First time home buyer, 10k, little credit
Member since 2023 · 4 posts · 1 vote
I’m 18, haven’t been able to build up a lot of credit, I have over 10k I could put towards a house right now. But with little to no credit, I’m curious if there’s a way I could get involved with RE yet or if I should wait til I have more capital and better credit in a few months
Congrats on your interest in real estate at your age. If I knew what I know now at your age I would probably have 1000 doors by now! lol. Instead I started at age 45 and I have 37... but hey, I'm on my way!
I would start off by checking at what age you can contract to buy a house in Indiana... whether it is 18 or 21? If it is 21, you could always get a family member to help you make the deal happen. So that is step 1.
Step 2 is that you need about 20-25% down if you are buying an investment property (financed). I would say you would be short of that goal in today's market. But, with that said, house hacking (where you buy a house that you are going to live in, and then rent part of the house (think duplex) to another person is close to achievable probably with close to where you are at. You usually need about 3-5% down to buy a house you are going to live in. You may still not be there, but you aren't too far off probably. The easiest way to answer some of these questions is to reach out to a mortgage broker (not a bank) and just ask them if they have 2 minutes to answer some quick questions.
1. Age to contract.
2. Programs they offer with least amount down on a house.
3. First time buyer's programs?
4. How much down to buy a $100,000 house?
5. Can you finance in closing costs?
It should give you a good basis to know where you stand.
So let's say it's 21 to contract, and you're short on funds. Maybe see if a parent or relative would go in on it with you. You put up your 10,000, and maybe they throw some money in too and partner with you. It may even have to be in their name up front, but do a written contract with them as to what your terms to work together are. With family you could make a deal that at 21 they deed your portion to you through a quit claim deed. I wouldn't do that if they weren't family... but usually you can trust your family, right? (hopefully).
Now the down sides. Houses are really expensive right now, but are coming down as the Fed raises their interest rates. This has the knock-on effect of expensive mortgages on properties (which is the whole idea the Fed is trying to accomplish... make homes expensive to force sellers to lower their prices to control inflation).
With interest rates high, it is hard to find a property that is worth buying these days for cash-flow purposes. Not saying it can't be done, but the higher interest rates mean hundreds of extra dollars in financing costs each month. So if you said, What's the best thing to do... it's probably to keep your eye out for a property that works, but know if you wait out the high rates (which might be a year or two) you will be able to use your money much more effectively when rates are back in the 4-5% range, instead of the 6-7% range. I'm not seeing much on the market these days that will generate any positive cash flow currently... so I'm doing exactly what I told you... watching, and waiting. I get lots of notices of people lowering their home prices... so the market is starting to adjust... but it probably has quite a ways to go... so until then, it's watch and wait.
All the best!
Randy
Congrats on your interest in real estate at your age. If I knew what I know now at your age I would probably have 1000 doors by now! lol. Instead I started at age 45 and I have 37... but hey, I'm on my way!
I would start off by checking at what age you can contract to buy a house in Indiana... whether it is 18 or 21? If it is 21, you could always get a family member to help you make the deal happen. So that is step 1.
Step 2 is that you need about 20-25% down if you are buying an investment property (financed). I would say you would be short of that goal in today's market. But, with that said, house hacking (where you buy a house that you are going to live in, and then rent part of the house (think duplex) to another person is close to achievable probably with close to where you are at. You usually need about 3-5% down to buy a house you are going to live in. You may still not be there, but you aren't too far off probably. The easiest way to answer some of these questions is to reach out to a mortgage broker (not a bank) and just ask them if they have 2 minutes to answer some quick questions.
1. Age to contract.
2. Programs they offer with least amount down on a house.
3. First time buyer's programs?
4. How much down to buy a $100,000 house?
5. Can you finance in closing costs?
It should give you a good basis to know where you stand.
So let's say it's 21 to contract, and you're short on funds. Maybe see if a parent or relative would go in on it with you. You put up your 10,000, and maybe they throw some money in too and partner with you. It may even have to be in their name up front, but do a written contract with them as to what your terms to work together are. With family you could make a deal that at 21 they deed your portion to you through a quit claim deed. I wouldn't do that if they weren't family... but usually you can trust your family, right? (hopefully).
Now the down sides. Houses are really expensive right now, but are coming down as the Fed raises their interest rates. This has the knock-on effect of expensive mortgages on properties (which is the whole idea the Fed is trying to accomplish... make homes expensive to force sellers to lower their prices to control inflation).
With interest rates high, it is hard to find a property that is worth buying these days for cash-flow purposes. Not saying it can't be done, but the higher interest rates mean hundreds of extra dollars in financing costs each month. So if you said, What's the best thing to do... it's probably to keep your eye out for a property that works, but know if you wait out the high rates (which might be a year or two) you will be able to use your money much more effectively when rates are back in the 4-5% range, instead of the 6-7% range. I'm not seeing much on the market these days that will generate any positive cash flow currently... so I'm doing exactly what I told you... watching, and waiting. I get lots of notices of people lowering their home prices... so the market is starting to adjust... but it probably has quite a ways to go... so until then, it's watch and wait.
All the best!
Randy
Congrats on your interest in real estate at your age. If I knew what I know now at your age I would probably have 1000 doors by now! lol. Instead I started at age 45 and I have 37... but hey, I'm on my way!
