Starting to invest in real estate at 18... Am I crazy?

Question

Jonathan Towell · Answer

This isn't a crazy idea. It is a genius idea.

I wish I had started at 18. I would have bought a duplex or triplex. I would have lived in one unit while renting the others. About 2-4 years after buying the first, I'd do it again for another, then another. I'm 34 now, so that first property would probably be paid off. And, it would not be hard to imagine having 20-30 units, altogether generating income equivalent to my current salary.

You may have trouble getting a loan from a bank if you don't have an income. Learn about seller financing and wrap notes.

You're on the right track. I wish you the best!

Aaron Lovett · Answer

Hi @Rand Knutson, that's a nice bit of money you have saved up.  If that was a result of recent work, keep it up!  If gifts or anything else unearned - congratulations for not blowing it!  Now, on to your questions...

Sure, you can put it in a Roth IRA.  Talk to an accountant about the benefits and limitations of that.  As far as real estate, there are lots of options, and these are totally tangible for you.  I think I'd have done something similar to Jonathan's suggestion if I had your epiphany at 18 - buy a cheap duplex or triplex, fix it up, live in one unit and let the other two pay the mortgage.  Keep saving and buy another, or sell it off and upgrade with a nicer multi-family or separate single family homes.

Yes, lots of benefits - and lots of hard (and smart) work.  You're on the right track.  This website has tons of good advice and resources, but don't limit your research to this website, or even to the Internet in general  Talk to folks who make money in real estate. Investigate terms such as BRRRR, flipping, buy and hold, RE investing, rental property, etc. and authors such as Robert Kiyosaki, Dave Ramsey, Gary Keller, and BP's own Brandon Turner.  Here's a nice list of recommended reading from BP.

A word of advice - Keep in mind that there's more than one way to do any of this real estate investing.  Some advocate using other people's money and leveraging to the max.  Other's suggest saving and paying cash for everything.  You'll find that there is going to be a give and take among risk, reward, and time.  Only you can know the best balance among those factors for your situation.  My advice is that you educate yourself, get to know yourself and your own risk tolerance, and be realistic about opportunities: don't underestimate the risks of going into debt, but don't fear risk so much that you pass up reasonably good opportunities.  Oh, and travel - no matter what - it's just good for you.

Jason Haala · Answer

Congrats! Having saved $12k by the age of 18, and considering investing in rental properties, you're already at a place where many 40 year olds are still wishing they could be. The fact that so many wealthy people are heavily invested in real estate is no coincidence.

I wouldn't simply call it a tangible goal. I would agree with @Jonathan Towell and say it's a genius goal and a smart move. Many people spend their entire lives never recognizing the wealth and financial freedom that real estate investments could have given them.

The biggest asset you have right now is time. However, time is a lot like money. Many who tell themselves they have plenty of it tend to waste it. By simply investing wisely at a young age, appreciation and compound interest will reward you later in life.

The beauty of the real estate game is discovering the power of leverage. Once you get started, you'll learn how to find and use other people's money instead of your own. The money you have now helps get you in the game. Once you're in, experience and knowledge will follow and success will begin to grow.

The simplest path to success is learning what has made others successful and putting it into action for yourself. Make smart moves and the sky is the limit for you!

Arpan Patel · Answer

Agree with everyone above; you're never to young. I started when I was 20 myself and it does take a minute to get your feet under you and some professional skills polished but in general worth it. Been doing it for 9 years and unsuccessfully for the better two thirds but keep at it and work you way though it. Many others start when they have matured and have known the grind and professionalism of a corporate environment but we don't have that. What I found helped me accelerate quickly was learning management skills along with real estate tools (concepts of buy and hold, notes, flips, lease options, etc.). In my experience people want to help the young but something the young get in their own way so my only advice as someone who also started young is to take your professional skills (HR, Time management, Management, Collaboration, etc.) just as seriously as real estate. That is what I'd tell myself from 9 years ago. Good luck and look forward to seeing you success story in the forums!!

Rand Knutson · Answer

@Jonathan Towell  @Jason Haala @Michael Lee @Aaron Lovett

Thank you for all of your words of encouragement! I am very motivated and will try to buy a property when I'm a second year college student and I will live in one of the units.

@Lane Kawaoka I am going to be studying computer science, and maybe a minor in business/real estate... Hopefully I can learn a lot more there!

Michael Lee · Answer

Hello and welcome to BP!  it is great that you want to get started at investing at that age.  When I was 18 (I am 60 now) how to make a living was way back in my mind.  All that I cared about way back then was partying and making a living was not in the front of my mind. The most serious thing for me was going to college, not that is mandatory, my parents wanted the same for me.

All that I really cared about was where the next joint was going to come from.  I now realize that was a mistake as well as your plans for the future and how you would live.  Life was different back then since we were grown up in that time.  I was lucky when I went to college and met my wife.  I waited until she was college degreed to marry her and she still had two years left after I graduated.  She also saved money for about 25 years.

Why am I happy about that now is that and her computer program learning in school?  It sure has taken a bunch of stress off of me when I had that brain anuerism and stroke and could not walk anymore ever since that happened six years ago totally unexpected.  My Doctor had been telling me that I was in good medical condition.

By the way I graduated college with honors and it specialized in real estate.  That was way back in 1980.  I have been in the construction business since I was 17 years old.  I also had an active real estate broker license for about 30 years but never did that full time.  I have only done one real estate inestment deal for myself and that happened before I found BP.  I had to sell it because of my medical condition.

That being said, let's get back to you.  I think it is a great idea for you and your age does not matter much.  Knowing things like real estate cycles and timing on getting in will effect you to a certain outcome that hopefully will pay off on you.  I think that BP is a great spot to start with learning and asking questions.  YouTube is another good place to deal with while learning is a top priority.

Learning will always be necessary for keeping up with real estate investing opportunity.  The.best opportunity of investing for the long term is rental units.  Talk to a tax consultant with a history and experience in real estate. He/she can advise you to get into the right things and to keep more of what you earn and what gives you the best benefits with your money.

At first just keep investing simple and being consistently on the right track.  Try to track on everything you do on a regular basis review that can help you control your expenses and grow your income.  Do not try to do it all by yourself.  Learn that hiring good help can get you to that advanced place.  Create systems for things you can get someone else to do.  Spend most of your time on income production.

Good luck to you!

Starting to invest in real estate at 18... Am I crazy?

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