Start Up Cost(Teen)?

Question

Hello im Scottie, currently a Senior in High School looking to invest and get into Real Estate. I would like to know the normal or typical Start up cost for Investing in a home. I would like to start early and already have money saved up working on more. Also if anybody has any tips I would grately appreciate it. Thanks!

P.J. Bremner · Answer

@Scottie Price

Congrats on being interested in real estate!  This is very much a loaded question as it really depends on how you want to enter into the market.  Here are some options to look into:

• Buy-and-hold - Long term rental which yields modest returns each month plus tons of benefits over the long term. I bought my first house using FHA - $250,000 house that I was able to get for 3.5% down - total out of pocket was around $9,000.
• Fix-and-flip - Short term, high risk and needs a lot of money but generally big rewards.  To do this, you need to have lots of cash.  Either full cash price of the house + cash price of rehabs, or enough to make the hard money lenders happy to lend to you.  Houses I flip in my area are bought for around $200k - $300k + average rehab of about $30k, so all cash I would need around $350k to be comfortable.  With hard money, I could probably do the same with about $100k.
• Wholesaling - Short term, low risk, needs a marketing budget and the rewards can be big.  You can do a lot of the market for free, just do lots of leg work to get started (get business cards and maybe a printer - $100 all in should set you straight plus gas money).  To do direct mail marketing, you should expect to budget at least $1,000 per month to get reasonable results.  I personally spend $1,500 - $2,000 per month in my marketing.
• Working Retail - There are several ways to work in real estate on the retail side that will allow you to make tons of money while learning the business.  Retail home sales, mortgage originator, property manager, apprenticing with investors, etc.  To get licensed to sell real estate, you should expect to spend about $1,000.  Mortgage originator maybe $700, but these numbers vary greatly by the state.

My personal opinion (which may or may not be right for you, take it with a grain of salt): get a job in the real estate industry and learn as much as you can WHILE you are saving up money.  For example, if you can get your sales license and partner with an investor or find a brokerage that doesn't have anyone specifically helping investors, you could fill the gap for them and handle investor clientel.  Once you start to make a little cash, have 2 years of commission checks under your belt, you can get an FHA loan and buy a single family home(I like 5+ bedrooms and rent the extra bedrooms out - read up on house hacking, or buy a multifamily and do that same).  Without steady income and some cash, you won't be able to qualify for a starter home.

Another option, which is trickier to do, is to find someone who is willing to sell you their home and carry back the financing or offer their property subject-to (you basically take over their loan payments).  While I cannot offer much advice on this path because I have only a small level of experience with this, I do know it's possible.

I think your best bang for your buck would be partnering with an investor who will teach you everything, or getting a job related to the real estate industry and learn as much as you can until you can qualify or find that first deal.  You will be getting paid to learn the industry you want.  Best of luck!