College student/aspiring real estate investor seeking guidance

[Joel Strehl]

Hello BP community,

For starters, I'm extremely new to the world of real estate. Currently I'm in the process of reading books/forum discussion posts, so any book recommendations or suggestions on  particularly helpful threads to read would be much appreciated.

First off, I'm a college student in Minneapolis with 1-2 years left of my undergraduate degree remaining. for 2015-2016 I will be living in a house near the university, but once my lease is up, my mom plans on helping me to finance my own place (apartment or small house). 

My mom is actually interested in real estate too, and lately we have been talking at length about making our endeavors profitable. She lives in Michigan and will likely be putting up the majority of the capital on the property to help me get started. We've talked about investing in a small house or apartment and potentially renting it out to generate some cash flow (easy to find tenants as a university student, I'm very comfortable with roommates). In my mind, the help from my mom is a powerful asset that we can both use to get our feet wet with real estate. 

With all this in mind, I have two main questions. 

1. What would be a wise plan of attack as for acquiring a cash flow property in order to invest the returns on future rentals?

2. What does a typical property acquisition look like from idea to transaction? Meaning what are the major steps (searching for the property, evaluating whether or not it is a bargain, legal stuff, finding tenants, drawing up contracts, etc; remember, I'm brand new and basically know nothing) to making this all happen?

Thank you for your patience,

Joel

[Joe Mazur]

Hi @Joel Strehl

Welcome to the community. I think the advice @Josh Mitchell gave above is a great idea. I wish I would have bought a house in college and rented out the other rooms. Would have been a great learning experience. Not to mention you can get good rates with conventional or FHA loans with a lot less down than bank financing for investment properties.

One book I just finished reading was the Book on Investing in Real Estate with No (and low) Money Down by @Brandon Turner, it was awesome with a lot of good info that you can probably use for your current situation. 

For searching for the property, my advice would be to find a Realtor in the area and start looking on Craigslist at FSBOs. You can probably find a good realtor that works with investors at a local real estate investing association meeting.  

And the main thing for rentals is cash flow. So based on sale prices of properties in the area, calculate how much your monthly payment would be with your loan, figure out what kind of rents you could charge per room based on other rentals in the area, and see what kind of return you could get. (And I would factor in some expenses in your calculation like maintenance, etc). Even if it's just living for free for now, that'll help by keeping the money you'd be spending on rent in your pocket.  

There is a lot more information that could answer your question 2 than can fit in a post. I would definitely start by searching in the forums for what your looking for and I'm sure it's been asked and answered before. And listen to the podcasts. They're great for getting information from people who are both novice and seasoned investors. 

Hope that helps.  

Joe