Could a savvy 21-22yo with $50,000 invest successfully?
Fort Collins, CO · Member since 2015 · 13 posts · 6 votes
Hello everyone,
A young person could join the military right out of high school and save up $50,000 during a four-year hitch.
Assuming that young person did a lot of self-study on real estate during his or her military service, could this person get out as a 21-22yo and use that $50,000 to invest successfully in real estate, such that maybe in 10 years or so that person could achieve financial freedom? If so, what are some general thoughts on the path such a person would take?
Thanks so much in advance for your replies. I am an Army veteran and wish I'd been smart about finances; one of my friends saved $100,000 during a five-year enlistment.
I'm working on a little book urging young people to consider other options besides going to college straight out of high school and racking up student loan debt.
I don't have much to offer in return but I am a licensed CPA and could try to answer any basic tax questions you have.
Very Respectfully,
Eva
@Eva Arnold - I think that you don't even need to necessarily wait until your 4-year is up, BP has interviewed, and has members who have begun their investing careers while still in the military. I seem to recall one member mentioning that he became an accidental landlord because he was unable to easily sell his house when he was relocated, and ended up renting it out and beginning his investing career.
It's certainly more challenging, and you would most likely need to have a non-military business partner or hire a management company, but it is indeed possible.
Flipping, I believe, requires too much hands-on to do property while in the military, and I don't know enough about wholesaling to comment on the difficulty of running such a business while still in uniform.
@Eva Arnold - I think that you don't even need to necessarily wait until your 4-year is up, BP has interviewed, and has members who have begun their investing careers while still in the military. I seem to recall one member mentioning that he became an accidental landlord because he was unable to easily sell his house when he was relocated, and ended up renting it out and beginning his investing career.
It's certainly more challenging, and you would most likely need to have a non-military business partner or hire a management company, but it is indeed possible.
Flipping, I believe, requires too much hands-on to do property while in the military, and I don't know enough about wholesaling to comment on the difficulty of running such a business while still in uniform.
Thank you, Alex!
I know several military members who own rental properties. They're all 'lifers,' i.e. people who stay in the military till retirement, and for the most part they do very well.
My question is about a kid who serves four years in the military and then gets out of the military with $50,000 in his or her bank account.
I guess it's kind of a silly question because obviously someone with a good self-education could take $50,000 and put it down on a fix-and-flip, and stand a decent chance of making some money off of it then going on to the next investment.
Such a person would have free college + a small living allowance from the GI Bill, so could be finishing up college, maybe working part-time too, but devoting most of his or her time out of college/work to real estate investment.
Are you saying this person would come out of the military with $50K, and not work? Or go another route say working full time, and invest the $50K on the side?
That would be a start. Check out Steven David, a realtor in S Florida. He started at 18 and how owns over 600 SFR. He teaches a lot of courses for agents in Florida. If you ever get the chance to attend one of his classes do it. 50K will certainly get you at least one maybe two properties and you can compound off of those as your cash flow increases and debt decreases. Don't let anyone tell you this isn't possible. You determine that!
Hello everyone,
A young person could join the military right out of high school and save up $50,000 during a four-year hitch.
Assuming that young person did a lot of self-study on real estate during his or her military service, could this person get out as a 21-22yo and use that $50,000 to invest successfully in real estate, such that maybe in 10 years or so that person could achieve financial freedom? If so, what are some general thoughts on the path such a person would take?
Thanks so much in advance for your replies. I am an Army veteran and wish I'd been smart about finances; one of my friends saved $100,000 during a five-year enlistment.
I'm working on a little book urging young people to consider other options besides going to college straight out of high school and racking up student loan debt.
I don't have much to offer in return but I am a licensed CPA and could try to answer any basic tax questions you have.
Very Respectfully,
Eva
It is definitely possible, in fact thats exactly what I did! I was able to put down close to 20% on my first condo (even though VA), which jump started my investing. 4 years later, that condo has ~$300k in equity, yes appreciation helps ;). This however, may be tricky with short (1-3 year) assignments.
Eva, when I started investing in real estate, I was 28 years old with only $1,000. Fast forward 11 years I was able to acquire $15 MILLION worth of investment real estate.
So the answer is: with $50,000...can you can succeed in real estate? YES!
BUT, you don't need to save up that much. $50,000 will help make things easier. But it's not a requirement.
What is needed is you need to educate yourself on creative real estate investing and hang out with the right group of people - people already doing the business. the reality is - you can buy 200 houses with $1 if you know how to combine creative deal acquisition strategies with creative deal financing.
@Gilbert Dominguez, that is a very intriguing idea -- three buddies entering into a partnership and buying a 6 plex. It does require a lot of cooperation but given the right circumstances could really work out well.
