How to start

Question

Hello everyone, My name is Anaika. I'm only 18 years old and have a good chunk of money saved up, but I don’t know what to do with it. I always wanted to start house hacking; that's always been my main focus in life. I want to buy a home and rent it out to someone reliable, but since I’m so young, I think I can't really do much because it will be tough to get the deal started on the property or just get the bank to give me a FHA loan from the start. My credit isn’t bad at all, but I don’t know if that matters at all. I'm just coming on here to get some suggestions from you and see what I can do. I'm a very ambitious person and like to learn from others.

Min Zhang · Answer

Hello Ana! It's fantastic that you're considering embarking on your investment journey at a young age. I'd like to offer a valuable suggestion. Cleveland is renowned for its robust cash flow potential, but if you're also interested in property appreciation, Columbus is the ideal choice. While you can still find 1% deals in Columbus, what makes it even more appealing is its status as a growing city with numerous significant companies planning to relocate to the area in the near future, creating a plethora of new job opportunities.

Cleveland, Ohio, is a goldmine for out-of-state investors. I personally possess a substantial number of properties in both the Cleveland and Columbus markets. Generally, if you're seeking a balance between property appreciation and decent net rents, Columbus is the preferred destination. On the other hand, if your primary focus is generating substantial cash flow, then Cleveland is the way to go.

Hi Ana! It is good that you are planning to start investing at a young age! Here is a great suggestion for you. Cleveland is truly known for its strong cash flow potential. But if you're also searching for appreciation, Columbus is the place to be. There are still 1% deals but the more attractive part is Columbus is an expanding city, with several significant companies relocating to the area in the near future, resulting in an abundance of new job opportunities. Cleveland, OH is a cash-cow for out-of-state investors. I personally own a ton of properties in the Cleveland market and Columbus. Generally, if you are looking for overall appreciation and okay net rents, you are better off in Columbus. If you are looking for a ton of cash-flow, then Cleveland is the way to go.

Preston Dean · Answer

Hey Ana!

First off I LOVE that at 18 years old you are on the forums asking for advice on how to buy your first property! Very wise of you.

Without some kind of proven work history its going to be pretty tough for a lender to approve you for a FHA/conventional loan. My suggestion to you would be to have a parent/guardian/grand parent co-sign with you so that you can get that approval.

second, I would suggest a duplex or a single family with a back apartment. That way you can have your space and your tenants can have their space but you still make some passive income

third, would be to buy a property under value and add some sweat equity into it by either adding sqft or just basic paint & new everything.

Your credit plays a part in all of this when it comes to the interest rate you get. Higher credit score you have the lower interest rate you will typically get.

Hope that helps!

Alfath Ahmed · Answer

Hey Ana, the Columbus market is a great place to invest for both appreciation and cashflow. I recommend investing in economic bases near downtown and surrounding areas. Most of my clients look into areas like Old North, Old Town East/King Lincoln BronzeVille, Merion Village, Driving Park, North Linden, Hungarian Village, Bexley, and North Hilltop.

These are all areas within the Columbus market that is next to an economic base. They are surrounded by economic development which is causing a good increase in population and rent growth.

Anthony L Amos Jr · Answer

Get the FHA and house hack a 2–4 unit every few years

Alecia Loveless · Answer

@Ana Arce Hi Ana, I didn’t start out much older than you, ended up with my first house hack, a B&B where I lived among the guests for many years when I was 20. I did have to get family help buying it though because of lack of job history to acquire the mortgage.

I like the suggestion of you trying to get a duplex or a SFH w/ADU where maybe you live in the ADU and rent out the house to generate the higher income while you’re still young and starting out.

Alex Hileman · Answer

Hi Anaika, you are off to a great start!

Do you have a house in mind already? I would connect with some local wholesalers and real estate agents and let them know what you are looking for. They will bring you deals based on your buying criteria. Be specific with the area you're looking in, multifamily, your budget, what level of rehab you're comfortable with.

I would definitely start in the area that you already live in and know and I would not recommend starting out of state for your very first project, unless you're in a completely unaffordable market.

When you find a duplex or house you're interested in, check online for similar houses in that area for how much they are renting for and what condition they are in. Definitely do a background check and criminal history check on any potential tenants. Ask for rental history and call their previous landlords to ask if they paid rent on time, damaged the property at all, etc.

In the meantime, keep working and building up your credit. You will get your first house hack when the time is right!

Patrick Drury · Answer

@Ana ArceYou are definitely in the right place. I bought my first rental at 19 years old. It was a single-family rental that I still own to this day. I bought it with 15% down conventional with no co-signers. I had 2 years of W-2 so I met their requirements. The biggest hurdle will typically be the 2 years of W-2 income. Feel free to reach out if you have questions!

Joey Banasihan · Answer

Hey @Ana Arce! Lots of great advice already, so will not reiterate anything anyone has said. The biggest thing to do is take action, take small steps, and learn along the way. If I were you, first find a real estate agent who is an investor and is well connected in your area. Get a lay of the investment land, then get a credible referral to a investor savy lender who can begin having conversations with you around what is currently possible or will help you make actionable steps to get to your goal. Next, find a real estate investors meet-up, meet people, network, but keep your goal in mind of getting your first place. Then, when you can make a move, being smart and connecting with other smart people, take it and go! You got this and we are all rooting for you!

Paul De Luca · Answer

@Ana Arce

I agree with @Preston Dean. Talk to a few lenders and ask your parents if they could co-sign.

Dan Sheeks · Answer

My advice would be to read the Bigger Pockets’ book First to a Million (and the workbook). It’s written for young aspiring investors just like you.

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