Can I make real estate Fastlane at 21?

[MitchM]

I know that many people use real estate as a way to make money off of their money, but what about someone like me who would be starting with around 20k saved up and wants to make it a primary source of income?

Do you guys think that I should start somewhere else?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[EvanOkanagan]

I know that many people use real estate as a way to make money off of their money, but what about someone like me who would be starting with around 20k saved up and wants to make it a primary source of income?

Do you guys think that I should start somewhere else?

I started with around the same money as you around 26y/o so I can relate.

What type of "Real Estate" do you plan on doing? With 20k and wanting to make it a primary source of income, you'd likely have to get into flipping properties. Is that what you're after?

Otherwise, I wouldn't use it as a "primary source" of income but rather a tool to build your net worth and progressively increase your (somewhat) passive income through buying rental properties with positive cashflow.

If that second option is where you're trying to go, then you'll likely need to start it as your "side-hustle".

It's been about 4 years since I started investing in Real Estate--with about 20k in savings to start. It's taken lots of hustling at my J.O.B (I'm a Realtor) over those 4 years, massive discipline (I was living off of 10-15% of my income for most of this time and living in one of my basement suites), and constantly learning and improving. With that said though, it's definitely paid off. I now earn over what the average household in my Country does through my rental cashflow-- so I could stop working if I wanted and travel, etc. It's not "millions a year fastlane", but it's given the time freedom (less than an hour a month spent on the investments now), and is constantly increasing my net worth.

 

[MitchM]

I started with around the same money as you around 26y/o so I can relate.

What type of "Real Estate" do you plan on doing? With 20k and wanting to make it a primary source of income, you'd likely have to get into flipping properties. Is that what you're after?

Otherwise, I wouldn't use it as a "primary source" of income but rather a tool to build your net worth and progressively increase your (somewhat) passive income through buying rental properties with positive cashflow.

If that second option is where you're trying to go, then you'll likely need to start it as your "side-hustle".

It's been about 4 years since I started investing in Real Estate--with about 20k in savings to start. It's taken lots of hustling at my J.O.B (I'm a Realtor) over those 4 years, massive discipline (I was living off of 10-15% of my income for most of this time and living in one of my basement suites), and constantly learning and improving. With that said though, it's definitely paid off. I now earn over what the average household in my Country does through my rental cashflow-- so I could stop working if I wanted and travel, etc. It's not "millions a year fastlane", but it's given the time freedom (less than an hour a month spent on the investments now), and is constantly increasing my net worth.

Thanks man. This is exactly the answer that I was looking for. Yeah, I figured I would have to start with flipping if I wanted to make most of my income from real-estate... I think I'm going to do what you said and make it a source of side income and maybe later in my life it can become a primary source.

 

[EvanOkanagan]

Thanks man. This is exactly the answer that I was looking for. Yeah, I figured I would have to start with flipping if I wanted to make most of my income from real-estate... I think I'm going to do what you said and make it a source of side income and maybe later in my life it can become a primary source.

Another thing I'll note... I can attribute most of my success in RE investing, especially in the early stages due to this.

Seek active investors.

I quit a high paying, cushy job to work alongside some experienced RE investors in my city. I'd never wanted to be a Realtor before I started, but I was given an opportunity to join a team with some successful investors and I took the leap. Learning alongside them was paramount to my own success. In your case though, networking or joining local Real Estate Investment clubs I'd say would be a great start.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[mike24601]

I wholeheartedly recommend you take a gander at this legendary thread: GOLD - 22 Years Old: First Apartment Building Acquisition Done

It has given me a great deal of inspiration. The problem I have isn't savings, it's income. My backend ratio wouldn't allow me to qualify for more than about a $100,000 mortgage right now, so I might have to wait a few years before I buy my first property. I could quit my job and get one that pays 3x what I make, but I would have to trade a lifestyle job for a 9-5 and that would be bad. If you have the income, maybe go the FHA route and keep as much of your savings as you can for later incidentals. My first purchase will likely be a 4-plex on a VA loan with 0% down and one of the units occupied by me. If I do it right and get some good positive cashflow, I'll have some extra money coming in that will allow me to live more comfortably, and will have free housing. That money I can reinvest into another business or more properties. If you choose an up-and-coming neighborhood like G_Alexander, you can get huge gains in equity when the area finally flips.

 

[Under-Dog]

You can try to start off with wholesaling if you need some money now. If you are trying to build up a portfolio that is a different story. You can purchase a multi-family home on a FHA loan with 5% down as compared to 20% with a conventional loan. The downside is you need to live on the property but that's not bad you live in one unit and rent out the rest that should allow you to live for "free". If you buy right you should have some equity in that property which you must live in for a year per FHA standards. After that you can sell and rinse and repeat or there are more options. Real estate isn't that big on this forum but I have found so much help by listening to the bigger pockets podcast.

 

[SquatchMan]

Why don't you find out yourself instead of asking a question?

Age isn't a factor in real estate unless you're under 18. You have enough money so I don't see why you can't get started.

You can do Lonnie deals. You can get creative with seller financing. You can buy mining rights and dig for gold. You can manage property. You can wholesale properties. You can...

