21 years old - 20k - what to do?
Arlington, VA · Member since 2013 · 115 posts · 40 votes
A little background: I'm a 21-year-old rising senior at Clemson University with about 20k to invest. I have my Pennsylvania Realtors License. Besides taking some real estate classes, my only experience in the field involves two real-estate internships and some personal tax lien investing background.
If you were standing in my shoes today, what would you do in this situation? What REI strategy? Or, where would you go from here?
Thank you in advance and I really look forward to hearing everyone's thoughts.
Ryan congrats on the education!
If I were still and college and had $20k and could talk to my old self I would:
#1 - purchase and read/listen to a few books:
#2 - Determine if Real Estate was something I could get passionate about by making a pros/cons list against my other passions. I'd try to imagine what my life would be like in 10 years if I had rentals and tenants providing cash flow v/s whatever else I was passionate about.
#3 - Tell my old self that setting up streams of income is the best way to generate wealth. Print off the cash flow quadrant and decide what quadrant you want to live in.
#4 - Attend a REIA meeting every month, but don't buy anything. Just network.
#5 - After the pro/con list if Real estate were the best decision for a passion in my life that would generate income streams & assuming I still had $19,950 and no job... I would market to mobile home owners with yellow letters and find a screaming deal. Get the deal under contract & buy a Mobile Home for ~$15k and spend ~$3k updating w/ new carpet, paint, roof, locks, etc. Rent it out and let it cash flow.
#6 - I'd get a job doing whatever I went to college for and get some decent stated income. Save 10% of each paycheck for down payments on real estate.
#7 Go to all your local banks, build a relationship and do what needs done to secure financing.
#8 Find a mentor @ the local REIA or on BP.
#9 Rinse & Repeat. Choose your REI passion. Flip, Buy&Hold, Wholesale.
#10 - Enjoy life with real estate!
I am just about nearing 25k myself and i am 22 years old still living with mom and dad. my hopes are to house hack, FHA into a duplex near the area i live in now. (Plymouth, MA) and live in one unit and rent the other. i also own a plumbing company and work full time to the handy skills help out so i wouldnt use many sub contractors to fix i can do it all myself. but thats the route i would take, start off smaller with a duplex, build capital with your cash flow and expand. Good Luck!
The biggest return on investment that I have ever made is investing in my own marketing.
#1. Market for equity partners.
#2. Market for great deals (direct to seller / off market)
If you read The Art of the Deal - Donald Trump - the first deal he does is buy a foreclosed apartment complex with NO MONEY DOWN and then gets a partner to finance the repairs.
He makes $600k on that deal over three years and then what he does with the money is really interesting:
1. He moves to New York City (identified his target market) and rents a cheap apartment (he mentions he was embarrassed to even have girls over it was so bad).
2. He buys his way into the most elite Country Club in New York City (at the time) so he can network with high-net worth individuals and representatives of institutional capital.
3. He puts up a retainer on the most feared real estate attorney in the City - to help him negotiate and tie up deals.
4. He contacts the owner of dilapidated property and gets an option to buy it with no money down. He later flips this property for a huge profit.
5. He contacts the owner of another dilapidated property (a boarded up hotel) and ties that up with an option; negotiates tax credits from the City if he fixes it up; then raises private money (not his) to buy it and renovate it.
Unless I'm missing something in all these posts, Ryan you still have a year of college left, thus no outside income other than rents. I don't see you qualifying for a bank mortgage to house hack just yet, unless you have a qualified co-signer.
It certainly doesn't hurt to walk into banks and speak with them about your plans and listen to what they say (that's part of how you develop relationships with bankers), but I'm not optimistic that a bank loan is in the cards just yet.
In my market in Northeastern PA (Scranton - Wilkes Barre), there are plenty of sellers who will hold a note with a decent down payment, easily for one year but sometimes up to 5 years. I would look at 2-family FSBO's and find a seller who may need to move out of the area on short notice (sometimes there are estate sales where the adult children don't want the property after the loss of a parent). They don't have time to sell their property through normal channels, and if you are offering a decent down payment and competitive interest rate (1-2% above a bank mortgage) you can often find a deal.
