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Updated 3 months ago, 08/06/2024
18 with 45k looking to invest ASAP
Hello BP community,
I am 18 years old with about 45k, and I want to invest in a rental property ASAP. I own a lawn care business and I have a goal to have 80k by the end of the year. Prior to starting my lawn care business, I worked my cousin since a very young age. He owns 150 rental units and my Dad owns 15 rental units. I was always curious and enjoyed the rental business, constantly asking questions, so I believe I have a very solid understanding of the business. I am also reading BRRRR to further my knowledge. I would not be afraid to buy a property that needs some rehab, as I have renovated two full kitchens by myself, and done lots of rehab with my Dad and cousin, so I have a good understand of what needs to be done.
I do not know nearly everything though. I am seeking advice on what would be a smart next step for me. Would it make sense to save up money to buy something cash, finance, wait for market to cool down, etc. I would love to hear what the professionals have to say.
Thanks!
@Kendell Powell The best advice anyone can give you is to slow down and take in the scenery. It's hard to do as a motivated 18 y/o but it will actually help you!
"He owns 150 rental units and my Dad owns 15 rental units." - Is your cousin and dad buying, selling, or holding properties right now and why? What strategies did they use to grow a portfolio? Finish reading that book then share your findings with them. Take advantage of these connections, learn more, and then take action. You have no obligation to rush into a bad deal.
#2 Buying & Selling Real Estate Contributor
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#2 Buying & Selling Real Estate Contributor
- Rental Property Investor
- Ellsworth, ME
Agree with @Jaron Walling - forget what a stranger on the internet that, in my case, lives several states away says and ask questions of the two guys that you know that have 165 combined units in your market.
Now that I've told you to ignore my nonsense, here's my take.
Live in flip or house hack is always the best first step as I see it. Find a place where you want to live. That's all the location study and analysis you need. And your downside risk is protected because it's a house for you to live in - it's an investment to remove your biggest expense. And if something goes sideways, your just paying a mortgage/rent expense that month like everyone else. You also have more financing options due to being the owner occupant plus the option to sell after 2 years with a tax free gain if you are going the live in flip route.
Quote from @Jaron Walling:
@Kendell Powell The best advice anyone can give you is to slow down and take in the scenery. It's hard to do as a motivated 18 y/o but it will actually help you!
"He owns 150 rental units and my Dad owns 15 rental units." - Is your cousin and dad buying, selling, or holding properties right now and why? What strategies did they use to grow a portfolio? Finish reading that book then share your findings with them. Take advantage of these connections, learn more, and then take action. You have no obligation to rush into a bad deal.
Thanks for the response! Sometimes my Dad tells me that I need to slow down, maybe I should take his advice. One thing that I have gotten from BRRRR is that if you "buy right", you significantly decrease your chance of getting into trouble. Whenever the time comes to buy, I will make sure that the deal financially makes sense, and remember that I have no obligation. Thanks again!
Quote from @Travis Timmons:
Agree with @Jaron Walling - forget what a stranger on the internet that, in my case, lives several states away says and ask questions of the two guys that you know that have 165 combined units in your market.
Now that I've told you to ignore my nonsense, here's my take.
Live in flip or house hack is always the best first step as I see it. Find a place where you want to live. That's all the location study and analysis you need. And your downside risk is protected because it's a house for you to live in - it's an investment to remove your biggest expense. And if something goes sideways, you're just paying a mortgage/rent expense that month like everyone else. You also have more financing options due to being the owner occupant plus the option to sell after 2 years with a tax free gain if you are going the live in flip route.
Hey Kendell,
Great to see another younger professional in this space. 45k is definitely a good start to start investing in rentals or BRRRRs depending on the area. It's good to be an action taker and have some sense of urgency, given most people who "want to invest" actually never even get their first property. As others have mentioned, it's also important to not rush into deals, and conduct due diligence! If you put in the input to search for properties and make offers, you will eventually secure a deal whether that's in 1 week, 1 month or 5 months.
@Kendell Powell Hi Kendall. For now I’d advise you to save your money and keep studying books and learning more about real estate. Learn as much as you can about your market and the potential area(s) you may want to buy that duplex in.
Personally I scan the local MLS each night in my target neighborhoods to be familiar with any new properties that may come on the market that I might be interested in. On the site I search on the new listings are first so it only takes me about 7 minutes to cruise through about 12 neighborhoods.
I also have a few people who have good connections that keep me informed if they hear of any good deals. Your cousin might have some good connections.
If there are any real estate meet ups or coffee hours in your area I’d recommend you start trying to attend some of those to meet some other people and get networking.
Then once you’ve got more time on the job and more money you’ll be in a better position to make a solid offer on that duplex when you find one that makes financial sense to you.
@Kendell Powell If you understand the basics of a rehab and even completed a few projects you have an advantage. Some people are afraid to swing hammers. That knowledge is powerful. Just because you personally don't own RE doesn't mean you bring no value. When I started out I owned 1 rental and a primary. My value was being a handyman for other investors (swinging hammers). I learned how, where, and what kind of investor I wanted to become. I dabbled in PM and dealt with a Sec8 tenants. My wife and I cleaned out eviction properties. I created a buy [box] without buying more doors. You could do all of this at half my age.
I had no family interested in REI when I started out. After I found some success I convinced my Mom to buy a bank owned property. She ended up flipping, renting it for 2 years, and then sold it for a 30% profit. That didn't include 24 months of rental cash-flow. REI takes time, patience, and money regardless of your age. Cheers.