I hate to say it though I find myself saying it a lot. If you have to ask a bunch of people on the internet if you can do something, then the answer is no you can not.

Not because it isn't possible, far from it.

It's because the action takers take action. The action fakers ask if it's possible.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Sinjen]

There are way too many variables in real estate to be able to really answer "with X can I do Y?", but with $20k, you're likely looking at flips to start. Depending on location, your credit, loan type etc, you may be able to wiggle into a multi-family but you'd almost definitely have to live there. Be careful with the temptation to buy a single family and turn it into a rental. After 15 years in real estate, I feel confident in making the generalization that single family rentals are rarely, if ever, cash flow positive.

 

[MitchM]

Why don't you find out yourself instead of asking a question?

Age isn't a factor in real estate unless you're under 18. You have enough money so I don't see why you can't get started.

You can do Lonnie deals. You can get creative with seller financing. You can buy mining rights and dig for gold. You can manage property. You can wholesale properties. You can...

I hate to say it though I find myself saying it a lot. If you have to ask a bunch of people on the internet if you can do something, then the answer is no you can not.

Not because it isn't possible, far from it.

It's because the action takers take action. The action fakers ask if it's possible.

You're being too black and white. Maybe I am asking because there are a lot of opportunities and I want to inform myself before picking a direction.

 

[Sinjen]

Why don't you find out yourself instead of asking a question?

Age isn't a factor in real estate unless you're under 18. You have enough money so I don't see why you can't get started.

You can do Lonnie deals. You can get creative with seller financing. You can buy mining rights and dig for gold. You can manage property. You can wholesale properties. You can...

I hate to say it though I find myself saying it a lot. If you have to ask a bunch of people on the internet if you can do something, then the answer is no you can not.

Not because it isn't possible, far from it.

It's because the action takers take action. The action fakers ask if it's possible.

A little much, dude. It's a forum. People ask questions of people who know more than they do. That's how you start learning something new.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Brian C.]

With $20k you have a plethora of options.

And even with $0, you have tons of options in real estate.

Sure, you can use part of that $20k to fund a marketing budget should you choose to go the wholesaling route. You might be able to generate decent capital and learn real estate fundamentals while you're doing it. In my experience, however, wholesaling is an entry point. Those that are successful in wholesaling eventually move onto bigger and better things. Like flipping, for example.

Which brings me to flipping. $20k really won't get you that much in regard to flipping. Before you write that off, consider this: even if you purchase a property at current market value with an FHA loan (3.5%), you need to accommodate for holding costs as well as potential rehabs. That gets costly, and at your current income (I guess you could say?), it could be a potentially burdensome investment.

If it were up to me and I had an extra $20k lying around, I'd seek out a Multi-Family with a FHA loan. I'd owner-occupy for a while, rent out the other units, and eventually move out. I heard that in some states the limit for maintaining residence is 6 mo.

In short, if you want to get started in REI, you're already further ahead than most. Augment your education, stack up money, and make choices at your own discretion.

 

[Duane]

If you're not interested in flipping houses, why not take that $20k and invest it into a business. Grow and focus on that business, and down the road when it's successful, sell it and preserve your wealth with real estate.

I thought about slowly increasing my passive income through real estate back in the day as well, but when I looked at the numbers, $20k into my business makes me a lot more money than $20k into real estate.

Passive income is only nice when you have a large amount of money invested into it imo.

 

[MitchM]

If you're not interested in flipping houses, why not take that $20k and invest it into a business. Grow and focus on that business, and down the road when it's successful, sell it and preserve your wealth with real estate.

I thought about slowly increasing my passive income through real estate back in the day as well, but when I looked at the numbers, $20k into my business makes me a lot more money than $20k into real estate.

Passive income is only nice when you have a large amount of money invested into it imo.

True, I have also been thinking this.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[MitchM]

With $20k you have a plethora of options.

And even with $0, you have tons of options in real estate.

Sure, you can use part of that $20k to fund a marketing budget should you choose to go the wholesaling route. You might be able to generate decent capital and learn real estate fundamentals while you're doing it. In my experience, however, wholesaling is an entry point. Those that are successful in wholesaling eventually move onto bigger and better things. Like flipping, for example.

Which brings me to flipping. $20k really won't get you that much in regard to flipping. Before you write that off, consider this: even if you purchase a property at current market value with an FHA loan (3.5%), you need to accommodate for holding costs as well as potential rehabs. That gets costly, and at your current income (I guess you could say?), it could be a potentially burdensome investment.

If it were up to me and I had an extra $20k lying around, I'd seek out a Multi-Family with a FHA loan. I'd owner-occupy for a while, rent out the other units, and eventually move out. I heard that in some states the limit for maintaining residence is 6 mo.

In short, if you want to get started in REI, you're already further ahead than most. Augment your education, stack up money, and make choices at your own discretion.

I like the idea of going with the FHA loan and living there for a short time. At my age that is a pretty reasonable thing to do and I could get something else going in the meantime. Thank you.

 

[SteveO]

You can do whatever you put your efforts to. There is plenty of money in real estate. You can start with flipping houses to gain cash and experience. Then move to bigger projects as you progress.