In my market, I can buy a 2-family for under $100K, sometimes well under, depending on the work that's needed. If you can also, then a $15K down payment is a significant chunk and should satisfy the seller you're not about to walk away.
If you can negotiate at least a 2 year note with the seller, then hopefully you are able to get a job after graduating college and can show a bank the property's rental income history as well as your salary and at that point you stand a good chance of getting a bank mortgage.
Keep in mind that establishing a good credit history starting now is critical. If you don't have any credit cards in your name yet, get a "secured credit card" immediately using $500 placed in the issuing bank's savings account. Then charge something every month, even if just gasoline, and pay it on time. After 6 months of on-time payments, apply for a 2nd unsecured credit card and use it and make on-time payments. Having an excellent credit score will be crucial to getting a bank mortgage.
Whether you live in one side of the 2 family or rent them both out is based on your housing situation, but perhaps you can live in one half and rent out the extra bedrooms on your side? Save as much of the rental income as possible (remember to open a separate checking account just for the rental income and expenses) so you build up your cash reserves.
After the bank refinance, you should get back most of your original capital and can start looking for your next deal.
Best of luck!
Hey @Ryan Koehler congratulations on getting started at such a young age, and for being wise enough to seek out the advice of others.
@Wendell De Guzman wrote a post:
How to buy 20 houses in 20 months with only $20k
Definitely worth a read. Keep us updated on your journey, I have a feeling you will go far.
@Ryan Koehler what Vanguard index funds did you put them in?
@Ryan Koehler what Vanguard index funds did you put them in?
- Total Stock Market Index Fund
- Total International Stock Index Fund
- REIT Index
A little background: I'm a 21-year-old rising senior at Clemson University with about 20k to invest. I have my Pennsylvania Realtors License. Besides taking some real estate classes, my only experience in the field involves two real-estate internships and some personal tax lien investing background.
If you were standing in my shoes today, what would you do in this situation? What REI strategy? Or, where would you go from here?
Thank you in advance and I really look forward to hearing everyone's thoughts.
I wish I was in your shoes at 21 years old! I actually have a very similar story. A little over two years ago I had around 20k to invest and got my Real Estate license. I joined a team of seasoned investors who were able to give me advice that led to my first cash-flow rental property. The first one I bought as my primary residence at 5% down, did some minor work to it and then converted it into a full rental. Two years later and learning from these same investors, I now have 6 rental units and over 3k/month positive cashflow and growing.
You're in a great position right now!
Everyone who has replied here over the last two days - all I can say is thank you! You all have given me a lot of interesting points to think about, great advice, and above all - motivation.
From now until Sunday my aim is reread everyone's posts and create a game plan for myself going forward. I'll post a brief synopsis of that on Sunday evening and would be honored if some of you could critique it for me. Your advice means a lot to me.
Again, thank you for your honest replies and genuine help.
I bought a foreclosure bank owned condo. I have my nursing degree, work full-time, so I can make mortgage payments. It was bought for 93k, FHA loan, with 3.5k down. Condo was appraised at 120k. You can do it! You have to get a steady job before most anyone will give a loan though :) It is mainly just hard in the beginning.
I bought my first rental when I was a senior at UGA... Go Dawgs ;)
Never did the house hack but I did flip a few but found out it wasn't my thing. I just buy, hold and rent currently. I don't see how anyone couldn't like real-estate but you need to make sure you are up for the headaches of dealing with tenants. One day you'll make enough money and be able to pay for someone else to deal with them but for now it will be you.
If I was 21 with 20k and still in college at Clemson I would:
1. Be on Hartwell with a cold on in my hand contemplating my future and enjoying my time
2. Stay away from the Overtime bar
3. Buy a mobile home on a piece of land. Someone else already advised this and I second it. You can find some good deals and either rent them out or use the rent-to-own model. Just like GA you have a lot of them in SC. Do a little reading on this. You could buy a old mobile home for 10-15k on a piece of land and rent it out for $500 a month. There are some disadvantages compared to SFR but the advantages far out weight them.
If SFR or multifamily is more your thing have a parent co-sign a loan with you.
