to the "empoyment at will" they should invest in RE so they have some investment income to sponsor a worry free/happy life and career of their choosing.

Originally posted by @Karen Margrave :

I'd tell them to follow their passion, but having an education wouldn't hurt their real estate investment career. On the other hand, our son that is now 26 works with us. He is extremely intelligent and picks things up quicker than most. He taught himself all of the programs that he uses to draw plans and renderings, in just a few months, plus goes to the City Planning and Building Departments to flush out what he needs to get the job done.

However; he has been on jobs and in meetings since he was a baby. He knows how to run equipment and how to work with people, so that's given him a huge jump. 

As a mom I wanted him to go to school and get a degree as an engineer, project manager, or something, but he hates school. Pushing him to do something he hated seemed pointless. He's good at what he does, and hopefully will make money doing it. If not, he can go get that degree. For now the experience he's getting, and all that he's learning is an education unto its own. 

 I agree what he is learning now is an education unto its own and the assumption you can work well together makes it even more pertinent.  But most of us will not have that advantage.   

Mommas, don't let your babies grow up to be landlords! @Cal C.  

@Cal C.    I do not have kids yet.  But I believe the sooner children are educated about passive income the better.  The power of multiple streams of income is the key to financial freedom.  In today's world the security of a job is not what it use to be.  Pensions, social security, and other old fashion benefits are going away.  Why not give your children the knowledge and show them the way to financial freedom.  I wish someone would have introduced me to passive income and investing when I was a child!

Originally posted by @Ryan Billingsley :

@Cal C.   I do not have kids yet.  But I believe the sooner children are educated about passive income the better.  The power of multiple streams of income is the key to financial freedom.  In today's world the security of a job is not what it use to be.  Pensions, social security, and other old fashion benefits are going away.  Why not give your children the knowledge and show them the way to financial freedom.  I wish someone would have introduced me to passive income and investing when I was a child!

 I know what you mean about being introduced to passive income and investing at an early age.  I sort of knew about, since there was one guy I knew, Junebug Davis, always had all of the keys to his rental on his belt.  But I didn't truly understand, though I thought at the time it was a good idea, but I didn't pursue it for 25 more years.  

@Cal C.  

18 be damned ... my {almost} 4-year old is already saving for a downpayment on his first {student} rental property.

stay in school.  but get ready to jump in with both feet running at graduation.  

think about it...most investors, of any kind, fail.  stock and futures traders, real estate speculators etc...it's all the same.  and with nothing more than a high school diploma he'll be digging ditches for the Chinese if things don't work out.  or in prison.  always have a back-up.

passions are emotions and are inherently flawed.  following your passion is like telling an alcoholic to compete in a drinking contest.  he'll love to give it a try...and that's it.  

how many people who follow their passion succeed, and how many fail?  it's easy...the vast, vast majority fail.  it's nothing personal.  it's all circumstance with a little bit of effort.  how many people in this forum make money and how many don't?  how many "new excited wholesalers" come on-board every single day?  20?  50?  and how many last 12 months?   1?

think it's cynical thinking?  it's called reality.   does it suck?  yuuuup.

the most valuable piece of advice he can have is to save his money.  and use credit card minimally.  this way when luck befalls him he shall be ready to act and act quickly.  

I enjoyed reading the reply's but most of you are using acronyms that I don't understand.

What is house hack?  What is PM?   

I am not young, just not experienced as the rest of you.

Thanks

@Patricia Hansen  

 PM is Property Manager, House hacking ( I actually posted asking that very question and I've been doing this 30+ years so don't feel bad) is when someone is buying a property and living in it, renting out rooms to help pay the mortgage. 

Originally posted by @Ryan Billingsley :

@Cal C.    I do not have kids yet.  But I believe the sooner children are educated about passive income the better.  The power of multiple streams of income is the key to financial freedom.  In today's world the security of a job is not what it use to be.  Pensions, social security, and other old fashion benefits are going away.  Why not give your children the knowledge and show them the way to financial freedom.  I wish someone would have introduced me to passive income and investing when I was a child!

 What he said! :)

I like what @Patrick Britton says. Look, to be an investor in the true sense you need money. The world is full of people without no particular skills and without two nickels to rub together trying to do wholesaling and calling themselves "investors". Very very few of them will make a consistent living at it. I do have a 17 year old and I tell her to go to college and get a degree in something that needs a degree. For example to be a doctor, lawyer, engineer, scientist etc you have to have the degree. You are not competing with anyone off the street which is the case in the RE business. Get some skills that are high value and high barrier to entry. Your career will always be your best investment. The ROI is infinity in potential. When you have some money, if you want to invest in RE, then go do it. And be a real investor. Not a wannabe.

