21 y/o with $25,000. What would you do?

Rental Property Investor · Chicago, IL · Member since 2020 · 11 posts · 8 votes

Hi!

I'm 21 years old and graduating from college with a computer science degree in 12 months. I have $25,000 in the bank and have the ability to move anywhere to work after college. I can live near Chicago with parents for free, stay close to school (Indianapolis), or move anywhere I want in the United States. I plan on house hacking my first property and then BRRRR-ing thereafter. My W-2 job will pay near $85,000 pre-tax when I start.

The question is... if you were in my shoes, then what would you do? What would you study (books, articles, blogs) in the next 12 months to form a strong foundation? Where would you want to move to get started in real estate?

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Tony AngelosPro Member

Real Estate Agent · Member since 2019 · 192 posts · 131 votes

@Scott Tangney Bias may be here because I'm from Chicago, but I suggest moving home after college and live for free at first. Any way you slice it, you can't lose and it gives you room to actually look for a deal. Househacking is a great idea, but you have to remember that you also need to live there as it's not purely an investment looking at the numbers; which is why I say taking the time to actually look for something is key. PLUS, 25K is unfortunately not a lot of money. Realistically, you need money for closing and stuff so really you can use like 12-13k for downpayment which can buy you a property for under 375K if using an FHA loan.

I highly recommend listening to the Straight Up Chicago Investor podcast and specifically the episode with @Brie Schmidt. She answers a LOT of the questions you have in great depth.

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Jeffrey EdwardsPro Member
Real Estate Broker · West Bloomfield, MI · Member since 2018 · 147 posts · 77 votes
6y
If I had a chance to redo it all over again, I would definitely house hack a small multi-family...maybe a duplex. I would also read the BP books: The House Hacking Strategy by Craig Curelop and David Greene's BRRRR book! Then just start saving for another investment property down payment.
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Twana RasoulBusiness Member
Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
6y
@Scott Tangney start with a House hack like mentioned above using fha loan for 3.5% down. The earlier you can start the better.
Best of luck
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Joe Aiola
Real Estate Agent · Fleetwood, NY · Member since 2018 · 264 posts · 235 votes
6y
@Scott Tangney congrats on getting started so early - very impressive. House hacking is the way to go starting out. I always encourage people to jump in and get started, but it might not be a bad idea for you to educate yourself a bit more over these next 3-6 months. With the economy changing by the day, nobody can confidently say where we're headed. I would hate to see you buy a property, the market crashes, then you hate real estate. At your age, you have the 3-6 months to wait and see where we settle - it won't hurt you. Plus, you'll be educating yourself along the way and will be prepared.
Just my opinion, though! Hope this helps and best of luck!
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George W.
Investor · NJ · Member since 2018 · 869 posts · 921 votes
6y
If I were you I'd look for a 2-4 unit building to house hack. Keep learning and saving as much money as you can.
being young, time is on your side if you buy longterm
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Tony AngelosPro Member
Real Estate Agent · Member since 2019 · 192 posts · 131 votes
6y
@Scott Tangney Bias may be here because I'm from Chicago, but I suggest moving home after college and live for free at first. Any way you slice it, you can't lose and it gives you room to actually look for a deal. Househacking is a great idea, but you have to remember that you also need to live there as it's not purely an investment looking at the numbers; which is why I say taking the time to actually look for something is key. PLUS, 25K is unfortunately not a lot of money. Realistically, you need money for closing and stuff so really you can use like 12-13k for downpayment which can buy you a property for under 375K if using an FHA loan.

I highly recommend listening to the Straight Up Chicago Investor podcast and specifically the episode with @Brie Schmidt. She answers a LOT of the questions you have in great depth.
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John Warren
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
6y
@Scott Tangney Chicago is a great place to go for 2-4 unit buildings, and I doubt there are many cities in the US with the kind of inventory we have here. With that being said, you will have to be patient no matter where you move since inventory is at an all time low in most markets. I second moving home with the family and stashing cash.
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Jonathan KlemmBusiness Member
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Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
6y
@Scott Tangney - I'd move where ever you want and go see what's going on around the country. That's what I did, and then by no coincidence ended up back in Chicago close to my family and friends.

