Hello BP! My name is Chris Melton, 18 years old homeschooled and about to graduate high-school. I've read "Rich dad Poor Dad, "The Cashflow Quadrant" and currently reading "The Millionaire Real Estate Investor". I am interested in rental properties to build passive income every month. I do understand that real estate is a marathon and not a sprint. The reason why I want to do this is because If I start now I can be well ahead financially in my mid to late 20's. I've done some research on FHA loan for a low down payment on multifamily properties. I don't plan on going to college because I don't want to get neck deep in debt. My personal opinion is that I would rather pay $30,000 worth of college tuition on a down payment on rental properties than to work a job and try to pay tuition off with no cashflow at all. My question is how much do I have to save on a FHA loan on a property? Also, what do you think will be the best way for me to build cashflow at this age? Any information is greatly appreciated.
Hi @Chris Melton. That's great you are starting young. Do you currently have work? You will need to show income when applying for a loan, maybe you can look into being a realtor. Or something with real estate, that way you are learning and showing an income. Keep in mind Investment property loans typically ask for a 20% downpayment.
Unless you have a trust fund you have to work. That said, do you wanna work a low wage job to attempt to save money or a higher wage job where you can save money? How do you know REI is your passion? My suggestion is that you at least entertain some element of college as you go through trying to figure out what you wanna do. There are plenty of college educated individuals who say that college was not helpful in their REI pursuits but only a scant amount of individuals with no college who make the same boast. In short, GO TO SCHOOL.
@Carolina E is absolutely correct. If you use standard financing for an investment property you will need to put 20% down, AND its important to understand FHA requires you to live in the property to get the loan... they wont lend on investment properties. They will lend on 2, 3, or 4 unit buildings so that might be a way to start, you could live in one and rent the others out.
I would like to very gently disagree with Carolina, don't get a job as a realtor. It will take 2 years of this income to be seasoned to use... you must show a 2 year track record for 100% commission jobs.
Get a job that will develop skills even if they aren't DIRECTLY tied to real estate. work for a marketing company, work in sales (salary + commission preferably). Work in a construction company estimating projects. Work for a commercial property management company. Work in banking or finance. Work for a financial planner as office support.
Thanks guys! I currently don't have a job, but I was thinking about working for UPS the drivers work for $30 dollars an hour. I looked at the FHA requirement and it said, To apply for a 3.5 percent down payment I would need a credit score 580 or higher. It sounds like they don't care I went to Harvard or Yale they want PROOF that I can pay them back!
@Chris Melton good for you. You sound damn motivated and intelligent for someone your age.
I definitely agree with your thoughts on college - it completely depends on what you want to do in life. Personally, I am a strong advocate of city/state college (or other colleges) with low tuition costs - just in case you need a back-up in life - but it is NOT a requirement for REI.
Best of luck with whatever you choose to do!
Chris I'm one of those people who went to college and feel I could have done without it. I started investing right after my 16th birthday with my older brother who could contract and because I wanted to be the first in my family to get a college degree I worked a full time job and carried a full load at college.
I feel what I got out a college was a girl that I have been totally crazy about and married to for 55 years, so going was well worth it to me just for that reason, but career wise it was a total waste of time. It also took away four years of my investing time plus the years after graduating that I wasted playing executive for a fortune 500 company with 70+ hour work weeks.
But it is a good item to have as a fallback plan. I have seen scores of college graduates try to make it in in real estate, as a agent or investor and other causes and it was a life saver to them to have that degree in order to get a good job when their attempt at self employment and independence crashed. Consider it an insurance policy. Just make sure the degree is in something marketable.
@Chris Melton FHA usually only requires 5% down and they recently lowered that standard as low as 3% down. I would try to find a quadplex out there in your area. Live in it and rent out the other three so you can qualify for the FHA loan. Make sure you are building credit as well throughout the process. If you have decent credit you can put less money down and still have a good interest rate below 4-5%. You can also avoid PMI.
Good luck on your journey!
Keep the motivation! If I would have been smarter I would have bought the duplex I was renting when it went up sale at your age. Great idea, cost of living would be super cheap if you do it right. Don't rent to your buddies!
Thank you all! This is great information, Thanks again guys!
I'm 19 and was kind of in the same vote not really sure how to get involved in real estate. I started with reading a lot books and I worked towards my license. I currently go to a local community college and work for a real estate firm full time that focus's on land development so its not your typical real estate office. Community college is defiantly cheaper and I plan to move to a fully online college soon. To get involved in real estate I had the opportunity to get in touch with a mentor. If you can I think that this is a great avenue to go, because the mentor has so much experience and the learning opportunities are endless. I work for his firm full time and I love it, I think you would see the benefits of going to college and working in a setting that you are passionate about. I know that I see a lot of correlation between school and work. My goal is to get a 4-plex in the next year, and live for free.
Hey Tim! Thanks for your input. You're right, a community college is ALOT cheaper than going to Harvard. I have a mentor in real estate and i'm looking forward to work at his firm. I believe we all need mentors in different areas in our lives. Wish you luck on your journey!
I bought my first home at 20 yrs old and my first investment property at 23 so you can do deals while young. I didn't have any money saved up. I went to a trade school and did have a job to put food on the table, but none of that money from the job went to real estate. Also I quit my "real" job when I was 24 in order to rehab my houses.
The best part about being young, is that you haven't had to hear (at work) from all the old people, who didn't do anything with their life.
Plus when you start out with nothing, you have nothing to lose!
Oh, and I started doing real estate in Dallas so this stuff works in Texas.
Advice: Join the RICH club in Houston to network with the other LOCAL pros, because my rei career took off when I joined AIREO in Dallas, which is no longer an active rei club, but in the 90s it was the only club in the metroplex, and it was pretty good.
Thanks Mr. Jason! I've heard of Rich Club I'm going to check them out.
Thanks again for the info.
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