21 Year Old College Student Looking to Buy First Rental Property

[Jake Berlin]

Hello everyone, 

I hope this message finds you well. My name is Jake Berlin and I am currently 21 years old looking to buy my first rental property (I have 50k in equity.) I think I have the funds to buy a property but have a few questions and hope someone can point me in the right direction. 

1. I am wondering how to get a loan from the bank or a third party with little credit built up (I made a similar post about this a few months back and some people suggested looking into a dscr loan) 

2. Are there any emerging markets that I should be looking into that fit my budget? 

3. Are there any good places to look for single family houses besides zillow, redfin, ect...? 

4. Any recommendations on how to determine what my criteria should for my budget be would be greatly appreciated. 

[Gary Faraon]

@Jake Berlin greetings sir,

Location would b a good start. What market u r in? It's free to call an agent. It's free to talk to local banks in your area of operation. Find local meet ups and find a mentor in your target areas. Youtube university and BP podcasts has lots of golden nuggets.

[Joe Norman]

Market research will be your first step. Find a few that you are interested in and then interview a few Realtors who have a track record of success working with Realtors. If you have $50k to invest then you will probably be looking at properties in the mid-to-high $100s (assuming you're putting 20% down + closing costs and a little cushion). I can only speak from experience on the Baltimore market where you can definitely find quality rental property in this range. Other rust belt cities such as Cleveland and Detroit are likely also good options, but I can't speak from experience on them.

All that said, why buy a rental property instead of a primary residence? The lending terms (specifically the down payment requirement) are generally much more favorable for an owner occupant and you can always convert it to a rental property down the road.

Good luck!

[Jonathan Greene]

Based on your questions, you are a good six months to a year out from buying because you are at a very basic state - you have a downpayment. First, you want to talk to local lenders in your area, sometimes you can start at your local bank if you have money in there. You want to start the process now of building credit on your own so you will be ready to buy in a year or else you will need a co-signor. Go to local real estate meetups and meet other investors in the area, see what you can learn and who you can meet.

If you are a college student, emerging markets don't make sense. Why wouldn't you buy a two-family or single-family where you are now, rent to people you know, learn about landlording, and then keep it as a college rental after?

[Nathan Gesner]

I actually think your finances are the first step. I recommend you talk to a lender and get real clear on what you can qualify for, what you can do to improve your borrowing position, and make sure you have your finances under control. You need to know how much money is in your wallet before you start shopping.

After you have figured out your finances, you should decide what you want to shop for. Do you need steel-toed work boots? Running shoes? A quality pair of dress shoes for the office? Flip-flops for the beach?

Once you know what you are shopping for, you combine that with your budget and decide whether to shop at Nieman Marcus, Kohl's, or Walmart.

[Regina Blake]

Hi, great move as a college student to be thinking about investing in real estate. Check out Ohio people from all over the world are investing here. I have clients from all over the world investing in real estate in Ohio. Yes, where do you want to invest in real estate? You need a price point of how much you want to spend for and home and make sure you have money to fix up the property and an emergency funds free and clear just in case something goes wrong. Yes, get your financing in place example DSCR loan/financing ect. and speak with a Lender or your bank/financial institution about your finances and investing in real estate. Do you want a single family or multifamily properties? Online is the best place to look for properties and talk to a professional Realtor in the State that you want to invest in real estate. Please reach out if you have any questions. Best wishes!

[Samuel Diouf]

Columbus, Ohio is a great market to consider if you're leaning towards appreciation. Multiple, billion dollar companies are investing heavy in our area, such as Intel, Google, and Amazon. Which will bring plenty of other investors and general business to the area. I moved here from Florida after seeing the projected growth.

With little credit history, it will probably be your best bet to build up your credit to become more lendable, or to go DSCR so the loan is strictly based on the performance of the property.

[Gregory Schwartz]

I'll give you the same advice I tell my college student clients, house hack the cheapest 4-6 bedroom home you can find. 

I've house hacked twice and its been great both times! 

[Jake Berlin]

Quote from @Joe Norman:

Market research will be your first step. Find a few that you are interested in and then interview a few Realtors who have a track record of success working with Realtors. If you have $50k to invest then you will probably be looking at properties in the mid-to-high $100s (assuming you're putting 20% down + closing costs and a little cushion). I can only speak from experience on the Baltimore market where you can definitely find quality rental property in this range. Other rust belt cities such as Cleveland and Detroit are likely also good options, but I can't speak from experience on them.

All that said, why buy a rental property instead of a primary residence? The lending terms (specifically the down payment requirement) are generally much more favorable for an owner occupant and you can always convert it to a rental property down the road.

Good luck!

 Dear Joe, 

Thank you for the thoughtful response. That's the price range I was looking in a was looking into those midwest markets as well. Personally I would rather buy a rental property over a personal residence because I want something that can potentially give me cash flow every single month over a liability. Though, I have thought of buying a personal residence. However, I live in LA so the cost to live isn't very cheap. 

[Nerissa Minnick]

Makes sense you want to buy out of state if you live in LA, I live in LA and own rental properties out of state. Before investing out of state, I wish I had decided to buy here in LA with an incentive program. I would check out using a NACA loan to buy a multifamily 2-4 units you can live in in LA. the possibility for equity growth is amazing here, and you can only use that program if you currently own NO rental properties but you can buy as many rental properties as you want after you have that loan and live in the property. It is a no downpayment no PMI, and no payback or equity share program, with great interest rate buy-down options and the loan limits are very high because LA is a high-cost area. there are income restrictions. I think this program is an incredible way for new young investors who might make under the income limit, to house hack in high cost areas, which will appreciate well, and then afterward they can buy more rental property potentially in cash flow areas. I wish I had done this first. Niche thought but pertinante to your journey!