You can invest in real estate anywhere, I wouldn't let that govern where you want to live when you are 21 years old. I'd keep saving, reading, and networking and then you'll be ready to blast off. I've got a good list of books I can share......PM me if you're interested.

I also agree with @John Warren tons of great properties here in Chicago and there was always will be with the inventory of houses being much older.
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Scott Tangney
OP
Rental Property Investor · Chicago, IL · Member since 2020 · 11 posts · 8 votes
6y
@Jeffrey Edwards thanks for the book recommendations! I'll check those out
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Scott Tangney
OP
Rental Property Investor · Chicago, IL · Member since 2020 · 11 posts · 8 votes
6y
@Joe Aiola thanks for the tips! What education methods have worked best for you?
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Scott Tangney
OP
Rental Property Investor · Chicago, IL · Member since 2020 · 11 posts · 8 votes
6y
@Tony Angelos Hey Tony, I just listened to the podcast and it was really eye-opening. I'm listening more and more of those chicago specific ones. I'll definitely look to save as much as possible
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Scott Tangney
OP
Rental Property Investor · Chicago, IL · Member since 2020 · 11 posts · 8 votes
6y
@John Warren @John Warren Thanks the tips John! Moving back with parents makes the most sense for saving cash. Maybe a newbie question, what do you mean by "kind of inventory"?
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Crystal SmithPro Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
6y
Originally posted by @Scott Tangney:
Hi!
I'm 21 years old and graduating from college with a computer science degree in 12 months. I have $25,000 in the bank and have the ability to move anywhere to work after college. I can live near Chicago with parents for free, stay close to school (Indianapolis), or move anywhere I want in the United States. I plan on house hacking my first property and then BRRRR-ing thereafter. My W-2 job will pay near $85,000 pre-tax when I start.
The question is... if you were in my shoes, then what would you do? What would you study (books, articles, blogs) in the next 12 months to form a strong foundation? Where would you want to move to get started in real estate?