Keep in mind that everything has a learning curve. Many people lose money on the first deal and give up.

 

[EvanOkanagan]

You can do whatever you put your efforts to. There is plenty of money in real estate. You can start with flipping houses to gain cash and experience. Then move to bigger projects as you progress.

Keep in mind that everything has a learning curve. Many people lose money on the first deal and give up.

This.

In an earlier post I stressed to network and become friends/acquaintances with those more successful...

Well, I'm part of a local Real Estate Investment group and there was a young guy, eager to go who jumped on purchasing a house based on speculation (never do that btw). There was a proposed zoning in the area that would increase his value HUGE when it came into play.. unfortunately though, he bought it before the city's final revision which put him about 2 blocks OUT of the area. (I own one of the homes in the actual area-- he should have talked to me as well!)...

Anyways, because he bought for the future land value and not with cashflow in mind, he was actually NEGATIVE $1,000/mo cashflow--bleeding money out of his bank every month. This would have been very disheartening as you can imagine---HOWEVER, there's a very experienced investor who specializes in "Rent-to-Own" at our investment group. He analyzed the deal and worked to find him a tenant (who would eventually buy it from him) that put him over $500 POSITIVE cashflow in the house--- a $1,500 increase in rental income that he wouldn't have seen otherwise and now he's actually making money off the deal. No newbie would have thought of that.

Even to this day, I find myself stuck thinking "maybe I'm not on the right path" usually when analyzing a deal or looking at where I should invest next... then I chat with one of my mentors and he gives me a small tweak or change that changes everything.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[BrandonS85]

I started with $30k, looking back I could have done it with less.

~51 units with another 3 on the way shortly. Could make it a fast-lane deal and outsource 100% of the business and sit and collect checks, but I want to continue to grow the business, hoping to hit 75-100 by the end of this year.

Started as an agent at 21, bought my first rental at 22 when the market collapsed, took till 2013 to figure out how to really hit for private money (That, and my SEO business was doing great from 2009-2013) then almost 4 years to go from 0 to 51.

 

[MJ DeMarco]

My idea of "Fastlane" as a start in RE is to own a duplex, live in half of it, and have your tenant pay the mortgage.

@Envision isn't this something you do?

 

[Envision]

My idea of "Fastlane" as a start in RE is to own a duplex, live in half of it, and have your tenant pay the mortgage.

@Envision isn't this something you do?

Yes, i've been following this thread and reading the replies - just needed the time to reply in full, these answers tend to become essays.

I bought a duplex when I was 20 making 35k/yr using an FHA loan and put 7.5k down + 5k in repairs.

The duplex was 157,000 and each side would rent for $750 minimum ($1500 total) - with me living in it I would make $750 + $350(roomate) = $1100

My mortgage (with PMI) which is an extra insurance since its FHA, taxes, insurance came out to about $1097 at the time. I was only paying for the utilities which came to about $150/month.

May 2015 - Debt service (1097) - Income (1100) = net $3

2 years later (this month) I've refinanced the property into conventional (20%) and the value of the property in my area would sell for $200-220k. My rents are now $775 minimum and my mortgage is only $912. I still currently live in the property despite scrounging for any deal i can find but the area i live in is exploding in growth and property values no longer make sense to invest.

May 2017 - Debt service ($912) - Income ($1125) = net $213

this is my current situation after 2 years of work.

To refinance the property I also had to put down 6k but the reason I did that is because it dropped the PMI and freed up the FHA loan and dropped my payments which will pay off over the next 5 years.

Now I can repeat another FHA investment property as soon as I can find one.

This doesnt take into account the rent i've save over 2 years which is $400 * 24 = $9600
The equity appreciation If I sold the property $215,000-$143,000 = $72,000 (rough estimate)
The credit increase, landlord experience/reputation, and knowledge I've acquired today.

If I were to move out of this property realistically it would look something like this

Rents:

$850 + $800 = $1650

Mortgage

$912

$1650 - 912 = $738

And lets assume I have to allocate $200/ mo to repairs/maint etc fund

Net Cash flow $538/mo for a total personal cash input of $12k down +6k refinance.

What do you need to do this?

Cash: 10-15k
Credit: ~650+
A job with 2 years experience

Find a broker/realtor that invests in real estate and explain to them what you want to do
Find a mortgage broker to get you pre approved
Find the property that makes sense with you living in it to invest in
Buy it, repair it, and get it rented.

On a side note you should find mentors as well. I've got multiple incredible mentors that I will blatantly ask regularly where Im being stupid, where Im going wrong, what I should do differently, what they think of certain things im doing. I always make the final decision but I want to see how they think about it.

Just want to answer some statements made.

If you're not interested in flipping houses, why not take that $20k and invest it into a business. Grow and focus on that business, and down the road when it's successful, sell it and preserve your wealth with real estate.

I thought about slowly increasing my passive income through real estate back in the day as well, but when I looked at the numbers, $20k into my business makes me a lot more money than $20k into real estate.

Passive income is only nice when you have a large amount of money invested into it imo.

