What would you do at 22?

General Real Estate Investing

What would you do at 22?

Commercial Property Manager/Facilities Manager · Boston, MA · Member since 2015 · 187 posts · 41 votes

Hi BP,

I'm new to this site and though I've seen this question asked several times before I figured I could offer some new questions and get some new perspectives/experiences.

What would you do if you had $20k at age 22 (with what you know now; or are 22) in terms of real estate investing? Consider these facts/characteristics:

Bostonian, $9K in student loans, no rent expenses currently (living at home), not a really a spender (1 pair of sneakers and 2 jeans for contrast), living off of $200 every paycheck and fully employed with a salary.

My goal is to have 80% of my portfolio filled with rental properties while leaving the other 20% for capital projects. So I ask, given the description of the scenario (that I am in) that you'd be in with what I described, how would you spend your $20K?

I am a huge reader so I've come across many terms but am in no way on the advanced level. Thanks in advance for your answers!

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Indianapolis, IN · Member since 2015 · 125 posts · 50 votes

10y

I would buy a fourplex with an FHA loan, live in one of the apartments and rent the other three. Let them lay down your mortgage while you save the cash flow to buy another property. 1 leads to 2, 2 leads to 4, 4 leads to 8......snowball...snowball.....

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Michael McCormack
Real Estate Professional · Carlisle, MA · Member since 2015 · 31 posts · 4 votes
10y
Hey Craig,
If I was in that situation, depending on your goals you could do a couple things, you could use it as a regular 20% down payment and purchase a 100k property a multiplex or SFH, or use with an FHA loan and purchase a multiplex, live in one of the units and rent out the rest, or you could use it with a hard money lender to finance a flip. These a just a bunch of options, I'd probably use it to do a flip, but only if you know what you're doing, cause flips can go wrong fast, but the upside of the flip is that you can likely turn that initial 20k into 40k, creating more liquid cash you can leverage with going forward.
All the best,
Michael
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Wells Lange
Indianapolis, IN · Member since 2015 · 125 posts · 50 votes
10y
I would buy a fourplex with an FHA loan, live in one of the apartments and rent the other three. Let them lay down your mortgage while you save the cash flow to buy another property. 1 leads to 2, 2 leads to 4, 4 leads to 8......snowball...snowball.....
3 Reply
Christian Bors
Real Estate Agent · Mechanicsburg, PA · Member since 2014 · 529 posts · 217 votes
10y
@Wells Lange is absolutely correct. The best option is to buy a 4 plex. Use FHA financing, live in one unit and rent the others. This will give you a taste for land lording. It's simple, easier the most other options, and helps you learn a ton in a very short period of time.
@Craig Moore
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Vanessa Vandervalk
Investor · Madison, WI · Member since 2015 · 44 posts · 31 votes
10y
I just came across your post. The very first thing I'd do is REJOICE that I am that smart at age 22 to start investing in real estate. I can't emphasize enough how wise this is. Congrats to you!! You are decades ahead of most! Time will be your friend, as well as your frugal spending habits.
After rejoicing, I would learn everything I could so that I could start forming my real estate goals, strategy and plan. The Bigger Pockets Beginner's Guide to RE is a great resource to help you start doing that. Also on this site is a recommended book list. I have "read" many real estate audiobooks while on my commute. You said that you are a big reader, so soak it up! I personally started to notice repetition as I moved to the next book or podcast, and then I knew I was gaining a solid foundation of understanding. (I am getting ready to select my first investment property in the next few months.)
There are many ways to invest or make money in real estate. Having a goal and creating a plan to reach that goal is going to help you decide what to do with your money. Also, real estate is local, so you have to consider your market and whether you plan to invest there or elsewhere. These are some reasons we can't all tell you more specifically what we would do in your situation.
Good luck and congratulations!!
Vanessa
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Peter MacKercherBusiness Member
Residential Real Estate Broker · Saint Louis, MO · Member since 2014 · 1k+ posts · 567 votes
10y
@Craig Moore you'd be well-served to follow @Wells Lange's advice at this point. Since you already have a salaried position, use that to get yourself into your first property. Limits are a 4-unit building, which will give you the biggest cushion against vacancy and the best likelihood of cash flow. Work with an investor-friendly Realtor in your area, go to local real estate club meet ups and learn as much as you can about your market before taking the plunge.
Congrats on being able to ask this question young, keep up the reading!
Cheers
[email protected]
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JD MartinBusiness Member
Moderator
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
10y
Given your parameters and your location, I would probably:
1. Pay off the $9k in student loans to save the interest and improve your credit, since you can easily replace it with your low cost of living.
2. Consider relocating if the current job is not specialized or well paying, and purchasing some type of multi-family, rent out the other units.
3. Stay put if the job calls for it, gather up a little more proceeds and purchase something outright in a less expensive, growing or holding-steady locale that you are or can become reasonably familiar with. There are a lot of places in the US you can buy a single-family home free and clear for $40k that is not a total dump or in the ghetto. Boston, unfortunately, is not one of them. But with your low cost of living (how long can you live for free?), you could buy something in another locale, pay a PM to take care of the place, and still probably pocket 8-10% annually while you save some money for another unit. At some point, once you have a profitable place, cash out, buy another unit.
First and foremost I wouldn't have any personal debt. Student loan debt is not bad debt unless it hasn't contributed to making any more money, but it still carries an interest rate even after the tax deductions or credits. To prepare for investment, you should have your own house clear first. Good luck!
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Ben Leybovich
Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
10y
You are in Boston - one of the more desirable destinations in the country!
If you want to deploy $20,000 in RE, I would suggest you look at a nice SFR. Buy it with low down as an owner-occupant - live in it - use the spare bedrooms as short-term rentals on AirBnb.
At the moment the marketplace is definitely moving in that direction.
Good luck!
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Franklin Romine
Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
10y
@Craig Moore
I started when I was 24. Key things for me was.... a good w2, report all your income and borrow lots of good debt.