If you can stand staying w/ your parents & if they would have you, I'd live at home for one year and bank half your salary. This will mean living frugally but the point is not the short term but the long term goal. While living at home I'd do the following:
- Find a group of people that play the Robert Kiyosaki cashflow game on a regular basis. If you can't find a group, create one. Why Kiyosaki's cashflow game. The objective is simple-Learn & use income and balance statements to run your life & your business; establish relationships with like-minded people who could potentially be partners in the future. You could also go to school & get an MBA to understand how to use these statements to run a business
- Learn how to raise $ via syndication- Find someone who's done it successfully and become their mentee. In the beginning, you may borrow personally from banks but there's a limit on how much you can do w/ your own $ & credit.
- Hire/partner w/ a realtor to help you find listed & off-market multifamily property that you can purchase. At the end of the 1st year purchase a building; live in one unit while cash flowing the remainder
- Establish relationships with handymen, contractors, lawyers, inspectors.... build a team to support your business
- I could go on but that's probably enough to digest for now.
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Scott Tangney
OP
Rental Property Investor · Chicago, IL · Member since 2020 · 11 posts · 8 votes
6y
@Crystal Smith your in depth answer is awesome! I really appreciate your opinion and I agree with everything you've said. I'm going to join a few meet ups and really figure out my goals and use your advice to continue
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John Warren
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
6y
@Scott Tangney not every city has 2-4 units in areas where you are ok with living. In newer cities, the multi family areas are the shady areas where no sane person would live. A more established city like Chicago has multifamily properties everywhere, so you can actually house hack in areas where you don't mind living. This is one of the most under looked areas when it comes to real estate investing. The housing stock is not the same in every town!
1 Reply
Trevor Fritz
Investor · Arlington Heights, IL · Member since 2014 · 58 posts · 15 votes
6y
Hi Scott. I love the enthusiasm. I was in a similar situation but a couple years behind in terms of thinking about real estate. I went to IU and I am from the Chicago suburbs. I would recommend living at home for a year and learning as much as you can and building a team with a real estate investment/multi-unit real estate agent (not all agents are equally...not even close) and a mortgage broker who is creative when it comes to these projects (pm me and I can give his contact info). After living at home for a year, hopefully you have saved enough for an FHA 3.5% down payment and that you have found a place in a neighborhood you would enjoy living in. I would recommend southwest Logan Square, Albany/Irving Park, or maybe Avondale for the price range you will likely be looking at. If I could go back, I would have found a spot I could have had some of my friends live with me in my unit and then rent out the other unit(s). Ideally, you will be living there for free while stockpiling cash for reserves and CapEx and be on your way. I looked at probably 50+ 2-4 units and I became extremely discouraged by how overpriced many were and if not overpriced, the fear that many of these multiunits needed $50k+ to be fixed up (think decks, stair cases, foundation, cosmetics).
Your other option in order to save money would be finding a 3 bed condo in another area that you may enjoy living in more and having 2 friends move in who would cover all of your costs and again, the investment is that you are living for free and saving all of that money. In reality, that may be the best way to get you off the ground and with a nice nest egg. Based off where I wanted to live post-college, this is probably what I should have done in hindsight.
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Ethan Perry
Minneapolis, MN · Member since 2019 · 54 posts · 53 votes
6y
@Scott Tangney. Dude you are killing it! $85,000 right out of school in your early 20’s is huge.
As for your question, I think house hacking right away makes the most sense. It’s such a great way to get started. It’ll give you a taste for hands on landlording and will hopefully allow you to live for free.
You can honestly do a lot with $25,000. I’m also 21 y/o and am closing on my first property in about 2 weeks. I’m buying a 3/3 townhome for $225K and once I finish the basement, it’ll be a 4/4. The seller is paying my closing costs and with a conventional 5% down loan, my out of pocket expenses (including appraisal and inspection) will be around $15,000 at closing. I don’t have any renters yet but am hoping to eventually collect about $1200 a month from renting out 2 rooms. It’s not a home run deal by any means but it’s allowing my to get into home ownership and real estate investing and avoid needing to rent.
Here are some ideas about how you could productively use the next 12 months (besides finishing your degree.
1. Figure out where you might want to live.
2. Start connecting with realtors/lenders/contractors/etc In the area where you’ll move.
3. Read good real estate books. My favorites so far have been “The house hacking strategy” by @craigcurelop and anything by Brandon turner
4. Figure out what type of property you’ll want to start with.
Hope this helps and best of luck!
2 Reply
Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
6y
@Scott Tangney I would house hack and read lots and lots of books on RE investing.
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Brian G.
Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
6y
@Scott Tangney impressive at your age way to go! Another vote for House Hacking. It’s a great strategy and imo ideal especially in this season of your life (ie post college and pre family).
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Mark Albini
Realtor · Evansville, IN · Member since 2020 · 61 posts · 76 votes
6y
@Scott Tangney if I was to do it all over again. I would've moved to Evansville Indiana sooner to pursue my investment career. I am a licensed agent here and have been getting rentals at great deals. Some as low as 14k! No joke. This is even a awesome market for flip homes. I'd love to talk to you more about it if interested. :)
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Alex Ferraro
Investor · South Bend, IN · Member since 2018 · 111 posts · 57 votes
6y
@Scott Tangney I was almost in the exact same position as you about 3-4 years ago. I house hacked a duplex in Logan Square. I probably didn't have significantly more than the 25k you mentioned, but I would say that if you want to house hack in Chicago in a decent location, you'll definitely need more than that to have a respectable amount of reserves after the down payment.
My biggest pieces of advice would be to:
1. If you want to move somewhere else (which is a great opportunity), I'd really think about why you'd move to that location. As much as I love optimizing my returns from real estate and eliminating expenses from living at home, if you find that you hate where you live, it won't matter how good the returns are or how much money you are saving. That being said, I would also recommend to closely investigate whether that location is actually a lot better than Chicago in terms of potential appreciation, cash flow, and lifestyle.
2. Go to local meetups as much as you possibly can. One hour at a meetup can save you 50 hours of later headaches because you met the right person or heard the right advice at the right time.
3. As for educational resources - I would start with Rich Dad Poor Dad, Set for Life, and The House Hacking Strategy. Then I'd read all of Brandon Turner's books (I believe there are four now). I have a ton of other book recommendations not specifically related to real estate, but helped nonetheless, I would be happy to give those as well. I always binge-listened to the BiggerPockets Real Estate podcast, the BiggerPockets Money Show, and the ChooseFi podcast while commuting and other multitasking. As for blogs, I recommend reading stuff by people like Chad Carson, Paula Pant, and potentially Mr. Money Mustache. At this point in your investing, it's extremely important to save as much of your income as possible if you're looking to get into REI quickly.
4. Since you're likely going to be house hacking, I would avoid getting caught up in all the other ways to make money in real estate (AKA Shiny Object Syndrome). Of course, it's useful to understand how note investing works, but it is not useful to put a significant amount of time or money into it when that time or money could be used on your next house hack.
5. From a big picture perspective, if you think you're going to really enjoy your career, I'd focus a little more on long term appreciation vs. immediate cash flow. You'll not only make significantly more in your cash on cash return, but you'll also have an easier time renting to qualified tenants. As an added bonus, you will probably be closer where most things happen in for Chicago 20-somethings. Lastly, like I mentioned above, make sure you have more than enough reserves. The fact that you're reaching out on these forums at 21 means that you're most likely going to win the game of "financial success" at some point. Given that you have so much time and runway, the goal should be to not get knocked out of the game, not to win it 1 or 2 years faster than you would have otherwise. Go slow to go fast, as they say.
Hope this helps!
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Mark Plesha
Realtor · Highland, IN · Member since 2015 · 47 posts · 29 votes
6y
@Scott Tangney tons of great advice from everyone on here for you to digest, I didn't read all the replies, but one thing I didn't see mentioned that @Brandon Turner always talks about is analyzing deals! You are onto a great start, and I agree with all the book recommendations, but especially with how competitive the current market is you need to be able to analyze deals quickly and efficiently. Having this ability just takes practice like everything else in life. I would suggest waking up 45 minutes earlier than normal and analyze 3-5 deals every morning. Getting that sense of accomplishment at the beginning of your day is huge for the mental side of things.
1 Reply
Jason Hirko
Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes
6y
Originally posted by @Twana Rasoul:
@Scott Tangney start with a House hack like mentioned above using fha loan for 3.5% down. The earlier you can start the better.

