Arlington, VA · Member since 2013 · 115 posts · 40 votes
A little background: I'm a 21-year-old rising senior at Clemson University with about 20k to invest. I have my Pennsylvania Realtors License. Besides taking some real estate classes, my only experience in the field involves two real-estate internships and some personal tax lien investing background.
If you were standing in my shoes today, what would you do in this situation? What REI strategy? Or, where would you go from here?
Thank you in advance and I really look forward to hearing everyone's thoughts.
Engineer · Oklahoma City, OK · Member since 2013 · 144 posts · 44 votes
11y
Ryan congrats on the education!
If I were still and college and had $20k and could talk to my old self I would:
#1 - purchase and read/listen to a few books:
Weekend Millionaire (Mike Summey, Roger Dawson)
Rich Dad, Poor Dad & Second Chances (Kiyosaki)
Think & Grow Rich (Napoleon Hill)
Richest Man in Babylon
#2 - Determine if Real Estate was something I could get passionate about by making a pros/cons list against my other passions. I'd try to imagine what my life would be like in 10 years if I had rentals and tenants providing cash flow v/s whatever else I was passionate about.
#3 - Tell my old self that setting up streams of income is the best way to generate wealth. Print off the cash flow quadrant and decide what quadrant you want to live in.
#4 - Attend a REIA meeting every month, but don't buy anything. Just network.
#5 - After the pro/con list if Real estate were the best decision for a passion in my life that would generate income streams & assuming I still had $19,950 and no job... I would market to mobile home owners with yellow letters and find a screaming deal. Get the deal under contract & buy a Mobile Home for ~$15k and spend ~$3k updating w/ new carpet, paint, roof, locks, etc. Rent it out and let it cash flow.
#6 - I'd get a job doing whatever I went to college for and get some decent stated income. Save 10% of each paycheck for down payments on real estate.
#7 Go to all your local banks, build a relationship and do what needs done to secure financing.
#8 Find a mentor @ the local REIA or on BP.
#9 Rinse & Repeat. Choose your REI passion. Flip, Buy&Hold, Wholesale.
Investor/Realtor · Wentzville, MO · Member since 2014 · 846 posts · 431 votes
11y
Welcome to BP! You came to the right place to learn about REI. It really all comes down to your goals. What part of real estate investing interests you?
I would start with learning the basics about real estate investing. There are many good books to learn about the different strategies. One of my favorite books to read is The Millionaire Real Estate Investor by Gary Keller. It gives you a great example of how real estate investing can make you wealthy from using the buy and hold strategy.
Another way to get started is to keep asking questions and interacting on this site. Listen to the podcasts, read the blogs/forums, and network with like minded individuals. All this will help guide you.
As for as investing your 20k it really all depends on what you want in return. Are you interested in passive income or creating more capital? There are many strategies and they can all give you different results.
Arlington, VA · Member since 2013 · 115 posts · 40 votes
11y
Thanks for the reply @Ryan Billingsley! I've actually been on BP for going on 2 years but have been a lurker rather than an active poster. Up to this point, I feel decently comfortable with the basics of REI, am a big podcast listener and have in fact read The Millionaire Investor....one of my favorites to this point for sure.
I would be more interested in passive income but have had trouble pulling the trigger on any initial deals. Making mortgage payments (with little income) without having a tenant would be a huge struggle for me. Is there any advice you could give me going forward? Thanks again Ryan.
Sounds like you are half way there! It is easy to be stuck in analysis paralysis. There are always going to be good and bad outcomes. It all comes down to taking action and learning as you go. If you have 20k to invest to acquire a rental property I would leave atlest 5-7k for unexpected expenses mortgage payments (principal, taxes, insurance, interest) while property is vacant so you are not worried.
I am not sure about the price or market you are interested in but if you bought a 50k property, most banks would require a 20% down payment which would be 10k. Your payment on the 40k loan would be a couple hundred dollars per month. Of course there are other factors involved, such as rehab cost if the property is not turn key.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
11y
I think @Jay Hinrichs knows something about investments in that area. If not, maybe he can point you in a direction.
It sounds to me like you have a great foundation on which to start. The most important thing is knowing the market you will be investing in. Get up to speed on pricing. Go to open houses. Pay attention to finishes, lot sizes, house sizes, appliances, etc. so that you are comparing apples to apples.
What is the demand for rentals like? What about the supply of vacant lots? What is the local economy like?
Are there any local meetups in your area of other BP members? If so, go meet them. If not, maybe you can start one. Just pick a pizza parlor, set a time once a month, and go network, pick each others brains, and learn!
There's a lot of things to consider. At the same time, there comes a point when you have to take the gamble and jump! Good luck.
