House Hacking with 20k at 19 years old?
Member since 2020 · 8 posts · 6 votes
House Hacking with 20k at 19 years old?
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Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes
3yDo not try to flip a house that is 2,300 miles away from where you live.
My recommendation is you pat yourself on the back for saving up so much at such a young age. Then spend the next 6-12 months getting educated. Read as many real estate books as you can. Listen to as many biggerpockets podcasts you can. Spend more time here on the forums asking questions. Completely immerse yourself in real estate for the next 6-12 months and don't touch your $20k.
Then after you have a foundation of education, pick a strategy that feels right. If you do want to get into fix n flipping, I recommend you move to within 5-10 minutes of the homes you will be flipping (especially when you're first starting out).
But who knows, maybe after you do some more studying (and let the market pick a direction) you might realize you are interested in a completely different strategy.
26 Replies
- Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes3y
It will be very, very tight, but I would start with a very small flip and, perhaps, take on a partner for the first one to add more capital. Typically for a new investor, we would lend about 75% ( we usually range from 75% - 90% for more experienced investors) of the purchase price and between 75% and 100% of the rehab costs depending upon experience. You'll have closing costs and you'll also need Reserves, which are a number of months of payments including taxes and insurance in the bank set aside. It's doable, but you'll want to start small. You might want to flip a couple, but and hold one, flip a couple, then buy and hold one. You need to build some cash up, and the flip will help you get rolling. My advice, do what I did and start with a partner that had a couple of nickels to rub together to give you more ability to purchase and complete the first couple of projects. Good luck to you!
- 3yKonstantin GinzburgPro MemberMember since 2021 · 376 posts · 242 votes
$20k is possibly enough but in all honesty, it will be a bit hard since you are on the younger side so have not had time to develop a credit history. This will lead to challenges in getting finances as well as increase the interest rate you will be offered. This in turn will make it difficult to find a property that could cash flow as a house hack. It is certainly possible and I encourage you to begin reaching out to agents and lenders in the area you want to move to, in order to gauge your options. The first step I would do is to identify exactly which market you want to focus on and reach out to investors from that region to get their opinion on the future potential of that region. Next I would begin to reach out to lenders to see what type of financing terms you are able to acquire. Since your available cash is low, the best financing option you will likely be able to get is an FHA loan that only requires 3.5% down payment. Keep in mind, there will also be closing costs required to purchase the property in addition to some expectations of cash in reserves. You will likely need to talk with quite a few lenders in order to find one that will be willing to work with you due to your developing credit score and relatively limited funds and reserves. It is possible to find one, just don't be discouraged if you are often turned down during this step. Once a lender agrees to work with you and provides a pre-approval documentation, then I would begin reaching out to agents and see what property options are available within your chosen market. Best of luck with your real estate venture!
- 3yRemington LymanBusiness MemberReal Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
Quote from @Ethan Davis:
Hello bp forum I’m 19 years old and I would like to know if 20k is enough to either house hack or do a fix n flip. I’m in Los Angeles so I’ll have to look for out of state markets. Would Columbus OH, Cleveland OH, Cincinnati OH, or Toledo OH work? Thanks guys.
I moved from CT and did a house hack in Columbus, Ohio. You should do that!
- Real Estate Agent · Columbus | Toledo · Member since 2019 · 607 posts · 768 votes3y
Quote from @Ethan Davis:
Hello bp forum I’m 19 years old and I would like to know if 20k is enough to either house hack or do a fix n flip. I’m in Los Angeles so I’ll have to look for out of state markets. Would Columbus OH, Cleveland OH, Cincinnati OH, or Toledo OH work? Thanks guys.
You could move to Ohio and househack in either of those markets. 20k is 5% down on a 400k mortgage (Do a 3.5% FHA and the rest can go towards closing costs etc.) That's enough to get into a 2-4 unit in the rapidly growning Columbus market.
- Columbus, OH · Member since 2023 · 427 posts · 254 votes3y
With an FHA loan and that budget, a house hack is doable in Columbus and Cleveland (admittedly am not familiar with Toledo). We have a lot of low price points that can cashflow in B-C neighborhoods, just make sure you have enough left over in reserves after closing, especially if you take on a multifamily.
- Real Estate Agent · WA · Member since 2021 · 254 posts · 173 votes3y
I think that it is definitely doable. Make sure you assess your risk tolerance and safety chutes. What would you do if you can't fulfill the debt service?
- Contractor · Scottsdale, AZ · Member since 2010 · 2k+ posts · 3k+ votes3y
Do not try to flip a house that is 2,300 miles away from where you live.