[Nerissa Minnick]

Also I have helped a few buyers use this specific program in LA so if you want  more info send me a DM 

[Jake Berlin]

Quote from @Samuel Diouf:

Columbus, Ohio is a great market to consider if you're leaning towards appreciation. Multiple, billion dollar companies are investing heavy in our area, such as Intel, Google, and Amazon. Which will bring plenty of other investors and general business to the area. I moved here from Florida after seeing the projected growth.

With little credit history, it will probably be your best bet to build up your credit to become more lendable, or to go DSCR so the loan is strictly based on the performance of the property.

 Dear Samuel, 

Thank you for the response. Is there anything I should be doing in specific for me to build up my credit? 

-Jake

[Jake Berlin]

Quote from @Jonathan Greene:

Based on your questions, you are a good six months to a year out from buying because you are at a very basic state - you have a downpayment. First, you want to talk to local lenders in your area, sometimes you can start at your local bank if you have money in there. You want to start the process now of building credit on your own so you will be ready to buy in a year or else you will need a co-signor. Go to local real estate meetups and meet other investors in the area, see what you can learn and who you can meet.

If you are a college student, emerging markets don't make sense. Why wouldn't you buy a two-family or single-family where you are now, rent to people you know, learn about landlording, and then keep it as a college rental after?

 Dear Jonathan,

Thank you for the response and the great insight, I appreciate it. I would like to invest out of state since I currently live in Los Angeles and the cost to buy a property to rent out to my friends around school is very high. I have mostly been looking and doing market research on some of the midwest markets. 

You mentioned that I should look into building my credit. How do you suggest I start building up my credit? 

-Jake

[Jimmy Lieu]

Quote from @Jake Berlin:

Hello everyone, 

I hope this message finds you well. My name is Jake Berlin and I am currently 21 years old looking to buy my first rental property (I have 50k in equity.) I think I have the funds to buy a property but have a few questions and hope someone can point me in the right direction. 

1. I am wondering how to get a loan from the bank or a third party with little credit built up (I made a similar post about this a few months back and some people suggested looking into a dscr loan) 

2. Are there any emerging markets that I should be looking into that fit my budget? 

3. Are there any good places to look for single family houses besides zillow, redfin, ect...? 

4. Any recommendations on how to determine what my criteria should for my budget be would be greatly appreciated. 

1. If you have two years of W2 work history, I would recommend going with Fannie Mae/Freddie Mac. If you do not, then I would recommend going with DSCR. I would recommend owner occupying and putting as little a 3% down.

2. I would recommend taking a look into Columbus Ohio. Columbus is an amazing market because you can still find the 1% rule and huge potential for appreciation. I work with a lot of out of state investors and they love it here!

3. You can do direct to seller

4. It depends on your goals and what you're looking to do and how much resources you have before someone can consult with you on whether you should buy and hold, brrrr, or flip.

Happy to connect and answer any questions you have!

[Kerlous Tadres]

Quote from @Jake Berlin:

Hello everyone, 

I hope this message finds you well. My name is Jake Berlin and I am currently 21 years old looking to buy my first rental property (I have 50k in equity.) I think I have the funds to buy a property but have a few questions and hope someone can point me in the right direction. 

1. I am wondering how to get a loan from the bank or a third party with little credit built up (I made a similar post about this a few months back and some people suggested looking into a dscr loan) 

2. Are there any emerging markets that I should be looking into that fit my budget? 

3. Are there any good places to look for single family houses besides zillow, redfin, ect...? 

4. Any recommendations on how to determine what my criteria should for my budget be would be greatly appreciated. 

 Hey Jake, 

I would highly recommend in looking into finding a house hack first because you will be able to put little money down while being able to rent out the other side to someone else. Once you house hack the first time you will get some pretty solid experience. And when you want to start investing out of state I would recommend in looking at one particular city to focus on. From there I would build your CORE 4 such as: Real Estate Agent, Property Manager, Contractor, and Attorney. I invest here in Columbus, Ohio and would be more than happy to answer any questions that you might have!

[Dave Skow]

@Jake Berlin- thanks ...I would recommend getting a loan approval  started  using a hypotehtical purchase price and loan amt ...This will allow you to get  organized/ educated and  prepared  and many of your questions will be  answered - good luck

[Cyndi Lees]

@Nerissa Minnick

Could you please contact me regarding NACA.

Thanks

[Jake Berlin]

Quote from @Regina Blake:

Hi, great move as a college student to be thinking about investing in real estate. Check out Ohio people from all over the world are investing here. I have clients from all over the world investing in real estate in Ohio. Yes, where do you want to invest in real estate? You need a price point of how much you want to spend for and home and make sure you have money to fix up the property and an emergency funds free and clear just in case something goes wrong. Yes, get your financing in place example DSCR loan/financing ect. and speak with a Lender or your bank/financial institution about your finances and investing in real estate. Do you want a single family or multifamily properties? Online is the best place to look for properties and talk to a professional Realtor in the State that you want to invest in real estate. Please reach out if you have any questions. Best wishes!

 Thank you for this information! 

[Wale Lawal]

@Jake Berlin

Congratulations on taking the first steps toward buying your first rental property!

To obtain a loan with little credit, consider DSCR loans, FHA loans, co-signers, and credit unions. Look for new markets that have lots of jobs and people wanting to rent. Use the internet to find properties, set your goals, and educate yourself. Meet with local agents, investors, and mentors for tips and possible deals. Begin with smaller places to cut down on risk and learn as you go.

Good luck!