Starting In Real Estate As A Teen?

Question

My two brothers and my dad were thinking about investing in three deckers in my area. They are about $75,000. I would like to invest in this and my Dad likes the idea but would it be worth it for me for an investment of $1,000 to rent it out until the value goes up and then sell it?

Answer 1

The best answer is 'maybe'.  But if you want to learn about real estate, be determined to do this right.

1.  Look at the overall investment.  How much will the mortgage payment be?  How much will it be to maintain the building?  Ask other owners of similar buildings - a new roof, furnace repair, plumbing or electrical could be two years worth of rent.  Have the house inspected beforehand, too.

2.  Do you have a tenant already?  How long until you may find one?  And then, will they be good tenants, or will you come in 2 years later, and spend six month's rent cleaning up the smell of cat urine?  As you do calculations,

3.  Have you had Algebra 2, or three years college prep math?  Then look up "Internal Rate of Return" or "Net Present Value".  And tell your friend how useful Algebra is...Trust me, math is money.  E-mail me if you have questions on this.

4.  Rentals are work.  Who is doing the work?  A management company?  Good, but put that cost in your equation.

5.  Speaking of work - do the four of you have a contract?  If you don't clarify what percentage ownership you have, or who takes care of the property, or who gets what part of the profits, you have a bad situation waiting to happen.

If you plan to be rich, practice these (and other) steps - that way, you learn about the creation of wealth.

Answer 2

Sounds Great! But before you do anything count all the cost. Including tax liabilities.

As a rental if you sell it before you live in it for 2 years of the last 5 you own it then you must pay capital gains tax.

However if you do a 1031 exchange the tax is deferred and you can basically fix and flip. Or just sell it at any time you want.

Answer 3

Whenever you invest in real estate you become a gambler.  You bet that the improvements you choose will be popular with buyers.  You hope that interest rates don't go up and up.  You bet that buyers will keep buying.  You hope that renters don't ruin all your improvements.  You bet that prices will rise and keep rising.  It's fun and it's stressful.  Do it. /