This is the right answer!
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Scott Tangney
OP
Rental Property Investor · Chicago, IL · Member since 2020 · 11 posts · 8 votes
6y
Mark Plesha Hey Mark! Really enjoyed your response and you make a really good point. No one has mentioned developing the skill of analyzing deals. I've heard of quick sometimes you need to be on pulling the trigger, so I'm definitely going to make sure I gain some experience there.
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Scott Tangney
OP
Rental Property Investor · Chicago, IL · Member since 2020 · 11 posts · 8 votes
6y
@Alex Ferraro Alex! Thanks man. I really like how you point out being where you want to be living. Aka, I could live with parents for more than a year but that's not too enjoyable. Also, appreciate you pointing out considering other markets.
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Nicholas U.Pro Member
Member since 2020 · 65 posts · 44 votes
6y
Buy a multifamily home in which you live and the landlord. It will be work but you will only need 5% down. The more units the better. Reading is great but I find that going out and just looking at properties will start giving you a deeper understanding.

That being said I strongly encourage you to go start looking at places and understanding the market first. Good properties go extremely fast so you need to understand the differences. If you do make an offer hire roofing and plumbing professionals to make sure there are no issues. If the house is older (80+ years) you want to make sure it doesn't contain any knob and tube wiring. There is easy tells by walking a property in regards to knob and tube but it is just something you need to be aware of.

Finally, be conservative. Budget high on yearly maintenance, insurance, property taxes (your County Assessors website is helpful here), mortgage interest rate, and such. If you have a family member who would be willing to co-sign on the mortgage it will probably help a lot.

I started out buying a single family home when I was 19. Looking back on it I should have bought a multi-family because they are more limited and risks are lower.

Visiting here is a good first step, but understanding the area you want to buy is very important. There is a lot to do so don't jump in, it might mean letting a good property go at first, but if you don't understand what you looking for then you taking big risks.
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