Engineer · Oklahoma City, OK · Member since 2013 · 144 posts · 44 votes
11y
Ryan congrats on the education!
If I were still and college and had $20k and could talk to my old self I would:
#1 - purchase and read/listen to a few books:
Weekend Millionaire (Mike Summey, Roger Dawson)
Rich Dad, Poor Dad & Second Chances (Kiyosaki)
Think & Grow Rich (Napoleon Hill)
Richest Man in Babylon
#2 - Determine if Real Estate was something I could get passionate about by making a pros/cons list against my other passions. I'd try to imagine what my life would be like in 10 years if I had rentals and tenants providing cash flow v/s whatever else I was passionate about.
#3 - Tell my old self that setting up streams of income is the best way to generate wealth. Print off the cash flow quadrant and decide what quadrant you want to live in.
#4 - Attend a REIA meeting every month, but don't buy anything. Just network.
#5 - After the pro/con list if Real estate were the best decision for a passion in my life that would generate income streams & assuming I still had $19,950 and no job... I would market to mobile home owners with yellow letters and find a screaming deal. Get the deal under contract & buy a Mobile Home for ~$15k and spend ~$3k updating w/ new carpet, paint, roof, locks, etc. Rent it out and let it cash flow.
#6 - I'd get a job doing whatever I went to college for and get some decent stated income. Save 10% of each paycheck for down payments on real estate.
#7 Go to all your local banks, build a relationship and do what needs done to secure financing.
#8 Find a mentor @ the local REIA or on BP.
#9 Rinse & Repeat. Choose your REI passion. Flip, Buy&Hold, Wholesale.
Real Estate Agent · Gilbertsville, PA · Member since 2014 · 30 posts · 12 votes
11y
Sounds like you're in a great position for your age. I think if I were to know what I know now at your age, I'd take a good look at house hacking. I'd probably start by picking @Brandon Turner's brain for some tips. Good luck!
Investor · Gainesville, VA · Member since 2014 · 118 posts · 76 votes
11y
I think a combo of house hacking and getting a decent paying day job so you can qualify for mortgages is the safest way to go.
For more advanced you can try fixing/flipping around Clemson if there are any areas near campus you could scoop up cheap and then rent out for a high amount/or sell to another investor.
I love college towns for rentals, so if you like Clemson you might just stay put for a few years
Investor · Indianapolis, IN · Member since 2015 · 143 posts · 82 votes
11y
Hey Ryan,
I agree with some of the posters on here, you should probably try and house hack. But a duplex with that 20k, rent one side out and have the tenants pay for your mortgage. Or at least most of it.
If you do not want to do that and want to just buy an investment property, the very first step before you waste any more time is find out if you can even qualify for financing. The outcome will change your game plan.
Arlington, VA · Member since 2013 · 115 posts · 40 votes
11y
Thank you everyone for the kind words and the incredible advice you have given me.
@Ryan Billingsley I really like the idea of holding some of my money back as a sort of emergency fund/backup for when I need it. So far, I've been trying to avoid using the MLS. I've been looking at properties through sheriff sales, pre-forclosures through the local county, craigslist, and for-sale-by-owner listings. Not a ton of success to date.
@Karen Margrave One of my greatest issues is that I don't know exactly where I want to invest. I am familiar with all three of my potential markets, but can't decide which one would be best for me at this point in my life. I know I want to either invest in 1 of the following 3...
Arlington, VA · Member since 2013 · 115 posts · 40 votes
11y
@David Rundle Thank you so much for the detailed plan. I'm a big reader but definitely need to get myself out in the marketplace at meetings to expand my horizons in this regard.
This is probably a stupid question, but what does building a relationship with a bank entail? I've heard that phrase used often on BP and I never truly understand how to make that happen. Thank you in advance sir.
@Alexander A. What is the best way to determine if I qualify for financing?
Well the way I would do it is contact at least 2 different lending institutions. It can be a credit union, local bank or big bank like wells fargo. Talk to each one and tell them you want to see if you can get pre-qualified for purchasing an investment property and for them to tell you how much you can qualify for. Once you know the answer to this, you can move on the next step of finding a reputable agent/seller/provider to start looking at properties. But you can cross that bridge once you get to it.
The reason you should contact 2 lenders is because getting a mortgage is just like shopping anywhere else. You dont want to buy that product at JC Penny if you can find the same thing but cheaper at Wal Mart. Same concept. Get the numbers from both banks and choose the one that is better for your. One could have a better rate and terms which is what youre looking for.
If you need a lender recommendation, PM me and ill send you my guy. He specializes in working with investors so he knows his stuff. Or just ask around locally.
