Advice for a new investor

[John Coberly]

Hello all,

My name is John. I'm 22, have a full-time job that I like, in my field, and have gotten pre-approved for a $130,000 mortgage. I have some college credits, and take a class or two per semester, but no degree. I currently live at home, rent-free. My parents are wonderful people, and I have no major impetus to move out other than I want to feel independent and lessen their burden. I live in SE PA. As of right now, my job gets me $30,000 a year, and I have $5,000 invested in peer-to-peer lending that gets me 5% returns. I have no debt of any kind.

My goal is to retire as early as possible, buy a ship and sail the world, living off my investments. 

My dilemma is as follows: I want to move out, and am fairly frugal, yet I also want to realize this goal of mine as soon as possible. Instead of purchasing a small house for myself, in order to put my money to work for me and realize my goal sooner, I should probably invest it, correct? 

I see properties for sale (a good number in Rochester) that claim to have net operating income around $15,000. Instead of buying a house for myself (though it would be small and within my means), why don't I buy one of these houses that can get me half of my current income, and then do it again when I'm able? I'm fairly handy myself, but I would prefer to get a property manager to make it as passive as possible. 

I've read articles about people that buy investment property young and then retire at 28 to see the world. How can I get on that train?

Sorry for the thoughtvomit. These thoughts have been on my mind every hour of every day for at least a year now. Any advice would be most welcome, as my sounding board currently consists of my father and my more conventional (college-debt-rent-marriage-ratrace) friends who cannot relate.

[Geary Crawford]

@John Coberly

I think that you are spot on with working your tail off now and then experiencing the world when you put yourself in that position. It reminds me of the saying "do what others won't now, so you can do what others can't later." That one especially helps me keep going.

No problem at all on answering your question. I have benefitted somewhat from hard work and somewhat through a little luck. I have an engineering degree, and when I graduated from college in 2012 I was hired on in the petroleum industry. This is the lucky part as the petroleum industry was booming when I started making it easy to enter. So, that has put me in a position where I am able to afford to an accelerated payment plan that I have laid out for myself. I am fairly frugal as well, and housing prices are relatively cheap in Texas which is also somewhat being lucky. I hope this is not coming across as bragging or anything like that. That is definitely not my intention, and honestly, I wish that I had started looking at this stuff back when I was your age. I think you are on a great path having been able to save up essentially $20,000 already. It is even better that you are looking at investing the $15,000 and have already invested the other $5,000. I feel a lot of people in our age group tend to spend every dollar they make on status items rather than focusing on building wealth.

In terms of considering buying yourself a house or totally investing it, I would say it is probably smarter to just invest the whole amount and then compound it like you said. It really depends on what you want to do. I am kind of facing the same dilemma as you and am unsure whether to take my own advice ironically. I am wondering if I should cut back my payments on my house and use that money to invest or stick with my original plan to pay it off quickly. On one hand, paying it off quickly is much safer and definite route, but the other can possibly add a lot more value. I am also thinking about continuing the payment plan and borrowing money from family and/or friends if possible for a down payment. I have been reading a lot about the BRRR method while using a hard money loan. I'm not sure if you have looked at that as well, but it seems like a really good way to me to use the money you have now to essentially utilize, get back, re-utilize, get back, on and on. I just started looking at this website probably a week or so ago, so my knowledge is very low, but this website is such a great resource for learning. As Michael said, education is the biggest obstacle to getting started. I will have to take a look at Jay P Decima's books as well.