I don't agree with this. Living expenses is the BIGGEST expense in anyones life minimum of 30% of your after tax income goes to it. This almost isnt even about building passive income its about eliminating active expense and the income is a cherry on top. And running a real estate business is not a passive, preservation type of deal like most people think. The guys who are really killing it at the top aren't passive investors, they're actively managing, improving, finding, and growing the portfolios.

By doing this first, its allowed me over the past year to build a multi 6 figure e-commerce company because I literally leveraged the shit out of my financial position. If I had rent to pay I couldnt have been able to do it. I would take care of your expenses first to put yourself into a position to build a business after it's not hypothetical either literally I would have sunk myself if I had rent to pay.

I like the idea of going with the FHA loan and living there for a short time. At my age that is a pretty reasonable thing to do and I could get something else going in the meantime. Thank you.

This is crucial, but you need to ensure its multi family. The leverage you can create by putting so little down on multiple units is huge especially down the road as you have multiple tenants paying your property off, increasing their rents and forcing the value of your property to increase.

You can do whatever you put your efforts to. There is plenty of money in real estate. You can start with flipping houses to gain cash and experience. Then move to bigger projects as you progress.

Keep in mind that everything has a learning curve. Many people lose money on the first deal and give up.

This. Also here's just my thoughts. Im not looking for a short term thing. I've fully accepted im going to eat shit for the next 20+ years to get to where I want to be. With that being said, I wouldn't flip houses. You will incur capital gains taxes on the sale, your costs almost always increase based on some unforeseen thing and like @SteveO said, there's a learning curve. If it was a smoking deal and you knew you could make money on it and you could partner with someone who does flipping full time then maybe it'd be worthwhile to observe the process. Since you provided the deal and they provided the systems.

But if you think about it, real estate has a compounding effect and you don't get the full value out of it by selling it. I'd find a niche that interests you (multi family, storage, high price vacation rentals) and i'd master it, go deep on it and focus long term and focus on generating cash flow through your investments. If you're patient and willing to eat shit long enough you'll get out of the rat race relatively quickly.

There's your answer man

PS: Biggerpockets just came out with a podcast and book that you'd appreciate. The guy's 26 and he house hacks as well and he wrote a book on setting yourself up to do so. I read it and while I dont agree with all of it (i agree with more fastlane philosophies) I think his reasoning is sound for the majority of people especially those who want to get wealthy but aren't entreprenuers.

BiggerPockets Podcast 223: How to Become “Set for Life” Through House Hacking, Frugality, and Maximizing Your Income with Scott Trench

Book: Set for Life: Dominate Life, Money, and the American Dream.: Scott Trench: 9780997584714: Amazon.com: Books

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[mike24601]

Yes, i've been following this thread and reading the replies - just needed the time to reply in full, these answers tend to become essays.

I bought a duplex when I was 20 making 35k/yr using an FHA loan and put 7.5k down + 5k in repairs.

The duplex was 157,000 and each side would rent for $750 minimum ($1500 total) - with me living in it I would make $750 + $350(roomate) = $1100

My mortgage (with PMI) which is an extra insurance since its FHA, taxes, insurance came out to about $1097 at the time. I was only paying for the utilities which came to about $150/month.

May 2015 - Debt service (1097) - Income (1100) = net $3

2 years later (this month) I've refinanced the property into conventional (20%) and the value of the property in my area would sell for $200-220k. My rents are now $775 minimum and my mortgage is only $912. I still currently live in the property despite scrounging for any deal i can find but the area i live in is exploding in growth and property values no longer make sense to invest.

May 2017 - Debt service ($912) - Income ($1125) = net $213

this is my current situation after 2 years of work.

To refinance the property I also had to put down 6k but the reason I did that is because it dropped the PMI and freed up the FHA loan and dropped my payments which will pay off over the next 5 years.

Now I can repeat another FHA investment property as soon as I can find one.

This doesnt take into account the rent i've save over 2 years which is $400 * 24 = $9600
The equity appreciation If I sold the property $215,000-$143,000 = $72,000 (rough estimate)
The credit increase, landlord experience/reputation, and knowledge I've acquired today.

If I were to move out of this property realistically it would look something like this

Rents:

$850 + $800 = $1650

Mortgage

$912

$1650 - 912 = $738

And lets assume I have to allocate $200/ mo to repairs/maint etc fund

Net Cash flow $538/mo for a total personal cash input of $12k down +6k refinance.

What do you need to do this?

Cash: 10-15k
Credit: ~650+
A job with 2 years experience

Find a broker/realtor that invests in real estate and explain to them what you want to do
Find a mortgage broker to get you pre approved
Find the property that makes sense with you living in it to invest in
Buy it, repair it, and get it rented.

On a side note you should find mentors as well. I've got multiple incredible mentors that I will blatantly ask regularly where Im being stupid, where Im going wrong, what I should do differently, what they think of certain things im doing. I always make the final decision but I want to see how they think about it.

Just want to answer some statements made.



I don't agree with this. Living expenses is the BIGGEST expense in anyones life minimum of 30% of your after tax income goes to it. This almost isnt even about building passive income its about eliminating active expense and the income is a cherry on top. And running a real estate business is not a passive, preservation type of deal like most people think. The guys who are really killing it at the top aren't passive investors, they're actively managing, improving, finding, and growing the portfolios.