My recommendation is you pat yourself on the back for saving up so much at such a young age. Then spend the next 6-12 months getting educated. Read as many real estate books as you can. Listen to as many biggerpockets podcasts you can. Spend more time here on the forums asking questions. Completely immerse yourself in real estate for the next 6-12 months and don't touch your $20k.
Then after you have a foundation of education, pick a strategy that feels right. If you do want to get into fix n flipping, I recommend you move to within 5-10 minutes of the homes you will be flipping (especially when you're first starting out).
But who knows, maybe after you do some more studying (and let the market pick a direction) you might realize you are interested in a completely different strategy.
- Real Estate Agent · Nashville, TN · Member since 2015 · 2k+ posts · 2k+ votes3y
In LA, $2m is not enough...
In OH you can do a house hack with 20k, but you'd actually have to move there in order to house hack...
- Real Estate Agent · Columbus, OH · Member since 2016 · 593 posts · 664 votes3y
Quote from @Ethan Davis:
Hello bp forum I’m 19 years old and I would like to know if 20k is enough to either house hack or do a fix n flip. I’m in Los Angeles so I’ll have to look for out of state markets. Would Columbus OH, Cleveland OH, Cincinnati OH, or Toledo OH work? Thanks guys.
Fha 3.5 down and Columbus you're good to go. But that loan structure is owner occupied
- 3yTanner PileBusiness MemberReal Estate Broker · Colorado Springs, CO · Member since 2019 · 388 posts · 326 votes
What is your reason for looking in Ohio?
Many go there for cash flow. Is that what you're looking for?
LA to Ohio will be a huge change in life style. Is that something you're willing to do in order to reach your goals from house hacking?
Tanner Pile4.931 Reviews - Real Estate Agent · St George, UT · Member since 2019 · 56 posts · 30 votes3y
You're 19. Just send it and move to Ohio, get a decent paying job, and house hack like crazy for the next 5-6 years. Buy 4+ units a year like that, learn to fix things yourself, get rents up as high as you can, and by the time you're 25 you could have 20+ units and an awesome net worth.
At that point you'll have so many options and you'll be so far ahead of everybody else your age when you move back to Cali.
- Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes3y
The concern is even if you found a hard money lender, which would be difficult because you don't have established credibility, you do have to make those payments while the rehab happens and it is difficult to manage while out of state. Project managers I know go to the job site every day. My main concern is you will deplete your savings and not have a cushion.
If you are renting now, I would recommend saving a little more and buying a two bed fixer condo in LA and house hack. That's what I did to get started. That way you are building equity and at least have some credibility when a hard money lender asks you about your experience.
Alternatively, save up a little and buy a straight rental property. You are so young that you have the power of time on your hands.
I would disagree with Alexander, unfortunately unless you are making big money, it is hard to move back to LA once you have left. The cost difference is so much more and with the higher cost of living, you may not want to. That's why I'm suggesting a house hack here and then scale/move.
When we have thought about moving out of state, the idea is to rent out our current house hack (house with ADU). That way if we ever decided to move back, we already have a property.
- Member since 2020 · 8 posts · 6 votes3yThank you for the reply! Luckily I live with my mom and paid off my own car so I actually have 0 monthly expenses. What I was thinking was get an FHA loan on a 4 unit out of state property and technically I’d be living in 1 unit but I’d stay living in La with my mom rent free. So basically I’m trying to “live in” the FHA multi family for a month then “visit” my mom in La for the remaining 11 months until I can do another FHA but technically never had to move out of LA and technically I’m still living in the FHA’d property. Could this idea work?
Quote from @Rick Albert:
The concern is even if you found a hard money lender, which would be difficult because you don't have established credibility, you do have to make those payments while the rehab happens and it is difficult to manage while out of state. Project managers I know go to the job site every day. My main concern is you will deplete your savings and not have a cushion.
If you are renting now, I would recommend saving a little more and buying a two bed fixer condo in LA and house hack. That's what I did to get started. That way you are building equity and at least have some credibility when a hard money lender asks you about your experience.
Alternatively, save up a little and buy a straight rental property. You are so young that you have the power of time on your hands.
I would disagree with Alexander, unfortunately unless you are making big money, it is hard to move back to LA once you have left. The cost difference is so much more and with the higher cost of living, you may not want to. That's why I'm suggesting a house hack here and then scale/move.
When we have thought about moving out of state, the idea is to rent out our current house hack (house with ADU). That way if we ever decided to move back, we already have a property.
- Member since 2020 · 8 posts · 6 votes3y
Quote from @Account Closed:
With an FHA loan and that budget, a house hack is doable in Columbus and Cleveland (admittedly am not familiar with Toledo). We have a lot of low price points that can cashflow in B-C neighborhoods, just make sure you have enough left over in reserves after closing, especially if you take on a multifamily.
