Young and very very hungry

8 Replies

Hi, my name is John Stark and I recently just graduated high school. Recently I have been getting very motivated about how money works and would like to learn as much as possible about how to make my money work for me. I’ve read “Rich Dad, Poor Dad” plus other business books. I’ve watched countless videos and have considered many possible streams of income from day trading, to owning a gumball machine. 

But, nothing interested me more than that of owning rental properties. I currently live in Ohio near a soon to be HUGE cracker plant. And I believe prices of houses are going to go through the roof. 

My question is, how can an 18 yr old with little savings come up big when it comes to rental properties. Should I save 20% down and loan a house out? Should I try whole trading? Is investing money into stocks monthly the way to go? 

I’m looking for anyone who has the knowledge I seek. Thank you for taking the time to read this!! Hope to hear from you soon! :) 

@John Stark Welcome to BP. I enjoy chatting with young people just getting started. It helps me stay focused on the fundamentals. I must admit, prior to a bit of Googling, I was wondering how big a plant that makes thin crisp wafers could actually be. Are you down around Belmont County? Real estate, in my opinion is one of the best possible investments. There are so many advantages that don't come with other investment vehicles. That being said, at your age if you remain disciplined in your investments the vehicle almost doesn't matter. Real estate is best used as a get rich slow investment. Its good that you are already interested in local economics but be sure not to avoid the macro. For instance, assuming the new plant will raise property values in that area, will they outpace normal inflation of other nearby markets such as Cleveland, Columbus or Pittsburgh. You can also look at market trends of other places with similar industry. I would try to avoid speculation and make solid fundamental investment decisions. All of the following ideas are discussed in detail in @Scott Trench 's book "Set for Life" . Consider starting a career in real estate find someone to work for who will pay you and teach you. One of the best ways to get your first property is house hacking. Using a low down payment loan for a property up to 4 units that you will live in. Investing money into the market is usually worthwhile. I would consider opening a vanguard mutual fund account and just leaking say $100 month there automatically forever. Focus on aggressive savings to build capital for investments. A few years of aggressive savings now could say you decade of unnecessary work in the future. This response was quite the ramble but hopefully you will find something useful.

@John Stark

Hi John,

Partner up with a relative that's older than you (and has enough money to make it happen).

Explain the deal to them, the possible positives and the possible negatives.

Good Luck!

Originally posted by @John Stark :

Hi, my name is John Stark and I recently just graduated high school. Recently I have been getting very motivated about how money works and would like to learn as much as possible about how to make my money work for me. I’ve read “Rich Dad, Poor Dad” plus other business books. I’ve watched countless videos and have considered many possible streams of income from day trading, to owning a gumball machine. 

But, nothing interested me more than that of owning rental properties. I currently live in Ohio near a soon to be HUGE cracker plant. And I believe prices of houses are going to go through the roof. 

My question is, how can an 18 yr old with little savings come up big when it comes to rental properties. Should I save 20% down and loan a house out? Should I try whole trading? Is investing money into stocks monthly the way to go? 

I’m looking for anyone who has the knowledge I seek. Thank you for taking the time to read this!! Hope to hear from you soon! :) 

 Welcome to the site John.

John,

First, I would recommend sitting down and deciding which way you want to go. On this site, you will get the feedback on the real estate side. But, you need to understand both sides and make a decision that works best for you. If you are truly wanting to do real estate, I would look into getting an FHA loan. An FHA loan allows you to put 3% down of the purchase price as long as you live in the home for at least 1 year. You could use this strategy to rent out half of a duplex and live in the other half. This allows you to get started real estate investing and get into home ownership easily and for a fairly cheap price. Best of luck on your journey!

@John Stark

Congrats on deciding to start investing early on. In order to decide what to do when it comes to investing and how to find the funds, you need to educate yourself. "rich dad, poor dad" is a great start. Now you need to keep adding to this foundation by reading RE and personal development books. Read "the richest man in Babylon" next. If you need more recommendations, PM me. 