The reason why its super important to do this step first is because if you find out you can not qualify for financing, then this changes the way you need to think about investing in real estate. Your new options will either be clean up your finances, start saving like crazy or try and figure out a super creative way to buy real estate with no money. Which is very difficult.
Oh what to do what to do? You can give me the money!!! :)
I kid. But you're in an amazing position to start! I haven't begun real estate investing as of yet, but I've begin reading and listening to these forums. I go out and explore. Karen is right in saying that there's soooo much to consider. Taking that leap of faith! With what I want to do, if I were in your position I'd use the $20K to pay off my condo. Other investors would use it as down payments on other properties, use the money for mass marketing, the options are endless. Best wishes on your success!
Investor · Mission, TX · Member since 2014 · 117 posts · 40 votes
11y
Put it in a vanguard index fund and 200$ monthly and it will be worth almost 2,000,000 when you retire. In the interim, view all the podcasts, get a job, read all the REI books you can find, and decide whether REI is right for you. In the interim you got money stashed while you think about your future.
Of the three, look at the markets. What is the supply and demand for real estate? What type of property is in greatest demand? For people wanting to buy/hold (you might want to do fix/flip. Rentals (you may want to buy/hold) etc.
Also, the economy, what's it like? Are there jobs or a lot of unemployed?
Are rentals going for top dollar or low dollar (if it's low there may already been an oversupply), etc.
Of the 3 areas, which has the best economy, and what is the local community like (high crime, low crime, etc.)
There are many things that factor into making decisions, and you need to find the place you are most comfortable with, where the market is strongest.
Investor · Wlmington, NC · Member since 2012 · 62 posts · 19 votes
11y
Really consider house hacking! Get your first property to cash flow, and you are off. Sounds like you have accumulated enough "head knowledge" now it is time for some gut knowledge that you will gain by doing. Be patient in finding the right deal. You will recognize it when you come across it, so when you find it get it done, and get some cash flow coming into your pocket each month.
Realtor and Investor · Portland, OR · Member since 2014 · 21 posts · 7 votes
11y
FHA into a 4 until multi family. Seems to be the best way to leverage your 20k. After the property appreciates, you can refi into a conventional to remove PMI. Just a thought, and it's what I did, so I like the strategy. Plus a year in we are now getting paid to live in one unit because the other three rents pay more than the mortgage.
Cumming, IA · Member since 2015 · 4 posts · 1 vote
11y
Live at home and save more $. Also, avoid buying a car for more than $10K. Invest the $20K as a down payment in a condo or fixer upper. Then rent and repeat.
Arlington, VA · Member since 2013 · 115 posts · 40 votes
11y
@Eric Taylor All $20,000 are currently sitting in 3 different Vanguard Index funds. You think I should just keep it stowed away there? It's not in an IRA so there wouldn't be any tax implications, besides capital gains, for taking it all out.
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
11y
Invest in @Ryan Koehler and sit on it until you complete your degree. There will be no higher ROI. Decapitate all other debts, loans, payments you can. They will be anchors that hold you back. Be free! Begin with a solid foundation and go get 'em!
Real Estate Professional · Monsey, NY · Member since 2014 · 51 posts · 9 votes
11y
Sit down in a quiet room with a pen and paper, think about your personal strengths and your interests, and decide based on that in which specific area you want to specialize.
Then write your game plan. Don't work backwards ( i have 20k what should i do) work forwards - have a goal, how am I going to start to achieve that goal with 20k.
New to Real Estate · Dayton, OH · Member since 2015 · 22 posts · 5 votes
11y
I'm young too (23) and am looking into land contracts. With $20k, you could house hack AND buy a few other properties through land contract with $5-7k down per property. That you you have multiple streams of cashflow, not just one property.
I am partial because of what I do but I will tell you that if I was in your shoes I would get a job in a field that excites you. I would then look to buy a 3-4 unit property - your area of West Chester is great but so are many surrounding areas, as I am sure you know. I am from South Jersey and know your area well. I would recommend using a FHA 203k loan to utilize as little amount of money as possible but get yourself a property where you can build some instant equity (to be used later as leverage for your next deal). This way you are building equity via the work being done and purchasing the property correctly plus you have 2 to 3 other people paying your mortgage plus making you cash each month. I have had this same conversation a bunch of times with friends, family members, etc...had I known what I know today as I sit here at 38 I would be willing to say that I would be sitting with a lot more in the bank and a portfolio of properties (not that I am doing bad by any means but...).
The FHA 203k is the vehicle to make it happen- low down payment and qualifying isnt hard but you need the right team.
You are in a great position and you need to strike while the iron is hot! Good luck and if I can be a help feel free to reach out.