By doing this first, its allowed me over the past year to build a multi 6 figure e-commerce company because I literally leveraged the shit out of my financial position. If I had rent to pay I couldnt have been able to do it. I would take care of your expenses first to put yourself into a position to build a business after it's not hypothetical either literally I would have sunk myself if I had rent to pay.



This is crucial, but you need to ensure its multi family. The leverage you can create by putting so little down on multiple units is huge especially down the road as you have multiple tenants paying your property off, increasing their rents and forcing the value of your property to increase.



This. Also here's just my thoughts. Im not looking for a short term thing. I've fully accepted im going to eat shit for the next 20+ years to get to where I want to be. With that being said, I wouldn't flip houses. You will incur capital gains taxes on the sale, your costs almost always increase based on some unforeseen thing and like @SteveO said, there's a learning curve. If it was a smoking deal and you knew you could make money on it and you could partner with someone who does flipping full time then maybe it'd be worthwhile to observe the process. Since you provided the deal and they provided the systems.

But if you think about it, real estate has a compounding effect and you don't get the full value out of it by selling it. I'd find a niche that interests you (multi family, storage, high price vacation rentals) and i'd master it, go deep on it and focus long term and focus on generating cash flow through your investments. If you're patient and willing to eat shit long enough you'll get out of the rat race relatively quickly.

There's your answer man

PS: Biggerpockets just came out with a podcast and book that you'd appreciate. The guy's 26 and he house hacks as well and he wrote a book on setting yourself up to do so. I read it and while I dont agree with all of it (i agree with more fastlane philosophies) I think his reasoning is sound for the majority of people especially those who want to get wealthy but aren't entreprenuers.

BiggerPockets Podcast 223: How to Become “Set for Life” Through House Hacking, Frugality, and Maximizing Your Income with Scott Trench

Book: Set for Life: Dominate Life, Money, and the American Dream.: Scott Trench: 9780997584714: Amazon.com: Books

Looks like an interesting book. I will check that out next on my list. I was perusing the reviews and, as usual, there is always the one sidewalker who is unimpressed because the author didn't lay out a step-by-step gameplan to wealth. I've pasted the comment below for your enjoyment!



Ftr, if anyone knows how to swing say, a multifamily with 100 units on an FHA loan, let me know. I have a music festival in the Bahama's to trade.

 

[Duane]

Yes, i've been following this thread and reading the replies - just needed the time to reply in full, these answers tend to become essays.

I don't agree with this. Living expenses is the BIGGEST expense in anyones life minimum of 30% of your after tax income goes to it. This almost isnt even about building passive income its about eliminating active expense and the income is a cherry on top. And running a real estate business is not a passive, preservation type of deal like most people think. The guys who are really killing it at the top aren't passive investors, they're actively managing, improving, finding, and growing the portfolios.

By doing this first, its allowed me over the past year to build a multi 6 figure e-commerce company because I literally leveraged the shit out of my financial position. If I had rent to pay I couldnt have been able to do it. I would take care of your expenses first to put yourself into a position to build a business after it's not hypothetical either literally I would have sunk myself if I had rent to pay.

Just because you couldn't have built a business while paying rent doesn't mean other people can't.

The op didn't say he had problems paying bills. He said he was interested in what avenue to explore with his $20k. There's more than enough time in the day to start a business while keeping a job, but if you leverage a situation and live for free, then that's cool too, but it doesn't mean you're making real estate your main venture.

Real estate can be very passive with the a solid team, and it can also be full time. I wouldn't pursue the passive route unless it's to preserve the wealth built from a full time business.

 

[Envision]

Just because you couldn't have built a business while paying rent doesn't mean other people can't.

The op didn't say he had problems paying bills. He said he was interested in what avenue to explore with his $20k. There's more than enough time in the day to start a business while keeping a job, but if you leverage a situation and live for free, then that's cool too, but it doesn't mean you're making real estate your main venture.

Real estate can be very passive with the a solid team, and it can also be full time. I wouldn't pursue the passive route unless it's to preserve the wealth built from a full time business.

He was actually interested in if he could make real estate fastlane at 21 which is shown in my example above.

And it's not that you can't build a business with rent, but saving your monthly rent for inventory, loan payments, staffing, opportunity is huge.

But yeah, who wants to do that?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Duane]

He was actually interested in if he could make real estate fastlane at 21 which is shown in my example above.

And it's not that you can't build a business with rent, but saving your monthly rent for inventory, loan payments, staffing, opportunity is huge.

But yeah, who wants to do that?

Yes he is, but there are different types of directions you can go with real estate. The example you gave is how to leverage a situation so you don't have to pay rent/utilities and gain some equity in the process. I like that idea, it's smart to get out of paying some of your bills and I do something very similar. Yet I didn't have to pay anything out of pocket for the situation I've put myself in, but I also don't gain any equity.