@Patrick Britton   No offense but how can you fail of RE Investing? I don't believe this can be done. You can have temporary short term missteps or set backs and than learn from it and you move on and do a better job next time around.

And you should be able to take advantage of the only investment vehicle that afford ANYONE with a decent amount of persistence and work  an upward mobility. 

RE Investing reminds me to the Drivers License testing, it is not hard but some people afraid of it anyway, and sometime you might have to try 2-3 times to get it right,  but 5 years later when you are rolling down the street, who cares that it toke a few tries right?

@Anish Tolia   That myth that you need money is keeping a lot of people of of the RE game, especially the poor ones with low self-esteem.

I would mention, thatWe started out my "buy and hold" investing with $1800 in mutual funds and a yearly income of $14000 in late nineties. I purchased owner financed properties/foreclosures with all no money down ( I searched for a buyer's agent who would lend me his commission at 0% interest for 60 months so i could reduce my closing cost to a minimum at closing table.) 

I built up a portfolio of properties (B properties in B neighborhoods), i had purchased for about 20% discount. I leveraged up to about 105% and with an cash flow of about $50-100, I had no reserve but my risk was very low as most of these SFR properties were only 5-10 years old and i had no net worth to worry about, other than real estate.

So where are those properties today?  They tripled in value  and just about tripled rents too! (you could say it was luck BUT I was new in this area an was only willing invest  in counties/town where the census data was showing a stable population gains, past and future)   Noways I have about  $1000 true cash flow for each, including reserves,  dept service etc.......

It is called creating wealth from thin air! All you really need is s burning desire to invest and a strong follow up.

@Val Csontos  

Great story.  

Any more thoughts out there on what to tell an 18 year old about RE investing? 

@Val Csontos   I'm not suggesting success is impossible how you describe it. Just very unlikely. Its like pro sports or being a rock star. There are thousands of kids shooting balls in hoops in every city. And thousands of musicians who will never make it out of their garages. And I would venture hundreds or thousands of frustrated RE "investors" who cannot feed themselves off their so called "investments". But how many unemployed or poor doctors do you know? I prefer to play the odds rather than buy lottery tickets. And thats what I teach my daughter also. Could she be the 6 sigma success story that drops out of high school and becomes a billionaire? Possible but highly unlikely and I am not letting her drop out of high school any time soon!

Oh man, if I continue on my current trajectory my 18 year old won't have any choice but to take over the family business.  So you can bet their entire life will be based around growing up around Real Estate.  Of course, seeing as how I am 34, and no children, if I had one now and continue my success of doubling my net-worth every 3 years, they will grow up in a 1% household and can really do whatever they want.  But in the back of my mind, the trust has a 'working for Dad' clause before anything goes to them.   

On the otherside of the coin, no matter the age, anyone who shows interest in real estate, I love! I'll tell them the good, the bad, and the ugly and tell them that they can make a career out of it if it truly is a passion.

One thing I have heard my father say for years is that he wished he would have started doing what he does now many years ago. The way I see it, I being 27, am technically my father many years ago. I pay particular attention to long term investments  that he says he wishes he would have started many years ago. With this knowledge and "head start" , when I am his age, hopefully I will be able to tell my kids, I'm glad I did "fill in the blank" years ago not I wish I would have. if you start investing when you are 18 in real estate or anything else for the matter, you will be way ahead of the curve. So think about things you wish you would have done and started and give them that advice, because they are technically you, many years ago.

Having an 18 year I can tell you, you can't tell them anything they know it all!  That being said I tell my sons 18 and 22 find something you love and do it providing you can find a way to make a living at it.  They don't want to do real estate right now but they do understand it. My younger son is in school for welding that's not my dream it is his. That is the important part, it is what he wants to do, my job is making him understand how to get there and what impact that choice has on his life.

If someone young came to me with the same question I would try to help them understand the choice they have. I think that is the best thing you can do for anyone,  help them sort out what choices there are and educate them on what those choices mean.  I don't just mean how do you flip a house or be a landlord but understanding the nitty gritty of what that is, the reality of tenant calls or weekend work or whatever pros and cons there are for a particular career. The other thing I would tell them is that you can do more then you think you can if you are willing to put in the work. 

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