Thank you for the help. Id definitely be able to get the rest of the money for closing. With my budget will that only allow me to get distressed multi family properties or move in ready multi family properties?
- Columbus, OH · Member since 2023 · 427 posts · 254 votes3y
Quote from @Ethan Davis:
Quote from @Account Closed:
With an FHA loan and that budget, a house hack is doable in Columbus and Cleveland (admittedly am not familiar with Toledo). We have a lot of low price points that can cashflow in B-C neighborhoods, just make sure you have enough left over in reserves after closing, especially if you take on a multifamily.
Thank you for the help. Id definitely be able to get the rest of the money for closing. With my budget will that only allow me to get distressed multi family properties or move in ready multi family properties?
Depends on the area, but realistically would be hard to secure a turnkey, especially if you're aiming for 4 units. With that budget, distressed is doable, distressed meaning anything from cosmetic rehab and some fixes all the way to completely gutted, vacant and boarded.
- Member since 2020 · 8 posts · 6 votes3yThanks for the response! I have a question about the credit part. I’ve been building credit for 1 year and I’m at a 740. Since 740 is a good number will I still get bad loan offers due to my credit history being only 1 years old even though the score is high? If so can I leverage trade lines to boost my credit score and credit history immediately?
Quote from @Konstantin Ginzburg:
$20k is possibly enough but in all honesty, it will be a bit hard since you are on the younger side so have not had time to develop a credit history. This will lead to challenges in getting finances as well as increase the interest rate you will be offered. This in turn will make it difficult to find a property that could cash flow as a house hack.
- Member since 2020 · 8 posts · 6 votes3y
Quote from @Account Closed:
Quote from @Ethan Davis:
I Appreciate your feedback I’ll start researching everything I can about about those cities before I shoot an offer.
- Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes3y
@Ethan Davis- thanks 1) thats likely not enought to get started as most scenarios will require a down payment of 15% or more of the purchase price 2) you will also need to have a loan pre approval in place unless you have some private source of funds to use 3) good luck
- 3yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Quote from @Tanner Pile:
What is your reason for looking in Ohio?
Many go there for cash flow. Is that what you're looking for?
LA to Ohio will be a huge change in life style. Is that something you're willing to do in order to reach your goals from house hacking?
>Many go there for cash flow. Is that what you're looking for?
Do not judge the number of RE investors from the posts on BP. Based on the posts on BP, you would think that there are a lot of Ohio RE owned by investors. The reality is this is far from factual. The investor owned RE as a percentage in Ohio is the 4th lowest in the nation. This is because many investors, especially larger investors, recognize the difference between initial cash flow and actual cash flow over a long term hold. - 3yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Quote from @Ethan Davis:
Thank you for the reply! Luckily I live with my mom and paid off my own car so I actually have 0 monthly expenses. What I was thinking was get an FHA loan on a 4 unit out of state property and technically I’d be living in 1 unit but I’d stay living in La with my mom rent free. So basically I’m trying to “live in” the FHA multi family for a month then “visit” my mom in La for the remaining 11 months until I can do another FHA but technically never had to move out of LA and technically I’m still living in the FHA’d property. Could this idea work?Quote from @Rick Albert:
The concern is even if you found a hard money lender, which would be difficult because you don't have established credibility, you do have to make those payments while the rehab happens and it is difficult to manage while out of state. Project managers I know go to the job site every day. My main concern is you will deplete your savings and not have a cushion.
If you are renting now, I would recommend saving a little more and buying a two bed fixer condo in LA and house hack. That's what I did to get started. That way you are building equity and at least have some credibility when a hard money lender asks you about your experience.
Alternatively, save up a little and buy a straight rental property. You are so young that you have the power of time on your hands.
I would disagree with Alexander, unfortunately unless you are making big money, it is hard to move back to LA once you have left. The cost difference is so much more and with the higher cost of living, you may not want to. That's why I'm suggesting a house hack here and then scale/move.
When we have thought about moving out of state, the idea is to rent out our current house hack (house with ADU). That way if we ever decided to move back, we already have a property.
You do not state your income but have you looked into NACA loans? NACA loans have a lot of hurdles, so if you use this route make sure either your lender or RE agent have experience with this loan.
