Kansas City, KS · Member since 2018 · 8 posts · 5 votes
I want to get into realstate investment and I am 22. Unlike many my age, I have a decent credit (around 730) and about $14k saved up. I made the goal of buying my first house or complex before I turn 24, and got a job as an apprentice to a general contractor who works on rental homes. I've been working there for 7 months so far and have about a year left to make my goal. I'm able to save nearly $1k per month.
I've been reading books and articles, but the more I read the more I realize how much I've yet to learn; there's so many different ways to get into it. Given everything I've described, and the chance to start again at my age, what would you do to get started?
Also, what kind of loan should I go for, and more importantly, where could I find it?
Note: I had a general plan of my first few houses being flips with me as the general contractor, then starting to buy rentals as I could. Thoughts on this?
All right, I don't want to get philosophical or weird, but why are you doing it? I didn't want to make money when I was 22. I already had miserable credit, thanks to that unfortunate 9-ball semester sophomore year out in Missouri. Savings? You've got to be kidding.
So how'd you get in the right headspace at 22?
To say that I envy you, of course, would be an understatement. I graduated at the top of my university class and went on to a fully-funded PhD fellowship in the Ivy League. If I had known then what I know now, I would have found the nearest GC after college and begged him on my knees to take me on. Barring a GC, I would have found a master plumber or electrician. I realize this might sound funny, even caricaturish, from your point of view but I am being perfectly serious.
All right, I don't want to get philosophical or weird, but why are you doing it? I didn't want to make money when I was 22. I already had miserable credit, thanks to that unfortunate 9-ball semester sophomore year out in Missouri. Savings? You've got to be kidding.
So how'd you get in the right headspace at 22?
To say that I envy you, of course, would be an understatement. I graduated at the top of my university class and went on to a fully-funded PhD fellowship in the Ivy League. If I had known then what I know now, I would have found the nearest GC after college and begged him on my knees to take me on. Barring a GC, I would have found a master plumber or electrician. I realize this might sound funny, even caricaturish, from your point of view but I am being perfectly serious.
Investor · USA · Member since 2015 · 325 posts · 447 votes
8y
Nick, you are about to start a great journey at a stellar age. When you are young your greatest asset is time. I was in the same position when I was young, good credit, some savings and a lot of ambition. This is what I would do if I could do it all over.
1. Pick a trade- Personally I would have become an electrician. It’s a great high paying job and you get to work on your own places!
2. Get a mentor- find people you look up to in the real estate area and pick their brain. I usually started like this “I think you are a genius at _____, can I take you out to lunch”.
3. Keep saving your money until you can buy on your own.
4. Study the market like crazy. The more focused the better. Become familiar with pricing, public records searches, tax assessors sites, just fill your brain with all things real estate.
5. Don’t let someone dictate your course. I have had bankers tell me that I was too young to do something. I politely told them to “kick rocks”. Look good on paper and deal over the phone.
When I was in sales I knocked on mans door who was completely uninterested. He told me “we live in the greatest country on earth, there is so much opportunity that if you keep moving you will be successful”. For some reason that stuck with me at 22 and I have pushed every day to crush it.
Flipper/Rehabber · Columbia, MO · Member since 2016 · 27 posts · 31 votes
8y
Nick glad to see you are starting so young. I wish i would have.
You might consider house hacking.(Buying a multifamily and living in one unit). This will allow you to go conventional or FHA since you will occupy the property. There is a ton on house hacking in the forums . If you have military time i would look into the VA loan.
Reading books and articles are great and you will learn a lot and I would continue to do this. Most importantly I would start making offers and finding deals. You will learn 100x faster by buying a property.
Action Steps:
Call or find a real estate agent in your area and ask them to start sending you Multifamily properties for sale.
Attend a local real estate meetup in your area. If you can't find one then i would suggest looking for "properties for rent signs" Call them and ask the owner if you can sit down and have coffee. My guess is they would be glad to talk and help you.
Rockaway, NJ · Member since 2016 · 2k+ posts · 2k+ votes
8y
At your age, with the savings you had I think your best option may be owner occupied loans. Either perform live in flips, or house hack a multifamily (BRRRR can be great to use here as well). you can start with a lower down payment, and use these to build up cash.
Like the others have said, congratulations on being at such a great spot at 22.
If your main interest is in flipping houses, I would advise you to do a live-in flip. Under Section 121 of the Internal Revenue Code, if you live in the property and owned the property for 2 out of the 5 years prior to the date of sale, you can exclude up to $250,000 of gain ($500,000 if married filing joint). This means that you can do your first flip without having to pay taxes on it (unless your gain is incredibly large).
If you decide to rent out a portion of the property while living there (house hack), talk to a CPA about how that will affect this strategy.
Also, before you get too involved with any real estate strategy, talk to a CPA. There are too many people who cost themselves a lot in taxes unnecessarily when they start off because they didn't talk to a CPA (pay a few hundred bucks in tax-deductible fees to save thousands in taxes).
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Nick Broce congrats on being here at your age. I actually put my first rental under contract at 22 and closed about a month after I turned 23. Now I have 3 rentals.
For people are age it’s not actually hard to get credit in the 720 type range, if you can avoid screwing up like paying late or defaulting on some bill, which many young people do.
