Young, Poor, and Ambitious

I am currently 16 years old. I have saved $5,000 from working, will save another $10,000 by the time I am 18 and will also inherit a $10,000 bond when I am 18; leaving me with $25,000 in cash. Duplexes and triplexes in upstate NY, in cities like Syracuse and Buffalo offer some of the highest CAP rates in the country. My question is what are the odds of an 18 year old with no credit score getting a loan with 25% down and what kind of interest payments will I be paying giving the current financial situation in this country? Please help me, I have spent the past few years of my life working socially degrading jobs and do not want to do this for another 4 years in college.
In Buying Property - Asked by Michael J. - Oct 17, 2008
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Answer(s)

Billy B.
Listing Administrator
Denton, CO

Two years ago your dog could have gotten a $200K loan. Today - not much chance of it. To be redundant with just about every news report we're getting, the credit markets are extremely tight right now. In two years things may be different but this downturn is very probably going to last quite a while and credit won't be easy to come by. Major corporations with triple-A S&P ratings are struggling to get credit right now. In a year whatever state the financial markets are in will probably stabilize to some extent and banks will assess the situation - and to some degree loosen up credit, at least for those with good or very good credit - but the halcyon days of "free" money, stated income loans, and other poor lending practices are of course long, long gone, most certainly not to return in my lifetime and probably not yours. Then again, the market retraction and consolidation / collapse of banks throughout the US could get even worse - to some degree it no doubt will, but in a year we'll probably have a better view of how long and how bad it will be.
The advice you'll probably hear from most is get a cosigner with very good credit. If your parents or a relative has good credit and you've clearly shown you have the discipline to be so frugal and save that much money I can't see why they wouldn't be willing to bet on you. Even then and even with sterling 750+ credit they may find it quite hard to get a loan, however if you can find the right kind of "fixers" and opportunities you may be able to get in a sizable down payment for $25K, making it less of a risk for a lender.
Short of that, I would look to become involved in local investment and/or sales groups to see who you can learn, get tips from, and network with. If you envision your career as being that of a RE investor your network--pretty much like sales people--will be your life. Most and probably all serious RE investors have a substantial network of people whom they develop a strong trust to partner with, especially those who are involved in almost any significant commercial RE.

Oct 17, 2008
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Matthew G.
Owner/Investor
Oakland, CA

Good question Micheal,
Unfortunately, a lot has happened in the past couple of weeks that makes your question tough to answer. The current financial crisis that this nation is experiencing has made it difficult for even a well qualified buyer to purchase investment properties. And even though you are looking to invest in a couple of years, you can bet that when lending institutions start lending again, their qualifying criteria will be much higher than it has been for the past 10 or so years. You will have to talk to a lender in a few years to get a precise answer. Worst case, you might need to bring in a family member or someone you can trust who will cosigning the loan. Its important that either a) you can properly evaluate the investment, or b) your cosigner knows what they are getting into, because you are potentially putting them at risk if the investment goes bad. I know this answer doesn't have the specifics your looking for, but there really isn't a good way to answer this question until you find a deal you want to pursue. Who knows what the lending laws/ mortgage rates will be in a few years? I wish you nothing but the best of luck.

Oct 17, 2008
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Aandrea C.
Owner/Investor
Kansas City, MO

credit is very important!!!! contacts are helpful, dont jump into something with out knowing what you are doing. if you want to come out to kc, ill show you around for an hour or so...

Oct 17, 2008
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Rick H.
Broker/Agent
Temple, TX

If you are going to college in upstate NY, buy a small property i.e. triplex, to live in and rent out the other units. Try not to pay retail, pay wholesale. Don't worry about the other stuff, if you are starting out a 18 buying property and continue to buy property you will probably retire at 30. As far as credit get yourself a credit card, maybe two. Charge something every month and pay it off the next month, not the same billing cycle, but the following cycle. Keep a small rolling balance. By 18 you will have excellent credit. Don't do something stupid and charge up the card. The only reason to have one is to establish your credit future.
Once you get going start contributing to a Roth IRA and as you balance gets up there invest that into real estate. Look at www.penscotrust.com Lots of good info there. Good luck

Oct 18, 2008
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Michael J.
Ronkonkoma, NY

Well im not saying I have a bad credit score im just saying, I have a non existing one because im 16 and its not legally possible for me to have credit cards, mortgage payments, or anything else that will bring up my credit score.

Oct 18, 2008
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ray s.
Broker/Agent
Fisher Island, FL

I started out the same as you.. The key is to start building credit as soon as you are able. I bought my 1st property when I was 18 years old. and bought one every year for the next 5 years. My suggest would to look for a 4 plex. They are will allow you to obtain owner occupied finiancing on a building with 4 of less units. They also allow you to use the income from 3 of the 4 units to help you qualify. You would need to move into one of the units. Or at least say you are going to move into one of them.

Oct 18, 2008
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Wilson S.
Owner/Investor
Waterloo, ON

Hi Michael,
Feel free to contact me at my email. Perhaps I can help you answer some questions.
Regards,
Wilson Shek
Toll-Free/Fax: 866-220-6593
Email: wilson.shek@ltdkate.com

Oct 18, 2008
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paul y.
Owner/Investor
Houston, TX

Well..I'm probaly gonna get some haters with this answer but here goes....hopefully by the time you reach 18,maybe the economy will be in a little bit better shape than it is now.....right now I think you should spend your time learning as much as you can about buying real estate.....without using your credit and with using as less of your money as possible.....right now is the time to start establishing good credit habits....many people are against hard money lenders...and to a certain degree I am also...but there are some out there who will do your deals and not make you jump through hoops...you pay a little more..but in this economic quagmire that we are in,the availability of being able to get the money is the issue

Oct 18, 2008
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Bob F.
Broker/Agent
Birmingham, AL

One thing that I wish I had done when I was eighteen was get my real estate license. I'm 30 now but I missed several good family deals where I could have received nice commissions on, and saved/invested that money! You can also do it either full or part time depending on your firm. If you work on your skills and continue to learn you'll be in good shape. Being closer to the business you might even make some good contacts. You may make a friend at a smaller bank that is in good shape because they didn't make all these bad loans. Depending on the bank he might be able to make you the loan. Put yourself in his shoes. (Good down payment, deal below market value/with great revenue streams, record of wise financial decisions, record of working and real estate commissions for income... Not impossible totally IMO)

Oct 29, 2008
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