If you were to give me $20k and I have no businesses and had to pay rent, I'd work a job and start a business with that money everytime over leveraging a situation to live for free. I'll live in a computer room on an air mattress for $100/month, eat rice and put everything I have into that business and it'll make way more than the $400/month and whatever equity you may or may not gain. Plus, you get equity from the business. Then you can do whatever you want.

But I'm confident in my abilities of making a successful business from all of the past experiences, if someone has zero knowledge in business it does change the situation. If it's going to take a long time to get something going and it be a success due to lack of experience, then why not put that $20k to work, live rent free and gain some equity while studying business. This usually isn't the case though here, most people I've met in person from this forum are pretty business savvy. Especially if they've read the book.

On the topic of making real estate fastlane, my own personal opinion is that buy and hold isn't a solid fastlane venture. It's a good exit strategy, but other than that it's 'get rich slow'. There are other directions to go in the business that I'm sure are great avenues to explore, but that's the only one I'm commenting on cause it's the one I understand.


This is all opinions though, maybe we can just agree to disagree.

 

[MidwestLandlord]

My idea of "Fastlane" as a start in RE is to own a duplex, live in half of it, and have your tenant pay the mortgage.

OP, don't underestimate the potential here ^^^^

Buy a duplex, have your tenant cover the mortgage and essentially live there for free (at the very least, much, much cheaper than renting or buying a single family home)

If you have no dependents and no debt, the rest of your monthly nut is what, $500?

$6,000 a year.

There's a million ideas for businesses on this forum alone that you could use to cover that much per year. Self-employed and controlling your own income and time in MONTHS...not YEARS.

Then, you can either keep working for yourself, or take a job, and save everything above your living expenses. Put that money into something that can explosively grow your income for the next 9 years, and think of where you'll be at age 30!

The only way your young age could hold you back is with financing. Banks like to lend to older people that are closer to death and have less years to pay their liabilities. (or something like that)

But other than having had less years to prove you are good at being in debt and a safe risk for the banks, your age only gives you advantages, not disadvantages.

 

[MitchM]

Yes, i've been following this thread and reading the replies - just needed the time to reply in full, these answers tend to become essays.

I bought a duplex when I was 20 making 35k/yr using an FHA loan and put 7.5k down + 5k in repairs.

The duplex was 157,000 and each side would rent for $750 minimum ($1500 total) - with me living in it I would make $750 + $350(roomate) = $1100

My mortgage (with PMI) which is an extra insurance since its FHA, taxes, insurance came out to about $1097 at the time. I was only paying for the utilities which came to about $150/month.

May 2015 - Debt service (1097) - Income (1100) = net $3

2 years later (this month) I've refinanced the property into conventional (20%) and the value of the property in my area would sell for $200-220k. My rents are now $775 minimum and my mortgage is only $912. I still currently live in the property despite scrounging for any deal i can find but the area i live in is exploding in growth and property values no longer make sense to invest.

May 2017 - Debt service ($912) - Income ($1125) = net $213

this is my current situation after 2 years of work.

To refinance the property I also had to put down 6k but the reason I did that is because it dropped the PMI and freed up the FHA loan and dropped my payments which will pay off over the next 5 years.

Now I can repeat another FHA investment property as soon as I can find one.

This doesnt take into account the rent i've save over 2 years which is $400 * 24 = $9600
The equity appreciation If I sold the property $215,000-$143,000 = $72,000 (rough estimate)
The credit increase, landlord experience/reputation, and knowledge I've acquired today.

If I were to move out of this property realistically it would look something like this

Rents:

$850 + $800 = $1650

Mortgage

$912

$1650 - 912 = $738

And lets assume I have to allocate $200/ mo to repairs/maint etc fund

Net Cash flow $538/mo for a total personal cash input of $12k down +6k refinance.

What do you need to do this?

Cash: 10-15k
Credit: ~650+
A job with 2 years experience

Find a broker/realtor that invests in real estate and explain to them what you want to do
Find a mortgage broker to get you pre approved
Find the property that makes sense with you living in it to invest in
Buy it, repair it, and get it rented.

On a side note you should find mentors as well. I've got multiple incredible mentors that I will blatantly ask regularly where Im being stupid, where Im going wrong, what I should do differently, what they think of certain things im doing. I always make the final decision but I want to see how they think about it.

Just want to answer some statements made.



I don't agree with this. Living expenses is the BIGGEST expense in anyones life minimum of 30% of your after tax income goes to it. This almost isnt even about building passive income its about eliminating active expense and the income is a cherry on top. And running a real estate business is not a passive, preservation type of deal like most people think. The guys who are really killing it at the top aren't passive investors, they're actively managing, improving, finding, and growing the portfolios.

By doing this first, its allowed me over the past year to build a multi 6 figure e-commerce company because I literally leveraged the shit out of my financial position. If I had rent to pay I couldnt have been able to do it. I would take care of your expenses first to put yourself into a position to build a business after it's not hypothetical either literally I would have sunk myself if I had rent to pay.



This is crucial, but you need to ensure its multi family. The leverage you can create by putting so little down on multiple units is huge especially down the road as you have multiple tenants paying your property off, increasing their rents and forcing the value of your property to increase.