If you’re confident you can flip and make money I would do that, otherwise I would just keep saving and buy rentals with that money. That’s what I did. Took me 10 months to get enough money to buy 1 rental.
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
8y
Compound interest and exponential growth favors starting young, so this is a great decision! I would consider looking for an FHA loan to buy a fourplex. You can get 96.5% financing at good rates, live in one unit and rent out the other three. You can also get 10 Fannie loans as an individual, I think you got to put 20% down, but they're worth asking a mortgage broker about.
Kansas City, KS · Member since 2018 · 8 posts · 5 votes
8y
Thanks for the replies everyone. The house hack seems to be pretty popular, I'll definitely look more into it.
@Caleb Heimsoth Wow, 10 months seems pretty impressive. What loan did you go for?
@Jim K. Well I spent a suitable amount of time after high school agonizing over what I would do, went to a community college for a year but dropped out when I made this plan. I've always hated being behind others, so I got really frustrated that I wasn't already starting whatever it was I'd end up doing. Then I moved to a 6 br house owned by a 23 year old man who lived there and rented to 6 or 7 college/grad students. And that's where the seed was planted I suppose. I've always been a planner, and I've always been good with money thanks to my parents (they gave me an allowance based off of how often I completed my chores, and had me use that money for buying clothes, shoes, or any extra things for myself). So it came naturally
Thanks for the replies everyone. The house hack seems to be pretty popular, I'll definitely look more into it.
@Caleb Heimsoth Wow, 10 months seems pretty impressive. What loan did you go for?
@Jim K. Well I spent a suitable amount of time after high school agonizing over what I would do, went to a community college for a year but dropped out when I made this plan. I've always hated being behind others, so I got really frustrated that I wasn't already starting whatever it was I'd end up doing. Then I moved to a 6 br house owned by a 23 year old man who lived there and rented to 6 or 7 college/grad students. And that's where the seed was planted I suppose. I've always been a planner, and I've always been good with money thanks to my parents (they gave me an allowance based off of how often I completed my chores, and had me use that money for buying clothes, shoes, or any extra things for myself). So it came naturally
OK, Nick, you just told me how you got interested in real estate. Someone showed you how a young guy could make money with a rooming house. The how of it is good information to know, but that's not what I asked. WHY? Why do you want this?
The closest you got was "I've always hated being behind others."
So personal ego is a big part of it. Do you have a better reason to risk everything in real estate to make a lot of money other than keeping up with the Joneses? And if you dislike "being behind others," how do you feel about failure? What about repeated failure, failing OVER and OVER and OVER again and having your family pity you for a hopeless dreamer, and your friends quietly desert you because you're a perennial charity case, and people on the street sneer at you because the stink of personal failure is on you as surely as it is on an addict sleeping in a cardboard box in an alley?
Because sooner or later, it's going to happen to you, Nick. Ivanka Trump tells a story about her father, in the middle of one of his periodic crashes and in deep debt, pointing to a homeless guy on the streets of NY and telling her that the homeless guy was richer than he was. A lot of people miss the point about this story. Sure, it's a mean shot at a homeless guy with no education, no resources, no way out of his situation. Sure, it sounds like cheap self pity. But it's not like Donald Trump said this to an acquaintance on the street. He was talking to his daughter, the one he had accurately assessed to have the most brains in his family. This is what he, in his moment of failure and misery, chose to teach his child as memorably as he could, asked his child to remember about financial success and failure.
So I'm asking you again, Nick, and if you tell me again that you want to do this because you want to feel just a bit better than the people around you, I'm going to laugh at my computer screen. Everybody feels that way.
There's a woman I see on my way to work many mornings driving a late-model Ford Mustang convertible out of the makeshift gravel parking lot of a decrepit 1-family house in a poor part of town. She ALWAYS wear sunglasses, even at dawn in the rain with the top up. That swiftly depreciating car is how she feels she manages to feel a bit better than the people around her.
I know a guy who brought back a woman from the old country who's thirteen years younger than he is to marry her here. They're on their third child together, and are close to penniless. He tells me he did it because he needed to make sure that when he told his wife to do something, she would so it. That's how he feels better about himself.
The children of very affluent parents are usually, by definition, in a much better financial position than most kids. If money equaled happiness in an uncomplicated balanced equation, then why do they so often take just a whole pharmacy worth of very expensive drugs just to feel better about themselves and escape their reality?
So, come on, Nick. Give us a WHY. Articulate it to yourself, look at it, and decide if it's important enough to you.
Investor · The Creek, WV · Member since 2014 · 890 posts · 1k+ votes
8y
@Nick Broce I think a lot of this is determined where you live. If you live in a coastal city then I recommend you continue to save up for an FHA loan on a 2-4 unit property and house hack.
If you live in the Mid West then I would start looking at cheap properties where you can do some rehab work yourself. Get that sucker rented out and then start saving around $1,500/month. The same $1,000 you have been saving and then the $500/month from your tenants on the new rental house.
Definitely wish I had your vision and knowledge of REI at your age. Congrats to you.
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
I wish I had started early :) I remember buying that shiny car instead of an apartment. So full kudos to you for this maturity. Use your instinct well when you deal with money. Plenty of people out there who would love to take it away from you.