Buying A House At 22. Am I Doing The Right Thing?

Question

I'm 22 years old with a good job in a growing field, have about $7,000 saved up for a downpayment living in coastal Florida. The average price for a 3bd/2ba 1,300sq ft house is about $160,000 from what I'm seeing in my area. I want to buy something that needs a little work as a live-in flip. Am I crazy or rushing into this? I'd appreciate any feedback or tips.

Ben Zimmerman · Answer

@Matthew Kafami Buying in the near future may be a good idea, but buying NOW is not. Let me explain...Don't take what I'm about to say personally, as I am going to make a few assumptions since I obviously don't know you. But the average 22yr old thinks that they know everything, when the reality is often the exact opposite. If you don't know if buying a home is the right thing to do or not, then you haven't done nearly enough research to make an informed decision. You have stumbled upon a great website with tons of free information, so use it. Go to the library and find a few real estate books, watch the podcasts on this site, read the forums, do research on your local market conditions ect ect. Once you have done your research, you will intrinsically know the answer to your question, and instead you will have other, more intelligent questions.The question should never be 'should I buy a home'. instead it should be:What neighborhoods should I buy inHow can I find a good deal at a below average purchase price in one of the neighborhoods that I wantHow will I fund my purchaseWhat happens if I need to relocate for my jobHow will I pay for an unexpected expense such as a broken AC unitWhat happens if home values dip and I end up owing more than the house is worthAnd the list goes on....The second reason why you shouldn't buy now is that you simply don't have enough money in reserves in my opinion. If you use an FHA loan you only need to put a 3.5% down payment on the house. This translates into $5600 on a 160k home. This does not count all of the misc fees that come with purchasing a home such as appraisal fees, loan origination fees, realtor fees, or any minor repairs that need done ect, which your 7k will struggle to pay for. Even after you pay all of this, you still need to have enough money in reserves to pay any unexpected bills. What happens if the month after you buy your home your car breaks down? Or your refrigerator stops working?Take a few months, and do your research. Find out if there are any down payment assistance programs that you qualify for, first time homebuyer programs, or if your state offers a Mortgage Credit Certificate ect. While you are doing your research live frugally and save up your money such that when you are mentally ready to make a decision, that you have the assets to be able to pull the trigger.If done PROPERLY, owning real estate is the most proven path towards obtaining long term financial success.

Steve DellaPelle · Answer

@Matthew Kafami At age 22 this is a great idea however it will impact your life in many ways. It is a lot of responsibility and a lot of added stress to your life...if you are willing to sacrifice "going out" and if you are willing to stay in on weekends and dedicate your spare time to this house then no it is not crazy.I am 24 and I am doing this exact thing right living in my own 4-unit complex while working full-time.It is not easy but I am willing to put in the time and make the necessary sacrifices.Good luck and PM me if you have any questions!

Bob Okenwa · Answer

I don't see anything crazy about purchasing a home if you can afford to live in it without over-extending yourself. At 22, it is even better as time is the most valuable resource in the world and the earlier you can get started, the more you can earn over time. Just make sure you do your research and have a plan and aren't doing it because it's the thing to do or someone told you to do it.

Steven McCaffrey · Answer

I'm with @Ben Zimmerman on this one, Not to discourage you or persuade you to do other wise but if you only have $7,000 think about all the expenses you'll occur since it's a flip, do your research and don't consider a low-end estimate. -Can you afford the mortgage, taxes and all utilities by yourself? Since it's a flip having roommates will be nearly impossible due to the living conditions if you're hacking at walls, gutting bathrooms and so on. This can cause legal issues quickly and they'll probably win... - Do you have the time? Flipping with a full-time job is rough but doable especially at your age just no that you will probably not need a phone anymore since you wont have a social life haha. - Do you have friends that are handy because this will help a lot especially if you can bribe them once in a while with pizza and beer. I can't stress enough on the expenses! If you need appliances, new roof, A/C, tools, new tile or carpet, any other main renovations. While $7,000 looks great at 22 you can spend that on decent A/C. If you can manage all of this than Do it, if not take an extra year and save for at least $10K just for the flip.

Shazia Chiu · Answer

Not crazy! My husband and I have seven rentals and I'm 24. Getting into real estate investing has been one of the best decisions I've made, even with the ups and downs.

Dominique Van Ryckeghem · Answer

Kyle R. · Answer

I second the 4 plex FHA route. Purchased my first unit at 19 and now have 81 doors at 24. My only regret is not starting off in multi-family.

Rob Beardsley · Answer

A live in flip could be a great idea, especially if you can get an FHA loan. As far as rushing into it, assuming you want to go down this financial path to freedom, NO you aren't rushing. But this particular property? How many properties have you looked at until you found this one? Have you crunched the numbers and done your homework on the area? Definitely take your time analyzing before making any purchase. GOOD LUCK!

Jay Hinrichs · Answer

Suggest you only use your FHA mortgage slot to buy a 4 plex at your age in that location its about doors.@Jessie Niu disagree .. just depends on where you live.My first house at 19 was in Milpitas CA.. I parlayed that one Bay area house into 2 homes in Palo Alto.. if you know anything About BAy area real estate you know where I am going with this.. the 500k tax free exemption when you move is the single best tax treatment we have as Americans.. I did it in the Bay Area 3 times and in Oregon 2 times and just about ready to do it for a 4th time on my potential move to Vegas.. 500k tax free equity spends quite nicely.

Christian Wathne · Answer

do it! I purchased my first home (townhouse) 6yrs ago when 24yrs old; one of the best decisions I've ever made as it snowballed into where I'm at now. If I were to give my past self advice it would be that when you analyse the deal to buy, make sure it will make sense as a flip in a couple years and also as a rental in a couple years. Being young you want to be flexible; a girl or job can take you across the country quickly.