I would start off by checking at what age you can contract to buy a house in Indiana... whether it is 18 or 21? If it is 21, you could always get a family member to help you make the deal happen. So that is step 1.
Step 2 is that you need about 20-25% down if you are buying an investment property (financed). I would say you would be short of that goal in today's market. But, with that said, house hacking (where you buy a house that you are going to live in, and then rent part of the house (think duplex) to another person is close to achievable probably with close to where you are at. You usually need about 3-5% down to buy a house you are going to live in. You may still not be there, but you aren't too far off probably. The easiest way to answer some of these questions is to reach out to a mortgage broker (not a bank) and just ask them if they have 2 minutes to answer some quick questions.
1. Age to contract.
2. Programs they offer with least amount down on a house.
3. First time buyer's programs?
4. How much down to buy a $100,000 house?
5. Can you finance in closing costs?
It should give you a good basis to know where you stand.
So let's say it's 21 to contract, and you're short on funds. Maybe see if a parent or relative would go in on it with you. You put up your 10,000, and maybe they throw some money in too and partner with you. It may even have to be in their name up front, but do a written contract with them as to what your terms to work together are. With family you could make a deal that at 21 they deed your portion to you through a quit claim deed. I wouldn't do that if they weren't family... but usually you can trust your family, right? (hopefully).
Now the down sides. Houses are really expensive right now, but are coming down as the Fed raises their interest rates. This has the knock-on effect of expensive mortgages on properties (which is the whole idea the Fed is trying to accomplish... make homes expensive to force sellers to lower their prices to control inflation).
With interest rates high, it is hard to find a property that is worth buying these days for cash-flow purposes. Not saying it can't be done, but the higher interest rates mean hundreds of extra dollars in financing costs each month. So if you said, What's the best thing to do... it's probably to keep your eye out for a property that works, but know if you wait out the high rates (which might be a year or two) you will be able to use your money much more effectively when rates are back in the 4-5% range, instead of the 6-7% range. I'm not seeing much on the market these days that will generate any positive cash flow currently... so I'm doing exactly what I told you... watching, and waiting. I get lots of notices of people lowering their home prices... so the market is starting to adjust... but it probably has quite a ways to go... so until then, it's watch and wait.
All the best!
Randy
Thank you very much Randy!
@Mike Paquette Consider getting a secured credit card if you don't have one already. Use it responsibly and then graduate to a regular credit. Learn more: https://www.consumerfinance.go...
I’m 18, haven’t been able to build up a lot of credit, I have over 10k I could put towards a house right now. But with little to no credit, I’m curious if there’s a way I could get involved with RE yet or if I should wait til I have more capital and better credit in a few months
Hey Mike! Amazing at age 18 you're looking into investing in real estate and already have $10k to go toward it. Quick tip on buying your first home. Try and buy either a 2 or 3 unit property and live in one of the units. You can do an FHA loan and put as little as 3.5% down of the property if you live in it as your primary residence. Now you rent the other units out giving you some experience with renters and with the added bonus of a renter helping pay down the mortgage making the entire project much more affordable. After a year you can rent out the other unit if you wish.
Feel free to reach out if you need any further advice.
Hey mike. Welcome to BP! This platform is such a powerful asset. As others have said, it’s great you’re looking for suggestion on this topic at your age! It looks like you’ve already gotten some great advice above. I’d like to piggyback off @Randall Alan. House hacking is arguably one of the easiest ways to get into REI with limited capital. You can qualify for low down payment loans like FHA and conventional loans under the contingency that you live in the property for a year. It's what I'm currently doing and is proving to be a smart move. My wife and I bought our first home Jan 2022 and rented out our finished basement to a friend of ours.We bought over asking because thats what the market was like a year ago lol. Others who were buying around that time in markets like Denver can attest. Very competitive. We locked in at a 2.9% interest rate on a conventional loan with low money down. This worked for us. Sure we had an expensive property on our hands but we have very cheap debt on our home. HOWEVER, if I could go back I'd house hack a bit differently. At that point I hadn't found BP yet and my intention in buying didn't wasn't an investment strategy. I wasn't even aware I was house hacking. If I could go back with the knowledge I have now, I would have bought a multi family home like a 2-4 plex. With the same loan and rented the other units. This method would set you up for more cash flow after you move into another house hack the subsequent year. Multi family homes will always cash flow more than single family homes. I think some actionable steps for where you are at in your journey is to
1. Try and secure some more capital to invest or find a partner willing to fund a deal. There’s always unforeseen expenses that justify having reserves on hand. I had a to pay to repair a gas leak and buy a new water heater within our first 6 months.
2. Spend as much time as you can listening to BP podcasts like the “real estate rookie”The latest episode of the BiggerPockets podcast is actually titled “How to start a real estate portfolio with just 10k”
3. Research creative financing options for deals like “subject to” or “seller finance”. I don’t know what your income looks like or if you have a W2, but with your age, limited capital, and lack of credit history, lenders might have a hard time making the determination that you’re a safe and bankable candidate for a loan. These methods would be a good way to circumvent those issues considering your lender would essentially be the seller. It would help loads to have someone who has used one of these methods before in your network to help you through the process.
I hope this helped. Good luck!