High school student looking to invest- Suggestions?

Question

Hey, my name is Kenny. I am currently 16, in high school, and i have been avid on business and investing for about a year now. I have read dozens of books on the subject and have been hanging around BP forums for about 5 or 6 months. I am really interested in investing and want to get involved and yet, not surprisingly, its 10 times harder considering my age. I have a relative who is willing to act as my legal face and i was wondering what your guys' thoughts were? We are looking at wholesaling to build up capital before going into rentals and flips. I was hoping to get more opinions however before i make any commitments.

Damon Armstrong · Answer

John E.  yes, you can back out of a contract even if it is in escrow. Your EMD is still not refundable, though. This is typically your only money down. EMD's (normally) are at 1% ARV. It may be higher or lower under different circumstances. So he was right...unfortunately, wholesaling is NOT no money down as people make it seem. There are a few out of pocket expenses but are worth it for that nice ROI. So getting that job you were talking about earlier would help out when trying to fund your wholesaling deals. I suggest saving up 5-10k. This way you can can fund your own first deal. There is your EMD, closing costs, and sometimes other expenses that have to come out of pocket. Also you should really consider getting into your local REIA. I joined one in New Orleans (about an hour drive from home) and found my first investors/cash buyers and you guys can do the same. I can even help with your simple purchase contracts and assignment contracts. It's great finding peers on here and hopefully we can all help each other our!

Kenneth Huddleston · Answer

Hey, john. Nice to know i'm not alone on here and i have considered looking for rentals with owner financing and i have learned that wholesaling isn't exactly NO MONEY DOWN like many say it is, even if the amount needed is lower than in most forms of investing. Rentals have always been my primary interest and if i ever do wholesale and/or flip properties it will be for the primary purpose of putting the funds towards rentals.

Kenneth Huddleston · Answer

Cool info Damon. I realize that wholesaling is not no money down, but you don't need as much as you said either. I'm probably gonna save up about 2 or 3 grand and use that to get through my first deal, and then i can use the proceeds from that deal to do the rest. Also, i have attended one REIA general meeting in my area and i intend to attend another in about a week. I already have about 8 buyers on my list, 3 directly and someone who can connect me to 5 more, and i am in contact with a contractor and a realtor. I agree that its nice finding kids my age on here and we definitely need to stay in touch.

John E. · Answer

oh yea and @Kenneth Huddleston , I also am a big believer in using profits from wholesale deals and flips to acquire rentals so that I can build LONG TERM CASH FLOW! I love it guys!

John E. · Answer

@Damon Armstrong Awesome! I'm definitely sending out requests to both you and @Kenneth Huddleston !

Wait- So we can get our names signed AND back out of the contract at anytime while it's in escrow. So wholesaling is a possibility!

I don't want to send out any direct mail yet (I haven't even gone to a REIA yet... No buyers yet), but how wouldn't want to do business- title companies, motivated sellers, and/or the end buyer?

Now there's no excuse!

Talk to you guys soon and we've GOT TO STAY IN TOUCH!

- John

Damon Armstrong · Answer

@Kenneth Huddleston  and  @John Elmenhe

Well hello to the both of you! I am 17, and have been interested in real estate as well. Kenneth, your plan is identical to mine. I was in the exact same situation as you a year ago, when I was 16. "How in the heck can I get started NOW?!"  It's clear the three of us are young, hungry, and ready to get started. I had the same situation, I also had a relative willing to be my legal face. I got in touch with a real estate agent in New Orleans who referred me to a real estate attorney to identify the technicalities of my legal standpoint. What I learned shocked me. This real estate attorney told me by law, there is nothing prohibiting us from getting houses under contract and wholesaling them. By law, age has nothing to do with it. Now I will point out a few details he told me about and I will leave it to you guys to decide whether they are advantages or disadvantages.

Like I said, there is nothing prohibiting us from getting any type of investment under contract. Here's the catch, being a minor means that we, by law, cannot be held accountable for the contract. No matter what the contract says, we can back out at any given time if we want too. There are many reasons why one may need to back out of a deal. Even though our signature is on that contract, we are not responsible for it. At first I thought this was great, if I can get an investment under contract and it turns out to be a good deal, then GREAT! I would just proceed normally and assign it to my end buyer...with that being said...sellers are much less likely to do business with you (and by you I mean us), because of the simple fact that we can back out of a contract at any given moment for any reason, under any circumstances. At first I did not understand why my signature would be valid on a contract once I assigned it to an end buyer, but not be valid if I backed out. The real estate attorney I talked to (who is also a title attorney), told me if I can get a property under contract and assign it to and end buyer, then do it. If at any point something with the investment goes wrong, I can back out and not be responsible for it. So yes, this is why it would be difficult to get people to do business with you. Because we can back out, and they cannot. By all means, if you find a seller willing to take you serious and do business with you, and you have an end buyer willing to sign the assignment, then go for it.  Keep in touch. I'd like to stay in touch with both of you.

John E. · Answer

Hey Kenneth! I'm John and... I'm 15. So I think I know first hand the frustration of  BEING SO YOUNG! I'd say that if you can get a legal face to work with you I would be awesome! @Jimmy Moncrief has a nephew around our age all ready to properties due to seller financing! I would network to because "your net worth is equal to your network."

Perhaps you can get a job and have some funds for down payments, direct mail marketing, catching up a motivated sellers payments (bring the mortgage current), gas, and more of the costs that gurus don't mention.