New Guy in Real Estate

[Steve Cristal]

Hi, I'm a 21 year old college student thinking of dropping out of college to start investing Real Estate. It doesn't make sense for me to take on huge amounts of loans so that I can be stuck in a full time job. I would rather use loans to get money back at exponential rates, so I turned to Real Estate.

I've read the ultimate guide and I was amazed by the wealth of information. I've decided to invest in multifamily homes first and my strategy to make money is to buy and hold.

That being said, I still haven't gotten some of the fundamentals down yet. One of them is:

- Criteria (how to find the best deal)

I understand the math part, but I'm sure that there are other elements at play such as location, the type of neighboorhood, etc.So my question is this

How do you narrow down from a broad selection of properties to a single ideal property ? What types of questions do you ask yourselves? Is it more efficient to get a real estate agent to find deals for you? If so, what would you ask or tell them to make yourself not look ignorant? ( I currently work as a sales representative, so I love pitching products to ignorant customers, so I can pitch them the highest price possible)

[Brie Schmidt]

Welcome! I am a multi-family investor with a buy and hold strategy in Chicago. Every market is different. But how I start looking is I want $1,200 in rent per 100k I spend. So if I am looking at a 300k house I want $3,600 in rent. That is just my initial qualifier. Many others here use the 50% rule to determine if it is a good deal.

I would use an agent, as you are the buyer and it is free to you. I can loosely recommend someone in your area (my parents just closed yesterday on a place in Surprise) but others here may have a better recommendation based on experience.

I also think it is important to make sure you wait to find the right deal. It took us 7 months to buy our first and we are starting to look for our 4th and there isn't anything on the market today that I would even want to see. Also, location is super important (at least here in Chicago) so a local agent who is familiar with areas would be very beneficial.

[Jassem A.]

I wouldn't say that multi-family is any better than single-family. If you have the cash and are handy then it should be fairly easy to become a landlord. I usually try to get 700-900/mo rents for every 10-25k that I spend on a property but I know this is not possible in all markets and there is probably a higher level of perceived risk associated with such properties.

[Brie Schmidt]

Every market is different, which is why a local real estate agent is SO important. In Chicago it is cheaper to buy a MF than a SF and you get more rent for a MF

[Eric M.]

Please don't drop out of school to do REI. You can do REI part time and you will regret no degree for the rest of your life.

Don't obsess over the debt you have a long working career ahead to pay it off. Pick a smart major and finish school!

[Jassem A.]

Agents are good but I usually don't like to waste their time until I'm ready to buy. You can get most if not all of the MLS listings on sites like Zillow, Realtor, Trulia, Hotpads, Craigslist, etc. and there will usually be enough details listed to make an informed decision. Sometimes it's better to wait several months for something you really want to pop up than to be in constant communication with an agent when there is nothing that you really want that is nearby.

[Joel Owens]

Steve,

What major do you have in college??

School works for some and not others.

For example accumulating debt in college that you can't get rid of but you know a high paying six figure job is waiting with excellent demand and you enjoy the field it might be worth your time to finish out.

If you went to school because your parents pushed you there and you have no field you enjoy or you do not like the major you are in and are racking up debt then really you are wasting time. Going to college has to have a PURPOSE that you can validate for taking on debt you cannot get rid of. Did you know bankruptcy will not even wipe out student loans?? That's right I know people with 100k of student debt with a major in the field that only pays 30k a year starting out.

Some people are entrepreneurial and just do not want to be boxed in as they are not wired that way. I think for now at least in the short term stay in school and start saving until you research if you actually enjoy your major and it will give you very high earning year over year and growth so that you can invest. For example you need to research a field of getting a 4 year degree versus a masters degree. On the scale of starting out and getting promoted over a career in some fields the earning difference is striking. If your major is low paying and you are taking on debt relative to the per year you will be making getting out then it's time to reevaluate changing majors or going on your own. You can always start with one property and if it takes off then exit the college scene. You might want to finish out the year you are in before stopping. School or no school you will learn everyday in life so it never stops.

[Sean Kuhn]

I hated school and never went to a day of college. Now I make more than any of my friends. College isn't for some people but if you're already enrolled see if you can even qualify for a mortgage. No sense in dropping out if you can't even qualify for a mortgage.

[Bill S.]

Education is an investment. Just like in REI your strategy and execution will determine ROI. As Eric and Joel said the key to your strategy is finding a major that will compensate you well. Check out http://www.onetonline.org/ and research your local market (major employers, major corporations moving in/out, etc.). Try to find something in demand in your area that can translate into some part of REI. Execution is grades, internship experience, etc.

Lending in REI and education are very different. Generally speaking in REI you need money to get loans where as in education you can't get loans if you have money. Give this serious consideration before making your decision. Besides, your beer drinking time goes way down once you start working full time so enjoy it man. Just don't forget about that execution;).

[Steve Cristal]

Thanks for the posts and advice! I'm definitely learning a lot and can't wait to do my first deal!

I didn't know people from this website were this awesome!

As for school, I wasn't really going to stay a dropout for too long. It's just I prefer self-education way more than the "standardized" education. You have to learn a lot of BS and time wasting classes, and I just see my peers doing what they are told and never question anything, like why do I have to do this? I don't like sheep mentality, so I'm just trying to forge my own path. My plan was pretty much to use REI to fund my education for the long term. Education that makes sense to me.