Andrey, that is really amazing! $300K in equity after four years is terrific! Congratulations! I agree that it seems tricky to invest while serving on active duty on 1-3 year assignments; my suggestions would be mainly geared toward someone who has gotten out and is investing as a veteran.
Wendell, that is amazing and inspiring; however, I must say that 'creative real estate investing' sounds a little scary and risky, not gonna lie. I know it takes a heck of a lot of know-how and hard work, not just $1,000 in your pocket to start -- so congrats!
I really appreciate all these helpful comments, thank you!
I forgot to mention I work part-time on the side with a real estate investor who does tax prep and bookkeeping for other real estate investors. I've been doing taxes for her clients since January. So let me know if you have a tax question; I really do enjoy tax research.
Eva
@eva arnold
Eva great idea, this is one thing I am passionate about as I love seeing young, eager, and bright sailors come on our ship as an alternative to going to college. Joining the military can teach a young person so much (the list goes on) and provides endless opportunities in and out.
I joined the Coast Guard at 22 after three years of college at three schools. $20k later I had 21 credits to show. I joined because I needed something to make me do one thing for more than two years, and I met the most beautiful woman in the world and was going to make her my bride, got to feed her. I jut hit 10 years now, I have earned a bachelors degree (actually made money doing it), become an Officer and am actually serving as second in command of our nations only heavy icebreaker, this is also the same ship I reported to out of boot camp. Talk about opportunity!
As for a young person enlisting and saving $50k during an enlistment, totally within the realm of possibility. It would take an exceptionally disciplined and savvy person to do it. Additionally they might need to work with some of the rules and guidelines that the seasoned member gets through time and experience understanding the pay and allowances structure.
As mentioned saving $50k in the first five years of enlisted military service is possible, but would be difficult. You would have to be very frugal and take advantage of the free/reduced recreational opportunities. My biggest piece of advice to save that amount of money would be to stay away from alcohol.
Mark's question: Are you saying this person would come out of the military with $50K, and not work? Or go another route say working full time, and invest the $50K on the side?
Hi Mark,
Thanks so much for the response. It really is up to the ambitious young person.
-He could work only part-time but attend school full-time and support himself with the Post-9/11 GI Bill housing allowance.
-He could work full-time + attend school on either a full-time or part-time basis.
-He could simply work and not attend school.
Any full- or part-time employment could possible be something related to real estate - real estate sales, construction, handyman work, property management, anything like that.
-As Joel W. mentioned above, the military will often actually pay you to attend college -- it sounds like Joel did so while on active duty -- so half- or full-time college attendance would be a good idea.
Really, such a person could go travel the world and not invest in real estate, or go live in NYC for two years and audition for acting jobs full-time, or any number of things.
Very Respectfully,
Eva
That is simply amazing and I hope more young people will follow Steven David's example and take charge of their financial well-being, rather than sleepwalk into college and rack up debt on some vague supposition that this is the smartest thing to do.
@Joel W
Joel, thank you for sharing your story -- serving on a heavy icebreaker sounds like no joke, yikes! Very sweet how love for your new wife propelled you into a Navy career, and it's wonderful to see how you've made the most of it.
Regarding saving, I have a dear friend who saved up $100,000 during a 5-year enlistment that included a tour in Iraq and a tour in Afghanistan. We used to poke fun at her for her extreme frugality, but she's definitely getting the last laugh now.
Hi Ryan, staying away from alcohol is definitely crucial to saving money in the military!
I think once a young person adopted a wealth-building, options-conferring mindset, saving $50K in five years would not be difficult. It is certainly not as difficult as what this poor guy did, paying off over $100K in student loans over 6 years on a journalist's income while living in very expensive major U.S. cities.
What happens, unfortunately, is that kids away from home for the first time suddenly have all this spending money they never had and do really stupid things with it. I used to teach at an Army training course and I'd see recruits spend $10-20 on snacks at the 'gut truck' each day, for instance. And of course, many servicemembers return from deployment and immediately put all their savings into the snazziest new car possible. And it's true that some servicemembers engage in 'drinking' as an activity in and of itself and waste a lot of money this way.
As I mentioned to Joel above, I had a very shrewd friend who saved over $100,000 during her 5 years in the service. She had two deployments during that time. She told me her now-husband saved $200,000 during his 6 years. I'm even pretty skeptical about that and hope to learn more from her husband about how he saved that much. She was very private about such matters when we were in the service, in fact she never even retorted when my husband and I would poke gentle fun at her for driving a ridiculous hoopty and shopping at thrift stores, but she's definitely getting the last laugh now.