The important thing is to continue educating yourself and staying motivated through the obstacles that will come your way and there will be many. You just have to stick to your goals to make it happen!

Good luck!

@John Stark

Lots of options but you need as much information as you can get at this stage, it’s a complicated industry when you factor in risk.

1) get a job in the industry, Property manager,
RE agent, maintenance tech, painter, anything to give you more insight

2) Best way to start investing in buying a double with an FHA loan and house hacking or making improvements while living there. Then start snowballing from there.

3) Save as much money as possible to invest

Good luck

@John Stark My recommendation would be to invest in yourself first and foremost. Much of the information on this site is about how to obtain rental property while minimizing the amount of your own personal cash you invest in it, however they key word there is "minimize". You still have to have cash to be able to continually make purchases, and REI is mostly a long-term game. I would recommend you focus on identifying what you want to do to support your REI goals, do you want to go to college, get a degree and (hopefully) a good-paying job to finance your REI? Maybe you want to get a trade job so you can both earn money for REI and also get knowledge of how to do things on your property yourself, such as becoming an Electrician or a Plumber. Or maybe you want to become a Real Estate Agent or some other job in the RE industry itself. Basically, you need to make sure you can continue to provide money for down payments, repairs, vacancies, etc. that come up until you reach the point where REI can support you by itself, which can be a long road.

I would also recommend you look into "house-hacking" where you purchase a property (usually a duplex, triplex, or fourplex, but occasionally people buy SFH's and rent out extra rooms to roommates) and live in one unit while renting out the other(s). The benefit of this is it allows you to take advantage of the low down payment requirements for owner-occupied properties (3.5% FHA or ~5% conventional depending on the lender). There are plenty of articles on this site about house-hacking, just do a quick search if you're interested. Good luck with your REI path!

@John Stark - Here is my "starting up" collection:

Read about the ideal-vs-desperate-investor
Read Dave Ramsey book "The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness." and complete the baby steps there.
Read Scott Trench’s book “Set for Life.”
Finish the school and get your degree - you'll need it later, especially if it's business management.
Get a job first where you have W2 income. Save 50 percent after tax income. Find deals in your market. Buy at discounted prices. Rehab. Rent. Refinance. Repeat.
Work slave job with W-2 documentation for 2 years to gain favor with banks. Freddy/Fannie conventional loans want to see those 2 years. Keep same job no matter how crappy. It's only a stepping stone to break free.
While you are slaving, eat ramen, roommate up or live in trailer, avoid Starbucks and tuck every dollar you can squeeze out into a bank account. need 20% down and money for materials. so for 80K home (trashed), you will want 35K banked to get started, just a rough idea.
Then, get pre-approved. Buy property. Buy another and another until you have enough equity to refinance one for large amount of cash. Take cash and start BRRRRR process (read up all you can on BRRRRR). Give boss notice. (sorry about all the school time you invested). Your free. Done.
Find a mentor to help with the process.
Doing an internship with someone that is serious about their business, and then making sure that you're just as serious about their business as they are, is an awesome way to gain invaluable experience and support for yourself in the long run.
Intern with a flipper. Intern with a wholesaler. Intern with Rental Investor. Then decide what you want to do long term. You have a long journey ahead.
Aggressively save money and buy a Multifamily 2-4 units with 3.5% FHA loan and house hack. Find a duplex/triplex that needs a little work, live in one unit rent out the rest. Raise the rents to market values and rehab to force equity and sell in 2 years to avoid capital gains. If you decide to keep the property you can refinance into a conventional loan and hopefully you have enough equity to eliminate the PMI/MIP. Then move out and repeat the process. Repeat. Do this four or five times and you'll never have to work again if you choose. [Beware = https://www.biggerpockets.com/renewsblog/house-hacking-drawbacks/]
I would look for a 2-4 unit too house hack. You can get into these with 3.5% down for an owner occupied FHA loan. Great way to get started FHA makes sure its a cash flowing deal before they allow you to buy. And house hacking allows you to make a little off the property, and seriously subsidize your rent. And lastly, you gotta live like a college kid. Rent out rooms, go the cheap route. Having those cheap expenses will really catapult you forward financially!
Income from RE investing is slow and boring (in a good way). The RE investing that makes fast money is not really “investing” - it’s a self-employed RE business. For example, flipping, deal finding, wholesaling, syndicating.
Boosting your credit score is the no-brainer investment. Go on My Fico and learn the credit hacks. Do them!!!
[Biggerpockets] is notorious for the no and no money down niche, but you really need to have a good financial runway prior to investing otherwise you will lose your bottom when it goes sideways.
Read all the usual books. But to be honest with you, If you do not learn some construction skills, your progress will be a lot slower as contractors will be raking in the majority of your profits.
Get a pro account on this site so you can access the PRO only blogs and avoid all the goofy stuff that can confuse you sometimes.
Take NO advice from salesmen such as realtors/brokers. Not because they are wrong, but because they are salesmen.
Take NO advice from anyone who does not own more real estate than you do. Why chance it.
Just keep reading, saving, researching your target area. Know the rents! Know the values.
Do all this and you'll be on a very good path. Just remember, there are no secrets and shortcuts in real estate investing, just slow and steady progress. You want fast, you are closer to speculating than investing and your risk skyrockets​.
"Ignorance is bliss. Knowledge is power, but also a burden. The cure to both - the 4 ions: education, action, progress(ion), not perfection".