Quote from @Ko Kashiwagi:
Hey Kendell,
Great to see another younger professional in this space. 45k is definitely a good start to start investing in rentals or BRRRRs depending on the area. It's good to be an action taker and have some sense of urgency, given most people who "want to invest" actually never even get their first property. As others have mentioned, it's also important to not rush into deals, and conduct due diligence! If you put in the input to search for properties and make offers, you will eventually secure a deal whether that's in 1 week, 1 month or 5 months.
Thanks for the advice!
Quote from @Alecia Loveless:
@Kendell Powell Hi Kendall. For now I’d advise you to save your money and keep studying books and learning more about real estate. Learn as much as you can about your market and the potential area(s) you may want to buy that duplex in.
Personally I scan the local MLS each night in my target neighborhoods to be familiar with any new properties that may come on the market that I might be interested in. On the site I search on the new listings are first so it only takes me about 7 minutes to cruise through about 12 neighborhoods.
I also have a few people who have good connections that keep me informed if they hear of any good deals. Your cousin might have some good connections.
If there are any real estate meet ups or coffee hours in your area I’d recommend you start trying to attend some of those to meet some other people and get networking.
Then once you’ve got more time on the job and more money you’ll be in a better position to make a solid offer on that duplex when you find one that makes financial sense to you.
I have never thought of looking to attend local meetings. I will look into that. Thanks!
Quote from @Jaron Walling:
@Kendell Powell If you understand the basics of a rehab and even completed a few projects you have an advantage. Some people are afraid to swing hammers. That knowledge is powerful. Just because you personally don't own RE doesn't mean you bring no value. When I started out I owned 1 rental and a primary. My value was being a handyman for other investors (swinging hammers). I learned how, where, and what kind of investor I wanted to become. I dabbled in PM and dealt with a Sec8 tenants. My wife and I cleaned out eviction properties. I created a buy [box] without buying more doors. You could do all of this at half my age.
I had no family interested in REI when I started out. After I found some success I convinced my Mom to buy a bank owned property. She ended up flipping, renting it for 2 years, and then sold it for a 30% profit. That didn't include 24 months of rental cash-flow. REI takes time, patience, and money regardless of your age. Cheers.
That is awesome. Thank you for the insight!
@Kendell Powell congrats on saving up $45K at 18! That alone is very impressive and you are already moving faster than the majority of people out there. You're drive and hunger is awesome.
I didn't get my first rental property until I was 28. So you are ways ahead of where I was when I was 18, that's for sure. You've gotten good advice about slowing down.
I'll phrase it in a slightly different way, cause I like golf, here's a golf saying that can also apply to real estate. Slow is smooth, and smooth is fast. Ultimately it's important to be accurate, consistent, and in a controlled pace in executing a task.
The biggest piece of advice for the first property you purchase is make sure it's a good one! Sounds like common sense right? But it does take time and effort to make sure it's a good one. You'll want to understand the different areas to invest in and how to attract the best tenants, and operate the building etc. The reason this is so important is because when you pick the right property after research and due diligence you'll say hey this is great, let's do more! However, if you move too fast you could get into the wrong property, or area, or not take into account certain expenses, or get a terrible tenant and you may say this real estate thing is a huge headache and not worth the hassle and you may not pursue it with as much vigor going forward, or worse throw in the towel altogether. With your drive and determination you likely wouldn't throw in the towel even if it got really tough, but why not have the first one be a hit and be smooth and you love it and are excited to do more deals.
It took me about 18 months to really study and understand the market I wanted to be in and what owning property truly entailed. That was back in 2015 and there are so many more resources out there now for you to learn much more quickly. I spent the next 18 months getting all my systems in place and getting a feel for real estate before I bought my next property. Then I bought another one each year, and then that turned into every 6 months and then that turned into buying a property every 3 months or so. That's what I mean about going slow to go fast. Get to really know the market and operations and then you can fly as you have systems in place, like you would in your current business. Even when you start to go fast you may slow down again, for example I'm itching for another property as I haven't bought one in about 9 months, cause there haven't been many deals that the numbers make sense to me right now. It could be a lot longer before I find the next right property, but if you find the wrong ones that's a sure fire way to set you back.
So like others have shared, this is the time to study and learn and keep saving so when you find the first deal you can knock it out of the park!
To answer your other questions I'm a huge fan and leverage. I like putting debt on my properties and the tenants pay down the mortgage. Also, debt helps you go faster. If you are looking to buy a $200K property that will still be some time before you save up for a cash purchase. If you can put down 20 - 25% you could own 4 - 5 properties that cash flow and tenants pay down the mortgage for the same cash outlay or you could have 1 free and clear. I'd take the leveraged position and multiple properties and diversity every time, but that's just me.
Sounds like you've got some great resources with your Dad and Cousin. If have any more specific questions or seeking recommendations for good resources to learn more, reach out directly at any time.
You're already in a great position. Go slow to go fast!
Great post! Investing in a syndication or fund could be a good fit given your situation.
I started investing in some fix and flips and some smaller residential properties from traditional BRRRs. And I just quickly found out that I wanted something with a little more scale and a little more meat on the bone. So we went into the commercial space and pivoted to self-storage. We like self-storage because even if there is a recession, and people downsize, those people will have a need for self-storage, as evidenced by storage occupancy rates during past recessions. And during inflationary times, our rental rates increase. We're also able to evaluate our rates, and keep pace with inflation, on a monthly and quarterly basis because of shorter term leases.
Now we syndicate larger self-storage deals and work with passive investors. These syndication can provide an 8%+ cash-on-cash return - providing investors monthly cash flow - and a 15-20% IRR over the length of the project. I'd be happy to connect.