$50,000 in five years assumes a private entering at the lowest rank possible and not enjoying any special pays for things such as deployments or Airborne status. I've run the numbers and am convinced it really can be done while still enjoying life in the military.
Yes, there are many opportunities for free or reduced-cost recreation when you are an active-duty lower enlisted servicemember.
Timothy's question: Thanks for asking this question! I am active duty myself and some ponder my possibilities. Not to steal your thunder here, but I have a tax question for you :) Here is the scenario: active duty, owns townhouse in NC that is being rented. Stationed in Japan. This past year I paid state tax on my rental 'income' as well as federal tax on the 'income'. However I still have to turn around and pay the mortgage with the 'income'!!! Is this right?
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Hi Timothy, maybe you could turn around your thinking. Think of it this way: regular employees have to commute to work, buy work clothes, and usually incur miscellaneous expenses in order to earn income. The money they spend on commuting or business clothes to wear to work or virtually all sundry expenses has to come out their pocket after it's been taxed. Furthermore, from the income they earn that they didn't spend on commuting/clothes/misc., after that's been taxed by the government, they have to provide for their housing and basic sustenance.
Let's contrast that with you: in order to earn income on your rental property, you must pay expenses on it, including state taxes and mortgage payments -- but the money you spend on those expenses you incur does not get taxed. Of course, any rental income you have left after that does get hit with Federal income tax, but not with the FICA / Medicare taxes the ordinary wages of our poor hardworking employee are subject to.
Furthermore, as a member of the military you get BAH and BAS (housing and food allowances) and you do not get taxed on that money, and you still get to claim the standard deduction on your taxes.
I hope those facts help you get into a more positive mindset about your rental. You are very smart for investing in yourself while in the military. I wish you all success as being an absentee landlord sounds a little scary to me, but then again I know several military "lifers" who own rental property and they seem to do very well with it.
Please let me know how else I can help.
Very Respectfully,
Eva
@Account Closed
Thank you for your positive words!
We have four young daughters and I hope I can mold them into the type of savvy little tycoons you used to teach! :)
I think my idea of the ideal route would be this.. save up as much as possible, for your argument we'll call it $50K. Come out, and work in some sort of trade related to real estate. Carpentry, plumber, property manager, etc. Skip the 4-years in college because while it is free, it's not earning you anything and just puts your 4 years behind. Once you have a job, use your VA loan to acquire and occupy a multi family building, ideally 4 units. The job comes in handy here in order to obtain the loan. The VA loan will allow you to get into the property for almost nothing. Then take your $50K and use it twice. $25K down on a $100K multi family (2/3 units) and $25K again on another $100K multi family (2/3 units). That would mean within 1 year, you could potentially have 10 units (12 if you find some cheap 4-units). Then, you'd hopefully be able to pull some equity out of somewhere, and go buy another multi-unit. Rinse, and repeat.
I like this question a lot but it is a rare few folks out there this young that would save that much capital, especially on a junior enlisted paycheck. I'm not saying it can't be done because it certainly can, especially with tax free deployments and bonus money. However, it took me until I was in my 30's to really cut back on spending and start aggressively saving. I have always saved 10-15% of my income but over the past few years I have been closer to 50%. The reason I was able to do that was due to promotions, pay increases and passive rental income while still continuing to live at the same level I was before all that. The problem I see is folks get a raise and think that should dictate a move to a more lavish living style, new car, buy things, trips, etc.... Especially young sailors and marines. So, if a person in their lower 20's is diligent enough to save that kind of money during their initial military commitment, I think they will have no problem being successful in real estate investing or anything else that they do for that matter.
I would love to meet that kind of military member, have them in my command, and continue to push them toward their investing goals. All the while, allowing them to motivate me to continue building a business and saving for my early retirement. If there are any of those folks reading this I would love to hear from you.
Great question and I hope one day my son will be one of these people. Even though my dad taught me a ton about investing and saving, it just didn't take for years after my college years. If I could go back and do it all over again I would have bought a house just like the one we were all renting in college and rent it out to all of my roommates.
I do see a lot of young people on here in their early 20's doing just that and it is very exciting.
I did it why cant anyone else?
I did it non military.
In your scenario, the VA loan opportunities would be a huge plus!
If you did it non military it is very different than doing it military. A low ranking young person in the military has given up many of their freedoms to serve. they also have accepted that their income is based off of the living situation that the government has determined is best for them. For example: a sailor getting out of boot camp must report to the ship and live on the ship for the immediate future, vs. getting to live on the economy and receiving a housing allowance, which can be up to 30% more on their monthly pay. There are so many factors that play into an Active Duty member's pay.
Then one should not go in the military if they are concerned about the pay.