Learn to use BP to its whole potential:
Subscribe to BP blog and podcasts and start reading posts and listening to their podcasts collection.
Find and connect with other BP members that are in your area: http://www.biggerpockets.com/m...
Set up keyword alerts to be notified of the topics that interest you: http://www.biggerpockets.com/a...
Read Beginner’s Guide: http://www.biggerpockets.com/r...
+ https://www.biggerpockets.com/...

You can find a glossary of some acronyms here: https://www.biggerpockets.com/...

You might also want to read: The Ultimate Beginner’s Guide - https://assets2.biggerpockets....
...actually the entire section: https://www.biggerpockets.com/...

BP has a whole section dedicated to education and starting up - https://www.biggerpockets.com/...

Get busy with the entire Education section on BP:
https://www.biggerpockets.com/...
https://www.biggerpockets.com/...
https://www.biggerpockets.com/...
https://www.biggerpockets.com/...
https://www.biggerpockets.com/... (including TENANTS MAINTENANCE)
https://www.biggerpockets.com/... (and the sub section on REAL ESTATE MARKETING TOOLS & TECHNOLOGY TAXES & ACCOUNTING LEGAL TEAM)

One way or another you will pay your "real estate tuition" - either in time, effort or money. My suggestion - better in time and effort, and money (through the mistakes you going to make), than paying a guru.

Between BP and books and all the other podcasts and blogs available for free, you shouldn't need any paid training - don't fall for that. Just find a good mentor to shadow, someone willing to impart from his/her experience, take them to lunch and make yourself useful to them, and they will teach you.

Here some recent articles good for starters:
- one to raise you up: https://www.biggerpockets.com/...
- one to bring you back down to earth: https://www.biggerpockets.com/...
- one in the middle: https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://royallegalsolutions.co...

You might want to read and follow these threads:
https://www.biggerpockets.com/...
https://www.biggerpockets.com/...
https://www.biggerpockets.com/...
https://www.biggerpockets.com/...
https://www.biggerpockets.com/...

Bonus for the weekend, my collection for starters (read the comments too, and then if you like the author, go check out what else they wrote):
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...
- https://www.biggerpockets.com/...

If that's not enough, ping me and I'll give you a whole collection of blogs and podcasts to follow.

Bonus 2:
1) Read at least one hour per day every single day.
2) Remember the quote by Jim Rohn "You are the average of the five people that you spend the most time with."
3) Check for toilet paper before sitting down.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you