This. Also here's just my thoughts. Im not looking for a short term thing. I've fully accepted im going to eat shit for the next 20+ years to get to where I want to be. With that being said, I wouldn't flip houses. You will incur capital gains taxes on the sale, your costs almost always increase based on some unforeseen thing and like @SteveO said, there's a learning curve. If it was a smoking deal and you knew you could make money on it and you could partner with someone who does flipping full time then maybe it'd be worthwhile to observe the process. Since you provided the deal and they provided the systems.

But if you think about it, real estate has a compounding effect and you don't get the full value out of it by selling it. I'd find a niche that interests you (multi family, storage, high price vacation rentals) and i'd master it, go deep on it and focus long term and focus on generating cash flow through your investments. If you're patient and willing to eat shit long enough you'll get out of the rat race relatively quickly.

There's your answer man

PS: Biggerpockets just came out with a podcast and book that you'd appreciate. The guy's 26 and he house hacks as well and he wrote a book on setting yourself up to do so. I read it and while I dont agree with all of it (i agree with more fastlane philosophies) I think his reasoning is sound for the majority of people especially those who want to get wealthy but aren't entreprenuers.

BiggerPockets Podcast 223: How to Become “Set for Life” Through House Hacking, Frugality, and Maximizing Your Income with Scott Trench

Book: Set for Life: Dominate Life, Money, and the American Dream.: Scott Trench: 9780997584714: Amazon.com: Books

Thank you so much for this response, it is everything I needed and more.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[MitchM]

OP, don't underestimate the potential here ^^^^

Buy a duplex, have your tenant cover the mortgage and essentially live there for free (at the very least, much, much cheaper than renting or buying a single family home)

If you have no dependents and no debt, the rest of your monthly nut is what, $500?

$6,000 a year.

There's a million ideas for businesses on this forum alone that you could use to cover that much per year. Self-employed and controlling your own income and time in MONTHS...not YEARS.

Then, you can either keep working for yourself, or take a job, and save everything above your living expenses. Put that money into something that can explosively grow your income for the next 9 years, and think of where you'll be at age 30!

The only way your young age could hold you back is with financing. Banks like to lend to older people that are closer to death and have less years to pay their liabilities. (or something like that)

But other than having had less years to prove you are good at being in debt and a safe risk for the banks, your age only gives you advantages, not disadvantages.

I'm convinced.

 

[Envision]

Yes he is, but there are different types of directions you can go with real estate. The example you gave is how to leverage a situation so you don't have to pay rent/utilities and gain some equity in the process. I like that idea, it's smart to get out of paying some of your bills and I do something very similar. Yet I didn't have to pay anything out of pocket for the situation I've put myself in, but I also don't gain any equity.

If you were to give me $20k and I have no businesses and had to pay rent, I'd work a job and start a business with that money everytime over leveraging a situation to live for free. I'll live in a computer room on an air mattress for $100/month, eat rice and put everything I have into that business and it'll make way more than the $400/month and whatever equity you may or may not gain. Plus, you get equity from the business. Then you can do whatever you want.

But I'm confident in my abilities of making a successful business from all of the past experiences, if someone has zero knowledge in business it does change the situation. If it's going to take a long time to get something going and it be a success due to lack of experience, then why not put that $20k to work, live rent free and gain some equity while studying business. This usually isn't the case though here, most people I've met in person from this forum are pretty business savvy. Especially if they've read the book.

On the topic of making real estate fastlane, my own personal opinion is that buy and hold isn't a solid fastlane venture. It's a good exit strategy, but other than that it's 'get rich slow'. There are other directions to go in the business that I'm sure are great avenues to explore, but that's the only one I'm commenting on cause it's the one I understand.


This is all opinions though, maybe we can just agree to disagree.

The only reason I'm going to respond to this post is because it's pretty clear that you dont know what you're talking about and I think it could impact someone the wrong way if they took your advice.

It's not opinion that buying a mf property leveraging it by living in one side and then renting it out when you are moving on will make you a millionaire - that's math. It is an opinion to state this, "If you were to give me $20k and I have no businesses and had to pay rent, I'd work a job and start a business with that money everytime over leveraging a situation to live for free. I'll live in a computer room on an air mattress for $100/month, eat rice and put everything I have into that business and it'll make way more than the $400/month and whatever equity you may or may not gain. Plus, you get equity from the business. Then you can do whatever you want."

And Im not saying to not start a business. I'm answering the ops question as to if he can make real estate fastlane at his age. But your response is not thought out and shows that you dont know what you are saying. Buy and Hold investing is a business not a passive income strategy. The wealthiest people in the world own real estate assets in some form of a holdings/investment company. I personally know of three guys in my state with real estate businesses that are primarily based in buy and hold multi family that range from 100 million to 1 billion in value.

It literally blows my mind that you said, "On the topic of making real estate fastlane, my own personal opinion is that buy and hold isn't a solid fastlane venture. It's a good exit strategy, but other than that it's 'get rich slow'. There are other directions to go in the business that I'm sure are great avenues to explore, but that's the only one I'm commenting on cause it's the one I understand."

Because it's clear you dont understand it.

