New to Real Estate · Enterprise, AL 36330 · Member since 2020 · 20 posts · 19 votes
I am a college student with only a couple thousand dollars in savings (and I do not have any student loans to pay off), but how could I start getting involved in real estate? I am studying for an engineering degree, so I know I’m not going to be able to put a lot of time and effort into it yet, but any advice on how to begin learning and meeting people is very much appreciated (and hopefully there are others in a similar situation who could learn from this discussion, as well).
If I were in that position I would look for deals near my school that would be a good candidate for a house hack. This way I could charge rent to off set any cost associated with ownership. To fund the deal I would ask for owner financing. That way I wouldn't have to worry about not having income and the whole pesky being broke in college situation. If the house need things like paint and yard improvements, I would use pizza and beverages of my friends choice to fund those simple upgrades. What so you think about that idea?
If I were in that position I would look for deals near my school that would be a good candidate for a house hack. This way I could charge rent to off set any cost associated with ownership. To fund the deal I would ask for owner financing. That way I wouldn't have to worry about not having income and the whole pesky being broke in college situation. If the house need things like paint and yard improvements, I would use pizza and beverages of my friends choice to fund those simple upgrades. What so you think about that idea?
@Kade T. Brunson I purchased my first property (4 plex) while I was in your same position. Being on BP is the first step. Listen to the podcasts, soak up all the info, and ask when you have questions. Second, you need to start networking with investors in your local market or where you plan to invest ASAP. At this point in time, many meetups are virtual. It's not as great as in person networking, but it works for now. Search on meetup(dot)com, Facebook, and BP for investor meetings in your area. It takes time and work, but you can absolutely do your first deal in the near future.
I agree with Pride. Find a place where you can live and rent out rooms. Do you have someone who might be willing to go in with you and split the costs and profits? My first place was a 2 bedroom condo when I was in grad school. I rented the second bedroom.
@Pride Davis that’s a great idea. I have thought about house hacking before, but never really put much thought into how I would do it. The only issue I have is that I am currently under a lease already for the next 7 months (until next school year), but I don’t mind waiting that long. The place I’m currently staying is a small 4br/4ba home that I believe has a mortgage of around $1200/month, and I pay $400 in rent for 1 bed and bathroom. I know the lady who owns it is interested in selling, and I think my parents would help if I talked to them about it. Does that sound like a good idea?
@Theresa Harris my parents may be willing. The only issue is I’ve heard that sometimes it’s not a good idea to go into deals with family. What do you think?
@Kade T. Brunson absolutely. I used a combination of seller financing, private lending, and business credit to get the deal done. I went from maybe having ~2K in the bank to making a 40k profit on my first deal. I can send you a link to a podcast interview I did with some friends/partners if you want the full in depth story.
I really enjoyed your post. How do you sell the option of owner financing? Basically, the owner is now becoming the bank and I would pay him every month. If I am a newbie, what would give the owner the security of knowing the transaction would be beneficial for both parties? I understand the seller could foreclose if payments are not being met, but sometimes I think a seller would have some reservations.
Thank you for your time and I am looking forward to seeing your response!
@Kade T. Brunson I have had leases that had home purchase clauses in them. Where you are released from your lease in the event that you purchase a home. Might be worth giving your lease a read to see if that is in there somewhere. If not most owners will work with you. Worst case you can negotiate a lease termination where you are liable for the rent until the property is re-rented. Sounds a lot worse than it is. I have done that twice. As far as the purchase of the home you are currently living in... it all depends on the terms. Have you run the scenarios through the BP calculators?
@Steven Zamorano Admittedly, I have never actually gotten the owner financing option accepted. When I do offer it I present it to owners that either own the property free and clear or have a low enough loan balance that I can pay off in the form of a down payment. There are a lot of ways for the seller to ensure a smooth and fair transaction. A lot of what would make them comfortable has to do with what their goals are for disposing of the property in the first place. So lets make up a scenario:
Seller owns house that they rent by the room to college students. The owner manages the property themselves and does not want to use a property manager. The owner desires to move across the country to help take care of their grand kids that are now at home full time. Lets look at the top three benefits to the owner using owner financing:
Ability to defer taxes from the sell of the property.
Still receive monthly income without having to manage the property.
Ability to sell the note if their plans change in the future.
I feel like I didn't answer your actual question, but at least we have started the discussion of why the seller would even consider this option. Starting the conversation is the hardest part most times. Right?
The owner of the rental you live in is interested in selling? Sounds like a total score! Go for it. Ask if she will do owner financing. House hack with all your bro friends!
@Andrew Carlson it does, doesn’t it? It’s been right in front of my face the whole time and I never even thought of that as an option until I came in here with you guys. I’ve only been in the BP community for a few weeks (though I’ve been listening to the podcasts for about 7 months) and it’s already awesome. I appreciate all of the advice!
@Theresa Harris my parents may be willing. The only issue is I’ve heard that sometimes it’s not a good idea to go into deals with family. What do you think?
It all depends on you and your parents. You know what you are like and what they are like better than anyone else. I wouldn't have a problem doing that with my parents...my sister on the other hand is another story.
First, congrats on working through a challenging degree. Being new to RE investing myself and having graduated in Econ only three years ago, the grind and goal you describe strikes close to home.
From my limited banking experience I would echo Nicholas’ brief but powerful comment. One of the most stable scenarios would be buying RE after you have an engineering w2 job to support the loan, should tenants be unable or unwilling to pay rent. Keep the goal in mind and work to maximize your income and minimize expenses with goal of starting a solid foundation for your future RE empire. It would be less than favorable if a tenant or friend stopped paying their portion and you lost whatever equity you had if the owner/bank had to take it back. Without knowing your personal situation, perhaps a parental guarantee on a bank loan could ease any possible banker concerns if owner financing should fall through for any reason. Your parents wouldn’t be responsible for paying the loan unless you can’t pay for some reason. Best of wishes and keep up the grind! Glad to see other new investors!
It's great that you have savings! I would suggest to maintain it rather involving in your real estate business, since you don't have enough knowledge. I would suggest to build online website having a clear online presence It is imperative to maintain a successful online presence for your real estate business. Many prospective clients are looking online for keywords such as "real estate agent near me" or some other real estate resources and items in their vicinity. Through SEO optimization, you can make sure that your website shows on Google's first page or higher on your search results.
Get a job as a leasing agent. Learn what property management takes. Look for duplexes in your area. Get an FHA loan with 3.5% down, live in one side and have the other side pay for it.
I would read books about different real estate strategies so you can zero in on which you want to pursue once the time comes. From there, if you know where you are going to end up post graduation it wouldn't hurt to learn the local market, again this helps you hit the ground running.
Other than that, the other thing you need to do is save more. Normally I would suggest a real estate related side gig, but sounds like you think you don't have time for that.