Young first time real estate buyer

[Alexander Carlson]

Hello! My name is Alexander Carlson, I am 20 years old and I am looking to get into real estate. Now I realize that 20 years of age is not when most people start investing in real estate, or anything for that matter but I believe in getting ahead in the game. I understand that power of compounding interest and currently time is my biggest asset. I live in Lincoln, NE for half of the year and the other half I go to school in Phoenix, AZ. I am considering a partnership with a long time friend who lives in NE year round. Using the FHA loan one of us would live in the first property we would own, renting out the other portions.

I have 2 years of undergraduate work left then I intend on pursuing a real estate law degree. My goal is to be building my portfolio while in my undergraduate program so by the time I get to law school I have an income coming in because of smart investments I have made in years past. I intend on making this my full time career and developing more companies as I go. I was born and raised in a entrepreneurial family and I have seen my father grow a small company into a multi-million dollar one. Because of this I understand hard work and dedication, but I do not want to rely on my family for everything.

Between me and my partner we will have approximately $25,000 to begin our company. 

A few specific questions that I have would be:

- What cost are involved in starting? (e.i. L.L.C., Legal paperwork, business cards, website, ect.)

- Do I actually have to live in the house for the FHA loan?

- If I do have to live in it could I occupy the residents for a summer and then move out keeping the same rates?

- Should I even use a business partner? I have the knowledge and he has the money, seemed like a great relationship but is it always wise?

- Nebraska or Arizona for the home?

- Should I pursue a real estate license before I began any of this?

Advice of any kind is appreciated! I have connection in Lincoln with people in real estate, but I believe knowledge and wisdom are incredible valuable and I will take all of it that I can get!

Thank you for your responses!

[Zachary H.]

You are definitely asking the right questions. I am currently in the process of buying a property using an FHA loan and can answer a couple of your questions. Typically the cost of starting and maintaining an LLC are minimal, however this varies state-to-state. Go to Nebraska's secretary of state website and you should be able to find a fee schedule for the associated costs.

For an FHA loan you do have to live in the property as an owner-occupant for at least one year and in some cases more. Consult with your lender on this as they can give you better direction. In some instances you can get around this, however I would not count on it as it is typically due to hardship or other extenuating circumstances.

Your question about the business partner is one that nobody can really answer other than you. How much do you trust this other person, are you willing to give up half the equity and decision making process to someone else? With your father being a businessman I'm sure he has some experience with partnerships and can give you his two cents. Additionally when you purchase a property using an FHA loan the property is in the individuals name and I don't see how that would work out with a partnership.

Keep asking questions and you are certainly ahead of the curve by starting at this age. I hope I was able to help clear some things up.