20 Year Old looking to invest in real estate, best approach?

Question

Hi all, I currently have about 5k in the stock market and I'm looking to branch into real estate (my parents own about $2 million in commercial/residential and are about halfway through paying it off) as soon as I can. How much do I realistically need to put forward initially to start investing in real estate? Any advice would be greatly appreciated!

P.S. I'm a sophomore studying finance at a business school so I have a strong grasp over long-term stock market investing, but much less over property rental, but I definitely subscribe to the buy and hold philosophy as opposed to the 'flipper' mentality.

Mark Gallagher · Answer

Account Closed

Investing with no money down is always possible, but borrowing is typically easier.

Where you go from here depends on what you're looking for. Are you looking to build a rental portfolio? Fix and flip? Either way, I suggest partnering with your parents for capital and guidance.

Patrick Wheeler · Answer

I agree with Linda in the idea that starting out with house hacking is the best way to go. To answer your question specifically, I wouldn't say there is a set amount. Start looking into some of the creative ways to finance deals. For example, I am looking to BRRR into my house hack.

Linda S. · Answer

If it's going to qualify for a FHA, it has to be owner occupied, so I would look to find a place where you are currently studying.   Any place near a college will be an awesome rental because of the transient population.      I wouldn't suggest your permanent home in Jersey, unless you plan on moving back to the area  long term.      Good luck!

Aaron Gordy · Answer

Account Closed

If I were you then I would do fha. Or you may be able to do va but I am not sure if you have any connection to the military. If fha, you may want to ask a mortgage broker about grants for first time home buyers. In Austin, I know that its possible. I brokered a deal for some friends of mine whereby they went fha with 3.5% down. We found a local organization that covered the 3.5% down as a grant for first time home buyers. Then I negotiated the closing costs to be covered by the seller. My clients walked away from the table with money. Its all about who you know and being creative to make things happen favorably.

The slow roll is the best and the most conservative way to be. Buying and holding is proven.

Landon, pm me if you haven't found a real estate broker to help you.

Landan Dory · Answer

I'm in the same boat Account Closed. I'm about to graduate from Baylor and move to Austin, TX for work(still on the RE job hunt for any of you Austin RE pros reading this). I'd love to house hack a duplex or something of the sort just so I can get the experience of what operating a rental property looks like. The goal is to slowly build that portfolio of buy and holds until I'm established and settled in and familiar with the market there. My biggest hurdle right now is just doing it!

John A. · Answer

Thanks for the reply! Do you think I should be looking near my permanent home in Jersey? I study at a university near Boston for reference. I guess I'm wondering if there are better markets to look in or if proximity is important...

Sid Leibowitz · Answer

Hello John. IMHO, Credibility would be the major issue as you are starting young and do not have the credit established. Your income level may not be insufficient to repay the loan also. You can not use your parents assets or credit unless they give you something in your name  to show as income or collateral to leverage in obtaining a loan. Read up on FICO scores and  check your credit rating. You are also entitled to a free report each year from Trans union TRW , Equifax and Experian.  These credit reporting agencies report on your credit history and how you pay your bills on everything like car and student  loans  as well as credit cards. It takes years to be able to build great credit. I started when I was 18 and have maintained an excellent rating. Now I can purchase anything on credit. I am an excellent credit risk. I have never defaulted in over 40 years. Good luck

Linda S. · Answer

The lowest you could put forward would be the 3-5% if you did a FHA or conventional loan.   I'd recommend house hacking with a multifamily house, that's a super easy and cheap way to get started.

20 Year Old looking to invest in real estate, best approach?

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