Things to set up now for future investing.

[Alex Griffith]

Alright, so I won't be investing for another three years.

I'm a freshman at a military college, home now because of the coronavirus. I want to invest in the Fayetteville area, because I grew up here for the majority of my life and it is a great market.

I won't invest until after college because

1. I don't have an income

2. I won't have the time to check up on the property being stuck in the prison where I take college classes.

So what should I do now to prepare for my first investment? I would love to graduate, hopefully get stationed at Ft. Bragg, and rent a place until I find a deal I like. 

I would most likely look for a triplex or quadplex and do the househacking strategy, and then scale up into commercial real estate from there. I've been doing a lot of research, and will continue to do so.

1. Credit score. What credit score should I try to achieve for good financing on a quadplex at 21-22 years old? What is the best way to improve my credit score as a college student?

2. Evaluations. How do I tell if a property is good or not? Experience? The primary point here is knowing what is wrong with the house and what needs to be improved. HGTV scared me a little with all the extra problems and going over budget.

3. What else?

[Caleb Brown]

1) Credit score 700's would be awesome for lending, 3 years is plenty of time to achieve that. Open up a normal credit card, have a limit of $300-$500. Use it a few times a month and PAY IT OFF! Open up a gas credit card and Southwest airlines credit. Any credit card you open don't overuse it and overspend. Be accurate and on time on all your payments, if you miss a payment no matter the amount it'll effect you. 

2) When you evaluate a property many factors play into it. Are you looking for only cash flow? Only appreciation? Have enough reserves for 12+ months if rents are not paid. If you house hack the goal is to live for free or close to it, then move out. When you move out of the property it should cash flow. I'd listen to podcast and read books to soak up information. HGTV I think is made up half the time so don't trust what the TV says. 

[Alex Griffith]

Thank you, Caleb.

I would be looking primarily for cash flow, because I think it would be easy to scale up once you get your foot in the door with more free cash flow.

And yes, I've been watching BiggerPockets podcasts, the Cardone Zone, and reading books by Trump, Cardone, Kiyosaki, etc.

Soon to get the BiggerPockets books.

[Kevin Zolea]

@Alexander Griffith I was in a somewhat similar boat as you two years ago. I told myself in two years I would get started because I wanted to start with a house hack and being that I was just graduating college I didn’t have adequate income. Two and half years later I now feel like I am at a point where I am financially and knowledgeable enough to jump in and looking for my first house hack.

To answer your questions:

1.) When I was in college I got student credit cards. At that time they were 12 month interest fee. I would suggest doing that to build your credit but only if you know you can pay it off and use it responsibly. I had a decent part time job that allowed me to have some money. Instead of paying stuff with cash I would just put it on the credit card and pay it off at the end of the month. Also, it wouldn’t hurt to talk to some lenders and see what their minimum credit scores are, so you can have an idea of what you need to quality for a loan.

2.) I think the best way to understand evaluations is by practicing analyzing deals in the market you are interested in. If you don’t know how to analyze deals then ask for help or even ask local investors in your area if the numbers you are using seem accurate. I found this to be extremely helpful and it has made me feel more confident in my numbers. I’d even suggest reading J.Scotts book on Estimating Rehab Costs!

3.) Just keep learning and taking daily actions and eventually everything will come together!

Hope that helps!

[Chris Stroup]

@Alex Griffith what @Caleb Brown said is great.  Build your credit as much as you can.  Also, build your capital as much as you can. 

Another important thing to keep in mind is DTI. Debt to income ratio. The less debt you have the better your chances of getting a loan are. So if you get an expensive car and other debts it will be much harder to get lenders to work with you.

Fayetteville is a cashflow market.  This area appreciates slowly.  

[Daniel Tucker]

Alexander, along with the suggestions from previous replies, I would suggest reading (or listening to) "Set for Life" by Scott Trench as your first BP book. This book lays a solid foundation on where to get started, not only in real estate, but in life in general. Also David Greeene's BRRRR book is awesome. Whether you're going to use the BRRRR method or not, there is a TON of great information in that book, including how to determine whether a property is a good deal or not. The BP calculators are also a great resource for that. You may not be ready to invest for some time, but you do need to be analyzing deals every day. Develop your strategy for funneling deals and analyzing them and stick to that strategy. Brandon Turner does a free webinar every week where he analyzes a deal live and shows you why it is or isn't a good deal.

..Also don't watch HGTV. It is not based in reality whatsoever and everything is fake drama. In fact, if you pay for TV, cancel your cable subscription(s) completely. As a young person seeking early financial freedom, you need to save every penny you can. 

Good luck!

[Nicole Heasley Beitenman]

Network in person (when it's possible to do so again) and online. A lot. Like every day. 

[Marlen Weber]

@Alex Griffith it is fantastic that you are seeking advice to become better prepared to invest in your future. Best of luck and stay safe.