Good luck
- 3yTanner PileBusiness MemberReal Estate Broker · Colorado Springs, CO · Member since 2019 · 388 posts · 326 votes
Quote from @Dan H.:
Quote from @Ethan Davis:
Thank you for the reply! Luckily I live with my mom and paid off my own car so I actually have 0 monthly expenses. What I was thinking was get an FHA loan on a 4 unit out of state property and technically I’d be living in 1 unit but I’d stay living in La with my mom rent free. So basically I’m trying to “live in” the FHA multi family for a month then “visit” my mom in La for the remaining 11 months until I can do another FHA but technically never had to move out of LA and technically I’m still living in the FHA’d property. Could this idea work?Quote from @Rick Albert:
The concern is even if you found a hard money lender, which would be difficult because you don't have established credibility, you do have to make those payments while the rehab happens and it is difficult to manage while out of state. Project managers I know go to the job site every day. My main concern is you will deplete your savings and not have a cushion.
If you are renting now, I would recommend saving a little more and buying a two bed fixer condo in LA and house hack. That's what I did to get started. That way you are building equity and at least have some credibility when a hard money lender asks you about your experience.
Alternatively, save up a little and buy a straight rental property. You are so young that you have the power of time on your hands.
I would disagree with Alexander, unfortunately unless you are making big money, it is hard to move back to LA once you have left. The cost difference is so much more and with the higher cost of living, you may not want to. That's why I'm suggesting a house hack here and then scale/move.
When we have thought about moving out of state, the idea is to rent out our current house hack (house with ADU). That way if we ever decided to move back, we already have a property.
You do not state your income but have you looked into NACA loans? NACA loans have a lot of hurdles, so if you use this route make sure either your lender or RE agent have experience with this loan.
Good luck
NACA is a great program but have rules around renting out the home when moving out if you were to do a house hack. They will require you to sell which could be a good way to gain equity for another deal but would not get you closer to owning multiple rental properties.
Tanner Pile4.931 Reviews - Investor · Columbus, OH · Member since 2023 · 73 posts · 82 votes3y
Hi Ethan. Columbus Ohio would be doable with your budget, you would probably be looking for an FHA loan. I think that partnering with someone who has more change in their pockets would be helpful for a first time purchase and not a lot of capital to bring to the table.
Also, for this to be a "technical" house hack you would have to move to Ohio. Columbus is a great area to look at. I work with a team of investors that specialize in this area. I'm new to the real estate community and also looking to get my first house hack after graduating this coming spring. Good luck with your endeavors!
- Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes3y
Quote from @Ethan Davis:
Thank you for the reply! Luckily I live with my mom and paid off my own car so I actually have 0 monthly expenses. What I was thinking was get an FHA loan on a 4 unit out of state property and technically I’d be living in 1 unit but I’d stay living in La with my mom rent free. So basically I’m trying to “live in” the FHA multi family for a month then “visit” my mom in La for the remaining 11 months until I can do another FHA but technically never had to move out of LA and technically I’m still living in the FHA’d property. Could this idea work?Quote from @Rick Albert:
The concern is even if you found a hard money lender, which would be difficult because you don't have established credibility, you do have to make those payments while the rehab happens and it is difficult to manage while out of state. Project managers I know go to the job site every day. My main concern is you will deplete your savings and not have a cushion.
If you are renting now, I would recommend saving a little more and buying a two bed fixer condo in LA and house hack. That's what I did to get started. That way you are building equity and at least have some credibility when a hard money lender asks you about your experience.
Alternatively, save up a little and buy a straight rental property. You are so young that you have the power of time on your hands.
I would disagree with Alexander, unfortunately unless you are making big money, it is hard to move back to LA once you have left. The cost difference is so much more and with the higher cost of living, you may not want to. That's why I'm suggesting a house hack here and then scale/move.
When we have thought about moving out of state, the idea is to rent out our current house hack (house with ADU). That way if we ever decided to move back, we already have a property.
There is two things that come to mind. The first is this is mortgage fraud. You don't have intention of it being owner occupied. It will be especially challenging if you are using LA income to qualify out of state. The lender would likely want proof that you are actually moving. The second is I doubt the numbers would work. If they work at 3.5% down, why wouldn't an investor putting 20% down buy it?
- Rental Property Investor · Lubbock, TX · Member since 2021 · 58 posts · 21 votes3y
The markets you listed would work for a househack... if you are willing to move to those markets. I'm sure $20K would be enough to do a househack in OH. As far as a fix & flip in LA, it would be much more difficult to make that work with $20k.
- 3yRyan ThomsonBusiness MemberReal Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
@Ethan Davis love the hustle and great work saving up 20k already. 20k may be enough to house hack in a less expensive market. Some of my clients in Colorado Springs will use 20k to house hack or even down payment assistance.
If you are interested in those OH areas, I would connect with @Joshua Filkill
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