Renting out a house in my 20’s (I’m 16)

7 Replies

I am 16 years old and I would like to start renting out a house by the time I’m 20. I’ve listened to many bigger pockets podcasts, and I’ve received many opinions from my father but I’m am still confused. I want to get into the electrician trade to build up enough money for down payments on houses, and my dad says that it isn’t possible for me to rent out a house when I am 20. Could anyone give me precise steps on how I could accomplish renting out a house by 20? Do I need to go to school in real estate? How can I get a down payment on a house around 5%? Will tenants sign with me if I’m new/young, and if I don’t have a real estate degree? I just need help and tips because I can’t find much on the internet for younger people interested in real-estate and how to pursue that. Thank you :)

I applaud your way of thinking when you are young.  The only items on my mind at 16 were football practice, girls, video games, and girls.  

Secondly, while I'm sure your father is a great man in his own rite and you could probably learn many valuable things from him, learning finances and business practices from him will not be one of them.  I have never met a successful man who believed that a goal of renting out a house by age 20 isn't possible.  Impossible is simply not a word in a successful businessman's vocabulary.  Instead they analyze the situation and identify each of the roadblocks standing between them and success, and then formulate a plan to get past each and every one of the obstacles in their path.

The easiest way to break into real estate is to start saving now while you still live at home and have no bills (or extremely few).  Get a job, learn a construction trade and save everything you earn.  Don't be in a rush to move out of your parents home just because you turn 18.  While independence is great, so too is living with free rent.  Keep saving and by the time you are ready to move out buy a 3 or 4 bed house in a nice neighborhood and get 2 or 3 roommates and house hack.  If you get 2 roommates don't split the bills 3 ways, the goal isn't to reduce your expenses, the goal is to eliminate them.  

The first home I ever bought I had two roommates and the mortgage was 800/month.  I charged each of the roommates a flat 600 each.  This covered my entire mortgage, utilities, internet, netflix account, and still left me with about $100 profit each month.  Not to mention my home was slowly getting paid off and appreciating in value in the meantime.  

It is absolutely possible. I suggest to start building your credit as soon as possible. Real estate school is not necessary but education is key to success. Have you read any real estate related books, Rich Dad Poor Dad, the book on BRRR by Bigger Pockets?

You will not have to worry about being judged by your age by future tenants. If you choose to self manage your property you can simply say you are the property manager.

I would second the comment about building your credit now. This will make it a lot easier to get started. 

If you have some established credit and can show income / 6-12 months work history (as an electrician), then you could buy a place with up to four units just like a single family with maybe 3.5% (or even nothing) down. Note that closing costs will add another couple percent upfront though, so 5% is probably a good target. 

This should be very doable over the next four years. Start by getting whatever type of job you can (bonus points if it's something related to the electrical trade, since that's what you want to go into - even working at a supply store), and then have your parents open a credit card with you as an authorized user. It doesn't matter if the card has a $200 limit.. banks just want to see you buy something and then pay the balance off over at least 4-6 months. Once you hit 18, you can open your own card and continue the same thing. As you do this, they may increase the credit limit, which helps your utilization as well. Also, your parents may be able to put one of the household utility bills in your name, which has the same effect of showing a history of on time payments. 

If your dad has rental properties, that would help too - he could let you manage one (or even transfer one into your name). If you can show a year or two of experience as a landlord, then a bank might let you claim 50% of future rent as "income" when you buy. 

Also don't forget your future day job - once you get established / hold the right certifications as an electrician, you can have your own company. This not only generates cash, but also potentially puts you in contact with every other investor in town - lots of future deals could flow from this. 

Right on!  My only regret in real estate investing is that I didn't start it MUCH sooner than I did.

The trades are great to get into.  It's good money for a short bit of schooling.  Plus, when you own properties yourself, it's that much less expense to DIY what you can.  At least in the beginning.

I wouldn't necessarily recommend taking real estate classes, though I'm sure that wouldn't hurt either.  I just think your time would be spent more efficiently reading books on the subject.  I'd also recommend educating yourself on financial subjects, in general.  Including  the home buying process.  Get a good grasp for how loans work, how credit works, how to budget, etc.

Also, I don't know how attached you are to where you currently live.  But the world is about to be your oyster!  You'll have the freedom in a few years to move wherever you want.  Think about where you might want to go that could nicely coincide with your real estate goals.  For example, I grew up in So. CA.  But when I graduated from college, I moved to New Orleans because the cost of living was SO much cheaper.  I wasn't even thinking about real estate investing at that time.  I just didn't want to have to live with roommates until I was 30, lol.

There is no reason you can't buy a house when you're 20, if you have the down payment and a decent credit score/report ready.  Like other suggested, buy your own home with all the loan goodness (lower down payment and lower interest) that comes with being an "owner occupant" and house-hack.  Either by renting out rooms in your house or by buying a duplex, triplex, or quad and renting out the other units.

Originally posted by @Jennifer T. :

... 

I wouldn't necessarily recommend taking real estate classes, though I'm sure that wouldn't hurt either.  I just think your time would be spent more efficiently reading books on the subject.  I'd also recommend educating yourself on financial subjects, in general.  Including  the home buying process.  Get a good grasp for how loans work, how credit works, how to budget, etc.

... 

This. 

The only real estate classes that are worth taking, are if you want to become an agent (and I think those might be self study). There is zero value in going to any of those gurus to learn their top secret "system", paying for "mentoring", or buying access to anybody's "exclusive network". All those guys will do, is take the money that would have been your down payment, and possibly connect you to other scammers. People who actually want to do deals don't charge money to talk about doing deals.

This doesn't apply to books of course - I'm all for reading. But, do be aware that there are some good books out there, whose authors are also selling these bogus seminars and classes. 

@Jacob Swirtz

1. Get a job and save as much money as you can

2.. Develop your work ethic- Do chores around your house to show your parent you are focused, responsible and not a laze dreamer type of person. Get good grades in school.

3. Ask your parents to put your name and social security number on a credit card and charge and pay that bill religiously.

By the time you are 20 depending on where you buy you will have enough money saved up and your credit will be good.

Once that is in place your the process is very straight forward as far as getting preapproved for a loan and buying a house and renting it out.  

Your work ethic is what is going to make or break you once the money and credit score are right.  

Money and credit are usually the hardest thing for people.  Everyone claims to have work ethic.  

The wonderful thing is hard work is something that you can 100% control. Out work everyone around you and good things will happen.  

Good luck kid!!!