[Corey Hawkinson]

@Alexander Griffith To piggyback off what Nicole said, if you have not already I would recommend that you set up keyword notifications on Bigger Pockets for words in your market such as Fayetteville, Fort Bragg, North Carolina, NC, and whatever else is specific to that area. You’ll find investors on those threads for networking. 9 times out of 10 they will be willing to help and will know WAY more about Fayetteville than someone like me.

[Mark Horton II]

@Alexander Griffith hey Alex I am in Fayetteville and I was station here. I work in the area I would to assist if you need help.

[Nicholas L.]

@Alex Griffith great post.  Best of luck to you when you get started.  Check out these books - not directly related to real estate, but inspirational. 

• -Quit Like a Millionaire by Kristy Shen (FI)
  
• -I Will Teach You to be Rich by Ramit Sethi (FI)
  

[Alex Griffith]

Thank you @Mark Horton II

I remember you from the zoom trainings with Five Pillars. The main thing I'm looking for is experience, really. Just want to dive in and learn as much as I can.

[Matthew Terry]

Alex,

It is great you are interested in REI so young, congrats!.

My personal mindset is that I'm investing in people (including myself), not properties. REI is a side-hustle for me and I don't have time to be an expert or aggressively market yet, so I need to rely on experts to find and manage properties for me. An amazing deal well below market value can turn out horrible if you have a poor property manager, as an example. Start networking on BP and local REI meetings. It is easier to do this now since all meetings are online. Be transparent and honest that you don't plan to invest for 2 years, but you are in the process of learning and setting up a network to hit the ground running as soon as you can start investing.

Always save up for cash reserves. A VA loan (assuming since you are at a military college?) to house hack is nice, but make sure you can sustain yourself in times of vacancy and repairs. Just because you don't have to put money down doesn't mean you don't need money at all. If you anticipate your mortgage will be $1500/mo, start saving now for about $10K in reserves. 6 months of your mortgage and some leftover for repairs. $10K over 3 years is about $280 a month. Can you stash that away?

As others here have said, credit cards are a great way to build credit. They are also a great way to save money, but only if you are extremely responsible and pay it off every month. There are great cashback and points programs, that if used wisely, can save you thousands of dollars a year. I personally have everything I buy and every bill I get put on a credit card, if it is possible. As an example, If you are buying a ton of things on Amazon, you basically get a 5% discount with every purchase with the Amazon credit card. Some cards give you a $250 bonus if you spend $2-3K within a 3-4 month period, etc. Do some research and pick a card that is right for your spending habits (and that you qualify for). The interest rate shouldn't matter, because you will pay this off every month. 

[Mark Horton II]

@Alex Griffith lol I didn’t recognize it was you !!

[Davis Doan]

Stuff you can setup and do now to create a stronger foundation:

1. If you don't already have abudget plan, get that figured out so you can minimize your spending and increase your savings. Adjust as you go and your life changes. This will help you with managing expenses for your properties as you can manage your own.

2. Since you said you're in college, figure out what grants you qualify for in your state so you can lower the cost of tuition, books, scholarships. Work with a counselor to figure out what classes you have to take to finish your degree so you don't accidentally take extra courses. Find people to study with so you aren't alone in preparing for exams. This will save you stress and time!

3. Setup a high yield savings account (ally, capital one, ect.) To store your savings (around 1.5%)

3. Learn the credit card rewards game so you can take your regular spending and have that pay for vacations or hotels(thepointsguy.com)

4. Setup an emergency fund for yourself so you can be at ease financially in case you fall on tough times. This will be a foundation for cash reserves when you own property.

5. Analyze just two properties a day and by the time you graduate that will be more than 1000+ properties analyzed.

[Doug Smith]

@Alex Griffith

I am in the Harnett/Sanford area and I am by no means an expert, rather a newbie as well. What I will tell you is that when it comes to multi family in Fayetteville they are generally over priced or in war zones.. i.e. Fayettenam. That doesn't mean you can't do it though. 

I would however like to throw another idea at you. When you graduate you will be a LT and LT's love to live together, they also prefer for the most part to live in the Southern Pines or Pinehurst area. Both of those areas are established and sought after areas i.e. appreciation will continue to go up. You could house hack a SFH 3/4 bedroom (most have a bonus room you could also rent out), you could live in one room and rent out the others. You will have tenants that typically will be there at least two years and because LT's love to live together when one moves out there will be others waiting on your front porch to move in. When it comes time for you to PCS you lower the rent for the room mate you trust the most and he/she becomes your Property Manager and you keep the circle going.

Additionally, because you will be living there you could use your VA loan to purchase the house for zero down and although your credit score will need to be decent it doesn't have to be anything spectacular. PVT's get VA loans all the time and typically their credit is not the greatest. The most you would have to come out of pocket is some due diligence and home inspection.

Hope this helps, study hard and stay safe!