Lesson 3: Teens and Real Estate - How to Start Early
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Workshop Scenario
Please think of yourself in the following scenario as you complete this lesson.
You’ve decided to be the youngest Real Estate investor in your community. You realize that if you are successful, you can become wealthy and retire at an early age.
Your goal is to learn as much as possible about real estate and real estate investing now so that you can own seven (7) properties by the time you are 21.
In the previous lesson, you explored what Real Estate is and how it can be profitable. In this lesson, we introduce you to Real Estate Investing for Teens and why it is essential to start early.
Lesson Objectives
Analyze the pros and cons of investing in real estate as a teen.
Explain the importance of beginning real estate investing as a teen vs. as an adult.
As you read, please consider the following questions:
Why should I invest in real estate now versus when I am an adult?
How is it possible for me to invest in real estate as a teenager?
The Benefits of Starting Early:
Before embarking on the investment journey, you need to understand the benefits it comes with. This will keep you motivated and work towards achieving your investment goals.
1. Create a Foundation for Your Real Estate Career
A successful career doesn’t just happen. It begins somewhere. Investing early is an opportunity to start and establish your future profession. You have all the time to learn and build solid ground.
2. Flexibility in Choosing an Investing Strategy
As a teenager, risk-taking is not costly, it is a learning opportunity. You are at liberty to try alternative investing tactics until you settle for a profitable one. You can try unique properties in various markets and experiment with several exit strategies.
3. Build Equity
Properties appreciate in value. Beginning now means your equity will grow significantly with time. You start with one property, which will multiply by several as you grow. Through time you will have a high-value portfolio.
4. Create a Network
It is a chance to establish connections you will benefit from your whole life. A good network will help you secure financing and land profitable real estate deals.
How can you start investing now rather than later?
#1: Read and Educate Yourself
To understand the dynamics of real estate investing research and learn about property investing. Subscribe to blogs, read books, listen to podcasts, follow online forums and watch relevant YouTube videos.
Gaining standard knowledge of property pricing, taxation, and government policies is crucial for your growth and understanding.
#2: Have a Business Plan
This is the heart of your business. It contains your business name, core values, and your mission. A business plan clearly outlines all your objectives and how you plan to achieve them. It explains how you will operate your real estate business. Being a teenager, set realistic goals to avoid despair. You can also set up a PO Box for your real estate investing business as well as an LLC for legal protection.
#3: Get a Real Estate Mentor
There are real estate investors who began young. They know every challenge you are likely to face because they have traveled that road. Learn every viewpoint of their financial journey. Attend real estate investment groups, you will get someone to guide and coach you.
#4: Exercise Financial Discipline
Investing in real estate requires money. You need to save as early as now. Get a job, it can be lawn maintenance, babysitting, or tutoring. Use a banking app to auto-save.
Talk to a financial planner to guide you on accumulating your savings for property investment. Financial institutions will need proof of regular savings before funding you.
#5: Establish Your Credit
Begin building your credit by using student loans and credit cards. Use them responsibly and make timely payments. This will have a positive effect on your credit score.
Alternatively, talk to your parent to add you as an authorized user of one of their credit cards. It is a smart way to have a good credit score. You will secure loans with low down payments and attractive interest rates.
#6: Partner Up
Being young, you will gain more from a real estate partnership. Your partner will bring onboard financial solutions, experience, and a good network. A partnership is a mutually symbiotic relationship. Don’t just benefit from the partnership; ensure you bring value into the business. Be it skills or knowledge.
True or False? Having a mentor is not necessary.
True or False? You do not need good credit to start a business.
True or False? Investing now will help build your equity early.
Investing Strategies You Can Start With
The key to investing as a teenager is using your time and your limited finances to your advantage. Learn to work with what you have to get more opportunities. Here are investing options, to begin with.
#1: House Hacking
House hacking is renting out a part of where you are living. It can be a bedroom, a garage space, or even a basement. You can convert any of these areas to livable spaces and generate monthly rental income. It is also a great idea to reduce your living expenses.
Before house hacking, understand what it takes to be a landlord. Have a business mind to gain fully from this venture. Set boundaries to build a professional relationship with your tenant. Carefully screen who to live with, probably a responsible classmate. A disciplined resident eases property management and maintenance.
#2: Wholesaling
Wholesaling real estate is another brilliant strategy to break into real estate investing with minimum capital. It does not require you to purchase, fix or manage any property. Your job is to hunt for lowly-priced homes. Get the house under a contract. Look for an interested buyer, especially investors in house flipping. Assign the contract to the buyer.
Your return is the assignment fee paid by the buyer. The process sounds straightforward, but it is not. You must have an extensive understanding of your market and networking capabilities. The advantage is you will gain real estate knowledge in a brief span.
#3: Multifamily Rental Properties
In this lucrative strategy, you buy a multifamily home. Say you begin with a duplex. Use an FHA mortgage loan to buy it. You only need to have a down payment of 3.5% of the listing price. Live in one unit and rent the other. The monthly rental income received will offset mortgage payments.
A small multifamily home is a good place to start as a teenager because of minimum management responsibilities. To get the best out of this option, do a complete analysis of your expected cash flows.
Buy a property with a positive cash flow. After accumulating enough funds, you can rent the duplex and buy a triplex. Soon or later, you will own a range of properties.
In Conclusion:
Do not let real estate investing challenges scare you away as a young investor. Make use of the time you have to create a viable business plan and start building your portfolio.
There are various entry points to real estate investing. Research and start with an option you can handle. Define your tomorrow by the decisions you make today.
Closing Assessment:
Please respond to the lesson email with answers to the following questions, and one of our real estate mentors will respond with feedback.
Why should I invest in real estate now versus when I am an adult?
How is it possible for me to invest in real estate as a teenager?
Advance your understanding by participating in the 24/7 Discussion Forum:
1. Please answer the following questions in the comment section below and interact with learners from around the world.
What investment strategy would you start with and why?
2. Please read and reply to other learners’ answers in the forum by stating if you agree or disagree with their answers and why. Your replies should offer new substantiated ideas or thoughtful questions.
or try a prompt below!
