18 years old, 50k cash, what would you do?

Question

Hello everyone, I posted on here a couple times a little over a year ago asking for some advice from many of you. I got lots of great feedback and support! most of it was to keep learning and studying real estate so when I do get into the game I'll be well prepared. kept watching the market and learning about real estate like many of you told me to do. I read a lot of books and watched lots of videos and listened to the bigger pockets podcast everyday of course. I just did some summer sales and did over 6 figures I put most of it away in a Roth 401k and some CD's. I have about 50k left over, I've been watching and waiting for some time now to get into the real estate game. I've had a goal for a couple years now to pick up my first property when I'm 18. I'm trying to figure out the best way to do that. I've been trying to figure out a way where I can qualify for financing, I know there is creative financing out there like seller financing and among other things. I just don't have consistent income, I have good credit for being 18, 740-760, but Is there any way you guys would go about this differently or any ideas that I just haven't thought of/learned about. Any feedback would be great!

Travis Timmons · Answer

Priority 1 is to maximize your earnings potential. Work your a$$ off, live off of nothing, think long tern, and delay gratification. Whatever you did to earn 6 figures in summer sales...do more of that.

As for picking up a property, turn off your brain, stop making assumptions about what you can or cannot do and start talking to lenders. Figure out your options and go from there. There's a great Charlie Mungor quote that I always refer back to - "It takes great character to sit on cash." There are worse things than sitting on cash in the bank and waiting for the right opportunity.

I do think that your first property needs to be a house hack. I'd vote for a single family home, rent out spare bedrooms option given the price point where you live.

Derek Brickley · Answer

Hey Nicholas!  First of all, congratulations!  Hard work sounds like it's paying off.  Getting into real estate there are a few thoughts:

1. Househack:

With good credit and $50k available, getting into a househack could be a great way to decrease your living expense while also getting a property under your belt.  You might be right about the inconsistency in income and that could possibly impact your ability to qualify.  Would you have a relative/family member who might have sufficient income and could possibly be a non-occupying coborrower for you?  This way you could still buy it as a primary residence, but use their income and/or the rents from other units to help qualify.

2. DSCR:

Now this might not make sense in your market, but you could possibly use a DSCR loan to help get an investment property.  Downpayment requirements are generally 15-20% minimum, so it may limit the properties you would be able to find.  With that said, the benefit is that there is no income verification (no paystubs, tax returns, W-2s).  You would potentially qualify based on the property's rental income.

3. Creative Finance/Wholesaling

As you mentioned, if you're nailing those summer sales you may be able to transition those skills into real estate with creative finance or wholesaling by going direct to sellers.  Whether doing direct mail, door knocking, or cold calling you may be able to find off-market properties and negotiate terms with the seller that work for the funds you have available.

Account Closed · Answer

My vote is for house hack as well. number 1 bang for your buck starting off

Deb S. · Answer

Have you thought about JVing with someone? I'll bet there's someone else in a similar situation to yours who needs a partner for one reason or another. Even if that partner was a co-signer and then you flipped it together, it would be a learning experience with an opportunity to make some cash for the next deal and so on.

Read the book 'Who Not How' by Dan Sullivan. Once you stop focusing on HOW to fix your problem and focus on WHO can fix/help with your problem the doors of opportunity open up! You don't need all the answers, just find someone who does have the answers. Attend some local meetups and ask if anyone needs a partner. Tell them what you have to offer and then tell them what you need. It's that simple.

Good luck to you. The fact that you are 18 and starting out with this mindset tells me you will be going places. Network whenever and where ever you can to find the WHO'S you will need in your journey.

Shiloh Lundahl · Answer

@Nicholas Stevenson None of the advice here so far is helpful to you except for maybe what @Deb S. stated about owing a junior partner on a deal.

First, let me explain why the above advice is not helpful, and the. I’ll tell you what will be more helpful.

House hacking would be great, however, you wouldn’t qualify for the loan because your income is inconsistent and you likely don’t have several years of tax returns to show a banker your income track record. So that’s out. Getting a DSCR loan could work, but you still need income history and a track record for most banks otherwise you would get crappy loans when most loans are already crappy right now. So just think, more crappy.

I would encourage you to create an LLC with an experienced investor and buy a house with your 50k with an experienced investor. This would require networking with other investors in your area that are actively investing. After you have taken 10-20 out to lunch and paid for their lunch, call back 1-3 of them and ask them if you could partner with them on a deal they have going. Preferably a deal where you could get your money back quicker (6-12 months). Observe the process. Ask questions. You could also be a private money lender on a deal. Make sure your cash is protected by vetting the deal, and having a deed of trust on the asset.

I have done this with several people. I’m not saying this in any way for solicitation, but rather as evidence that this approach is an effective approach. I have helped my oldest 4 kids each buy houses in LLCs as my partners all being under the age of 18 with no credit or experience. The two oldest own 3 each, my 14-year-old owns 2, and my 9-year-old owns 1. I don’t say this to brag, I say this so you know that it can be done.

Good luck to you. Let us know how it goes.

Wale Lawal · Answer

@Nicholas Stevenson

First and foremost, congrats on your efforts and development in learning about real estate! It's remarkable how proactive you've been in your schooling and money management.Given your age and the fact that you do not have an income that is consistent, creative financing may be a smart option for you. Here are some strategies to consider:Seller Financing: This is when the seller acts as the lender and you make direct payments to them. It's a negotiating point that may be especially appealing to sellers looking for new methods to sell their property.Lease Option: You may want to explore a lease option, in which you lease the property with the opportunity to purchase it later. This allows you to stabilise your income and save more money while still maintaining possession of your property.Joint Venture: Working with someone more experienced or financially secure may be a possibility. They might provide the funding, while you contribute your talents and experience.Continue educating yourself on creative financing alternatives. The more you know, the more prepared you will be to build transactions that benefit both you and the seller.Remember to consult with a real estate professional or financial advisor as you explore these options. Real estate can be complex, and having expert guidance can be invaluable. Good luck!

18 years old, 50k cash, what would you do?

Most Popular Reply

Contact Us