Frank
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Craig Moore
OP
Commercial Property Manager/Facilities Manager · Boston, MA · Member since 2015 · 187 posts · 41 votes
10y
Bunch of great answers. I won't say that I'm "ahead of my time" but I certainly feel a greater sense of urgency than most 22 year olds. I need to make it happen now. I've definitely heard about the FHA loan and that's something I would like to leverage for sure.
0 Reply
Craig Moore
OP
Commercial Property Manager/Facilities Manager · Boston, MA · Member since 2015 · 187 posts · 41 votes
10y
Originally posted by @Franklin Romine:

@Craig Moore
I started when I was 24. Key things for me was.... a good w2, report all your income and borrow lots of good debt.

Frank
Frank,
Do you think you could elaborate on this a bit more? Good W2 meaning good refund? What is good debt per-say?
0 Reply
Craig Moore
OP
Commercial Property Manager/Facilities Manager · Boston, MA · Member since 2015 · 187 posts · 41 votes
10y
Originally posted by @Ben Leybovich:

You are in Boston - one of the more desirable destinations in the country!
If you want to deploy $20,000 in RE, I would suggest you look at a nice SFR. Buy it with low down as an owner-occupant - live in it - use the spare bedrooms as short-term rentals on AirBnb.
At the moment the marketplace is definitely moving in that direction.
Good luck!
I've heard about the AirBnB crazy as of late. Good strategy.
0 Reply
Luis M. Frias
Leominster, MA · Member since 2015 · 11 posts · 3 votes
10y
Craig, What wells said pretty much. I started at 20 years old so I can relate to you. I am only 26 now... I am also from the area so I can give you a few tips... Let me know if you like to chat more.... Just message me
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Franklin Romine
Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
10y
Originally posted by @Craig Moore:

Originally posted by @Franklin Romine:
@Craig Moore
I started when I was 24. Key things for me was.... a good w2, report all your income and borrow lots of good debt.