Best of luck and most importantly enjoy your last year. You have all the time in the world to make money but only a limited amount of time in college.
http://www.biggerpockets.com/renewsblog/2013/08/07...
Found a blog post while reading today!
Hey Ryan,
Have you considered the option of lending your monies out to people who need to fund rehab deals on their properties? A company that I am associated with, Renovation Funders, has a great program that matches you up with a project, and when that project is completed, you get paid your investment back plus a percentage of the selling price after the property sells. Check them out at: http://renovationfunders.com/investors/866
This is a very safe way to make money while learning to invest in real estate. Good luck and have a wonderful journey!
@Ryan Koehlerwhat do you enjoy doing in real estate? I'd start with that.
@Ali Boone thank you for the advice! I'm planning on making the trek down to Miami this fall for the game...should be a good one!
@Watson Smith How are you finding your rental properties? (MLS, tax sales, Craigslist, etc) And, are you staying close to home with these investments?
Thanks for the college advice....were you able to come to Clemson for the game two years ago? I went to the game in Athens last year - rough night for the Tigers. Just be happy that Deshaun Watson didn't play much haha
@Ali Boone thank you for the advice! I'm planning on making the trek down to Miami this fall for the game...should be a good one!
@Watson Smith How are you finding your rental properties? (MLS, tax sales, Craigslist, etc) And, are you staying close to home with these investments?
Thanks for the college advice....were you able to come to Clemson for the game two years ago? I went to the game in Athens last year - rough night for the Tigers. Just be happy that Deshaun Watson didn't play much haha
I've found most of my properties on the MLS. I've also bought some off auction.com and hubzu.com as well. My properties are close to me. All with in 40mins max. I manage and do all the maintenance on them myself. When your tenants see you come and bust your tale to fix their house they give you much more respect than if some third party was managing it. I don't have many free weekends but believe it or not I enjoy doing that type out work. I have 11 SFR and most of the tenants are like family. My average tenant stays 3-4 years. I never have to stick a "for rent" sign in a yard. I have people calling every week asking if I have any available. Mine are all lower income. Treat your tenant right and good things happen. You'll get screwed once or twice but thats life. Most renters don't have good landlords so they know its rare when they find one.
I didn't make it to the game at Clemson. If I remember correctly I'm glad I didn't. I make it to every home game though... And yes I remember last year :) Football season's just around the corner and I can't wait!
Late to the post, but hello there fellow Tiger! I graduated in 2012 and I'm from Anderson - just next door.
I love this area and I love Clemson. I'm hoping to get into some investments in Clemson sometime in the future myself.
My Grandfather built/rented out the "Le Mans" and "University" apartments on College Ave behind the Sonic, so I spent a lot of my time when I was younger in Clemson helping out with the rentals.
It's a good idea to use different avenues for finding properties like FSBO and craigslist, but I would absolutely still use the MLS. The first deal I ever made was a bank REO I stumbled across the day it was listed on MLS. The listing was for 2 small houses and I bought them for $3,500.00 cash. I rented one of them out for 4 months and made $200 cash flow every month, and then sold both houses after those 4 months for a $8,000.00 profit. It was an extremely good confidence booster that I could do a deal like that by myself and turn a nice profit (for me at the time).
Have you done anything with tax liens in Clemson?
@Justin Whitfield Great story and really good to hear man!
No - I have not done anything in Pickens county/Clemson with tax liens. However, I'm very familiar with their rules and regulations regarding sales.
I've bought tax liens in Greenville County and Beaufort County in SC and Cobb and Gwinnett County in GA so I'm pretty comfortable with the process.
I started investing in real estate when I was 21 years old. It is all about persistence and networking with professionals such as realtors, brokers and mentors. You need to become an expert in your market, examine market trends, see which neighborhoods are the best to invest in and always add value to your acquisitions after you manage to get them. I have been doing well here in the Miami / Miami Beach area for the past several years.
Invest in a personal residence. House hack using FHA financing. Great way to get started in your early 20's. Good Luck :)
Can someone give me a quick rundown of FHA financing?
I know the basics but am struggling with taking the next steps to receive financing (without a job/income because I am still a current college student). What is the process like and what is the easiest way to go about it? Thank you in advance.