I am 17 years old, I have 28,000 in cash, What do I do?

Question

Hello, my name is Nicholas,

Ive been interested in real estate investing for a while now, I've been wanting to become a real estate agent since I was 15. I graduated High school a year early, so I can focus more on reading books and learning about real estate investing. Im getting close to being 18 now in the spring, and I have saved up 28,000 in total, I worked a local fast food for 8 months and recently quit. As well as some other business ventures, I am currently unemployed, trying to get a job in a real estate type of environment so I can gain some more experience. As well as have a good work history for the banks. I don't know if thats possible because I am only 17, but the question I have is what I should do with the money I currently have.

Do I use it to get a duplex or a quadplex? (Using FHA)

Do the BRRRR Method on a property and recycle?

Ive thought about going into wholesaling recently, and I know there are other opportunities out there to do with real estate investing, but I don't know what the best course of action is. the market is kind of in a weird state right now, and I'm thinking about waiting 12-18 months before buying anything. Im still new to the game so I don't have experience under my belt. Any advice like what you would do in my situation would be greatly appreciated, Im just a kid looking to learn and do well in the real estate investing world.

P.S. If you know any jobs I can get started with in real estate as a 17 year old that would be greatly appreciated as well.

Thanks!

-Nicholas

Nathan Gesner · Answer

I have to agree with Randy. You need to be 18 to sign contracts. You also need two years of work history in the same career before banks will consider you stable. And you need a credit score.

The most straight-forward option would be to get a job in property management. You'll learn how to manage rentals and how much work is involved with each of the different classes. You'll also rub elbows with investors, learn the laws, get to know the market, and much more. At the same time, you can build credit, save money, and watch for deals.

A faster option is to find a property that will allow owner financing. Those are few and far between, may require a larger downpayment, and the owner may still refuse to finance because of your age and lack of history.

Randall Alan · Answer

@Nicholas StevensonSo I applaud your enthusiasm!  But I think there are some holes in your plan around financing.   First, at 17, you can’t legally buy a house… so waiting till 18 is the first step.

It takes a lot more than having the money for the down payment to close a deal. Banks want to know how they are going to be repaid. What’s your credit score… it plays a role in your interest rate, and who will finance you. You mention you are unemployed. That’s a huge issue…as the bank wants you to have a debt to income ratio that lets you cover all your monthly expenses plus about another 20-30%. They also look at your employment history… like for continuous employment…it’s a sign of stability. It’s entirely possible you won’t find a regular lender who will write you a mortgage until you start to satisfy some of those types of risks.

You may say, “I’ll use the income from the rental to help my DTI ratio out.  Odds are the bank won’t let you count it… at least not initially… they will want to see 1-2 years of rental history to count rental income - so they know it’s consistent.  They also know those units can sit empty - generating no income… maybe your tenant squats in the house and pays no rent and ties you up in court for 3-6 months… now how does the bank get there money?   So they want you to have financial reserves.

As for BRRR…don’t even think about it right now.  For the Renovate step…. Where are you going to get your money?  What if you misjudge the repair expense?  Our latest flip just hit a $40,000 unanticipated cost!  To put it in perspective, we will still clear 6 figures in profit… so that part isn’t catastrophic.. more annoying!  But how would you handle that if you put all your money into buying the property?

Wholesaling is a tough slog.  The concept is easy enough, but the competition is fierce.  We own about 40 rentals… we get 3 mailers and 3 phone calls a day (LITERALLY!!) wanting to buy our properties.  You are competing with lots of experienced companies with dedicated marketing teams cold calling thousands of leads a day. You are literally a marketing company.  Expect lots of rejection - and when you do find a deal - you are frequently dealing with desperate people in desperate situations.  We have bought a number of wholesale deals… at the end of the day it was people in bad situations… divorces, people desperately trying to avoid foreclosures… and it tends to be people getting exploited to some degree all in the name of profit - not so much for them; but for you and your buyer.  (Not exactly the way they probably sell wholesaling, eh?

So what do you do? My first suggestion would be to partner with somebody. Adding another person to the team – even if it’s a family member – helps you overcome a lot of your shortcomings. Yes they will be essentially cosigning your deal, but it’s a small price to pay to be able to get started so young. Plus if it’s a family member, you know you can trust them.

You could also try to partner with somebody that has more experience… You just have to be really careful not to be the one who gets exploited as well! Definitely have a written agreement with whomever you partner with that spells out who’s contributing what, as well as how you will split any profits, etc., etc.

As for what I would recommend you buy, it would be probably a duplex that you could house hack as well. This would let you minimize your rent expense, and save up for your next deal.  If it is a pure rental property, having 2 renters  gives you a little assurance that if one side of the unit is empty, you can still earn income off the other side to help cover your expenses.  You definitely want to buy the property for a personal use scenario. Otherwise you would have to put 20 to 25% down on a pure investment property.  After 6 months you can move out and rent out both sides and look at buying another property for yourself (rinse & repeat.)