Frank
Frank,
Do you think you could elaborate on this a bit more? Good W2 meaning good refund? What is good debt per-say?
A good w2 job is priceless when you are accumulating properties, accumulating debt. A stable w2 person can borrow much more easier than a self employed individual.
Good Debt is debt that is secured by a income producing assets. "Income Producing Asset"..... that simple. Think about this, accumulate the debt like your are accumulating house. What you owe today you are worth tomorrow. You can take this information the wrong way and miss use it, don't.

Frank
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Mike Fitzpatrick
Real Estate Investor · Framingham, MA · Member since 2013 · 28 posts · 3 votes
10y
Craig Moore shoot me an email if you want to chat about real estate investing I started when I was 23 with about the same amount of capital there are some great things you can take advantage of in MA for new home buyers
1 Reply
Ronnie Boyd
Fix & Flip, Wholetailing, · West Columbia, SC · Member since 2013 · 215 posts · 60 votes
10y
If you can make time I would find a good mentor or ask a local investor if you can work with him for free.
Learn from someone who is active and is where you would like to be 20-25 years from now.
0 Reply
Evan Roberts
Contractor/Realtor/Property Manager · Baltimore, MD · Member since 2015 · 73 posts · 42 votes
10y
I am going to disagree with the people saying you should do FHA financing as conventional 5% loans just make more sense from a long term cost perspective. FHA used to be the only game in town, but with money being so cheap right now you can look around at many options that were previously unavailable! By doing a conventional loan and pre-paying PMI, you will actually save a ton of money over the life of a loan. Also, by doing a conventional 10%, you can ask for up to 6% in seller concessions thus really maximizing the amount you've put down while still keeping money out of pocket low.
I am not a lender so please consult one, but this is based on my experiences as a realtor and investor. I started buying when I was 22 and had no where near $20k so above all else...don't read about it, be about it!
0 Reply
Christopher Gill
Investor · San Antonio, TX · Member since 2015 · 35 posts · 18 votes
10y
I started investing at 21. I just turned 24 in October and have to date turned $15k of starting capitol into almost $430k of assets and properties.
Educate yourself first (which you are obviously already doing), but don't stop! Watch videos, talk to people, go to meet ups. I feel like everything I've done to date is prep work for all that I'll do in the near future! Don't stop learning. I became a REALTOR on my quest to become more knowledgeable about investing. That was very helpful for me, but certainly not necessary.
Fight fear. The biggest difference between me and you and people that will never succeed is the fear of failure. I've had many MANY micro failures (currently no catastrophic failures), but when and if I do it won't change my outlook on real estate investing or life. Many people will dream and talk about doing real estate... Just. Start. Doing it. Seriously, jump in head first. You will learn so much through the hands on process. Being young is such a blessing; we can't squander it!
All the Best.
CG
0 Reply
Derek Patch
Investor · Farmington, NH · Member since 2015 · 25 posts · 31 votes
10y
Craig, I would love to chat about what ideas you have. I'm 23, in a similar situation. Shoot me a message
0 Reply
Craig Moore
OP
Commercial Property Manager/Facilities Manager · Boston, MA · Member since 2015 · 187 posts · 41 votes
10y
Originally posted by @Christopher Gill:

I started investing at 21. I just turned 24 in October and have to date turned $15k of starting capitol into almost $430k of assets and properties.
Educate yourself first (which you are obviously already doing), but don't stop! Watch videos, talk to people, go to meet ups. I feel like everything I've done to date is prep work for all that I'll do in the near future! Don't stop learning. I became a REALTOR on my quest to become more knowledgeable about investing. That was very helpful for me, but certainly not necessary.
Fight fear. The biggest difference between me and you and people that will never succeed is the fear of failure. I've had many MANY micro failures (currently no catastrophic failures), but when and if I do it won't change my outlook on real estate investing or life. Many people will dream and talk about doing real estate... Just. Start. Doing it. Seriously, jump in head first. You will learn so much through the hands on process. Being young is such a blessing; we can't squander it!
All the Best.
CG
That's pretty awesome, Christopher. You're halfway to my overall goal of being a millionaire by age 30 and you've got 6 years to spare. Wow! I'd love to talk about your experiences so I'll send you a connection request.
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Mike HurneyPro Member
Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
10y
@Craig Moore Welcome.
O/O MF!
Then look into some Wholesaling/Flipping.
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Daniel Sprague
Rental Property Investor · Mankato, MN · Member since 2015 · 47 posts · 13 votes
10y
I agree 100% with the FHA scenario of buying a fourplex.
I am now 28, and was in the same situation as you when i was 22. Unfortunately i bought a single family home with an fha loan. I still hold that property today, and i clear $800/month, so i am not mad about it, but when i look back i wish i would have been more educated on the options at that point.
I now own a fourplex that would have been an amazing 1st home.
If i would have known about this option i would have been all over it.
Dont be afraid of the mortgage insurance. That is something that would discourage most people, and i agree that it is a cashflow killer, but there is no other product that is so easy to obtain, with so little down, at such a good rate.

Good Luck!
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Craig Moore
OP
Commercial Property Manager/Facilities Manager · Boston, MA · Member since 2015 · 187 posts · 41 votes
10y
Originally posted by @Mike Hurney:

@Craig Moore Welcome.
O/O MF!
Then look into some Wholesaling/Flipping.
Mike,
I'm not sure what the O/O MF! stands for. Could you elaborate please?
0 Reply
Logan AllecBusiness Member
Accountant · Los Angeles, CA · Member since 2014 · 1k+ posts · 980 votes
10y
Chalk another one up for, "Buy a 3- or 4-unit property using FHA financing."

@Evan Roberts, you can't get 5% or 10% down conventional loans from a standard lender on three or four units owner-occupied, which would be this young man's best bet. That's why FHA's the way to go.

@Craig Moore, one thing to keep in mind if you intend on something else you need to consider when looking for an FHA owner-occupied triplex or fourplex, which is that 85% of the market rents on all four units need to cover your monthly payment (principal, interest, taxes, insurance, and mortgage insurance). This is known as the self-sufficiency rule. It only applies to 3- and 4-unit properties (not SFRs or duplex) bought using FHA financing. I put together a spreadsheet here to help potential house hackers quickly analyze whether or not a property qualifies. There are other FHA requirements concerning which you should contact your local lender, but determining whether or not a triplex or fourplex meets the self-sufficiency rule is a good place to start as this rule will immediately eliminate many properties from your search, especially in expensive markets like mine.
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Craig Moore
OP
Commercial Property Manager/Facilities Manager · Boston, MA · Member since 2015 · 187 posts · 41 votes
10y
Originally posted by @Daniel Sprague:

I agree 100% with the FHA scenario of buying a fourplex.
I am now 28, and was in the same situation as you when i was 22. Unfortunately i bought a single family home with an fha loan. I still hold that property today, and i clear $800/month, so i am not mad about it, but when i look back i wish i would have been more educated on the options at that point.
I now own a fourplex that would have been an amazing 1st home.
If i would have known about this option i would have been all over it.
Dont be afraid of the mortgage insurance. That is something that would discourage most people, and i agree that it is a cashflow killer, but there is no other product that is so easy to obtain, with so little down, at such a good rate.

Good Luck!
This is actually my first time hearing about mortgage insurance or that it even being a cashflow killer. Is this a necessity?
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Craig Moore
OP
Commercial Property Manager/Facilities Manager · Boston, MA · Member since 2015 · 187 posts · 41 votes
10y
Great answers everybody. I have one last question that could help me map out my direction. Just about how many properties is necessary to obtain at "minimum" $10K net profit per month? @Michael Boyer @Michael McCormack @Derek Patch
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