Again I applaud your enthusiasm, but you are going to suffer some of the consequences of being so young and lacking a lot of the things you need from an experience perspective (credit score, employment history, etc) in trying to get started in real estate. Truthfully, I would probably encourage you to pursue a more traditional employment situation, while you make real estate your side hustle for the short term. It will help you have a more desirable employment history and help you qualify with the banks. We are also coming into this high interest rate environment, and it will probably be with us for a good bit. This makes it really difficult to be as successful as it was when interest rates were lower. The bank ends up making more money, and you end up making less due to the loan terms (high interest rates)

All the best!

Randy

Account Closed · Answer

Hey Nicholas, seems like we have quite a bit in common. I am in SLC and got started in real estate young too. Great job at saving that much money, that takes a lot of dedication at such a young age! Before investing I entered the real estate world by being an agent, if you think thats something that would interest you, you can start the courses and take the test when you are 18. However, if the goal is to buy something as soon as you can. I would focus on getting a W2 job of some sort that can show consistent income for when you go to purchase something, and that doesn't necessarily need to be real estate related. There are lots of ways you can enter the real estate space without experience, but I am not 100% sure if you have to be 18 for most of them or not... But some ideas, when I was 18 I worked as an assistant for a busy realtor in the area, then I did admin work for a mortgage company, but you could work for a property management company, or even try to learn a trade. Having W2 income will help you qualify for a home a lot easier when the time comes. Also, build credit as soon as possible! When you turn 18, go to your local credit union and get a credit card. AND If its an option for you, I would also see if a parent (if they have good credit) would be willing to add you to one of their credit cards as an "authorized user". They don't even have to give you the card to use, but just being an authorized user will allow you the benefit of their credit history and help build your score. I am always happy to talk & brainstorm if you need. Wishing you lots of success!

Dan Sheeks · Answer

Hey @Nicholas Stevenson

I would like to recommend a Bigger Pockets book to you called First to a Million = www.biggerpockets.com/teen

It is specifically for teens who are exactly where you are right now - the beginning. This book is your launching point.

I am the author and have been a high school business teacher for 20 years. Let me know if you have any questions. Always happy to talk to beginners who are young like you!

Dan

James Dainard · Answer

Hey Nicholas,

In terms of maximizing your gains, you're probably looking for a BRRRR-type deal.

With where you're at you want to make sure you're minimizing your losses as much as possible. If you are currently paying rent a house hack would probably serve you better than chasing the returns from a flip, at least initially. Once you can get your cost of living down to a minimum then you can spend all your focus going after income-producing flips, BRRRR's, or holds.

FHA 3.5% down on a duplex is going to be your target for maximum leverage going into this. Use it either on a duplex or a large enough house to rent out the rooms.

Best of luck!

Paul Sweetman · Answer

Nicholas at 17 you rock. I bought my first home at 18 ($27k sold it for $35K god I miss the 70's) I've been investing for 33 years now. Join your local REI clubs go to meet ups learn what kind of investor you want to be. When I started I only knew about being landlord. That's who my parents rented from. But there are so many other ways to invest in real-estate. I love the 3 T's but at 67 I'm starting to look at other ways. Find a mentor.

Go out and meet someone to help you be your best and you do the same.

Paul

Paul Sweetman · Answer

All great responses. Find a local investor. Ask him if you can help him and if he'll mentor you. If you're living at home you can work for cheap and get paid to learn. He may be in a position to partner with you (seek legal advise with this one DO NOT DO THIS WITHOUT LEGAL ADVICE)

I've been tutoring a young man for 4 years, he doesn't have your drive and ambition. On the other hand he now completely understands construction, electrical and plumbing and he's starting to do maintenance and small jobs for other investors.

Danny Polanski · Answer

Heres my recommendation:

good on you for starting early. Thats the main ingredient to enjoyment.

Go the biggest you can. So 4-5-6 plex etc.

I say go the opposite route you’re thinking. Get into the maintenance and fixing things side of things.

Become a janitor then maybe a maintenance man, then a tradesman, etc.Once youre able to establish some serious skills, then maybe venture out to sales, commision type stuff, etc.

youre ahead of your peers already, now u need to keep that gap.

Nicholas Stevenson · Answer

Thank you so much Randy, I really appreciate your advice and expertise on this subject. I think Partnering with someone would be awesome I have a few people in mind that are family friends of mine who have been mentoring me for a bit now, and I believe I could partner with them or even just have a close up on deals they do and they could show/walk me through them. Working as a real estate agent when I am 18 is the goal, being in the field and gaining experience would be ideal I believe. You're right about being so young and not having credit or experience under my belt. But I also am eager to learn and willing to put in the work. Thank you for your advice again, I greatly appreciate it and I know it'll help me along my journey!

Thanks!

-Nicholas

I am 17 years old, I have 28,000 in cash, What do I do?

Most Popular Reply