 

[Duane]

The only reason I'm going to respond to this post is because it's pretty clear that you dont know what you're talking about and I think it could impact someone the wrong way if they took your advice.

It's not opinion that buying a mf property leveraging it by living in one side and then renting it out when you are moving on will make you a millionaire - that's math. It is an opinion to state this, "If you were to give me $20k and I have no businesses and had to pay rent, I'd work a job and start a business with that money everytime over leveraging a situation to live for free. I'll live in a computer room on an air mattress for $100/month, eat rice and put everything I have into that business and it'll make way more than the $400/month and whatever equity you may or may not gain. Plus, you get equity from the business. Then you can do whatever you want."

And Im not saying to not start a business. I'm answering the ops question as to if he can make real estate fastlane at his age. But your response is not thought out and shows that you dont know what you are saying. Buy and Hold investing is a business not a passive income strategy. The wealthiest people in the world own real estate assets in some form of a holdings/investment company. I personally know of three guys in my state with real estate businesses that are primarily based in buy and hold multi family that range from 100 million to 1 billion in value.

It literally blows my mind that you said, "On the topic of making real estate fastlane, my own personal opinion is that buy and hold isn't a solid fastlane venture. It's a good exit strategy, but other than that it's 'get rich slow'. There are other directions to go in the business that I'm sure are great avenues to explore, but that's the only one I'm commenting on cause it's the one I understand."

Because it's clear you dont understand it.

Nowhere in this comment have you actually given any real facts or even any value. You've done one deal in two years and say you know some successful guys, that's cool. But I'm going to break this down since it's clear you don't see the difference between passive real estate investing and a full time real estate business.

"It's not opinion that buying a mf property leveraging it by living in one side and then renting it out when you are moving on will make you a millionaire - that's math."

This is far from true, the math is pretty flawed. Your not going to become a millionaire from a duplex worth $200k. You'll make some side money and if you know what you're doing you'll gain some equity, but most people get burned their first few deals. It takes a lot of deals and time learning the industry to become a millionaire. I'd hate for someone to go into this thinking it's going to be a piece of cake money maker and that they get to live for free when that's not always the case. Falling on your a$$ and losing your $20k is a possibility, just as losing it starting a business is.


"Buy and Hold investing is a business not a passive income strategy. The wealthiest people in the world own real estate assets in some form of a holdings/investment company"

Buy and Hold can be a business depending on what you do. You can buy something that you know is worth more than what it currently is, and with some time and effort can bring its worth up to where it should be and make a decent cashpile from it if you sell the property. If you're not selling it, you raise the rents and rent it out. The large part of your income comes from sifting through tons of properties, doing deals and working. The income you get from renting the place out is low, so you need a lot of real estate to have a good rental income stream that you can actually enjoy a nice life with. So to make good money consistently, you're either constantly doing deals and selling houses, or finding someone with a lot of money and running the operation while they sit back. This is not the aspect of real estate that I'm talking about.


Passive buy and hold is when you have property managers and you're the one sitting back and chilling. The only thing you're doing is collecting checks, seeing pictures, and approving big repairs. You do the investing and everything else is done by your manager/team. It's a business yes, but it's a passive business that doesn't require your time and takes the allocation of a large amount of real estate before you're getting a large consistent income stream from the rent checks. There's no point in hiring a team until you have enough real estate that warrants it. $20k is not enough to warrant it, so you're going to be doing all the work yourself for it to make sense or else hire a property management company and losing 10% of the rental income, which is devastating to your passive income in the early stages.

Some people slowly build up a passive real estate stream over time, but the return they get from this is a lot less vs if they were to re-invest their money into a successful business. That's why I call it get rich slow because if your business has no ceiling in terms of scale, why play in real estate on the side rather than putting everything into your business. It's going to suck time and effort if you're running it yourself, and if you pay someone to do it for you, your profits are even more garbage until you actually have some real money to play with.

The smart players build a massive wealth through a business, exit and then invest into real estate to not only preserve their wealth, but also to maintain a solid income stream. Your big players you talk about that have 100 mill to 1 bill in wealth, they can be passive because the income stream is massive. But for your guys with $20k; they are either constantly hustling/working OR they are making like $500/month. If you want to constantly hustle, find deals, sell houses and build it up to a massive operation.. Why not make real estate that main thing until you can sit back and collect checks?

TL;DR I'm all for hustling and growing a real estate business, but if you're just in it for the $500/month and then you're gunna try to start your main business, you could have done it from the start. Maybe for you, you couldn't have made that e-commerce business a success without eliminating as many expenses as possible, but to me... It just sounds like the slower path to take.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Daniel Pitta]

Nowhere in this comment have you actually given any real facts or even any value. You've done one deal in two years and say you know some successful guys, that's cool. But I'm going to break this down since it's clear you don't see the difference between passive real estate investing and a full time real estate business.

"It's not opinion that buying a mf property leveraging it by living in one side and then renting it out when you are moving on will make you a millionaire - that's math."

This is far from true, the math is pretty flawed. Your not going to become a millionaire from a duplex worth $200k. You'll make some side money and if you know what you're doing you'll gain some equity, but most people get burned their first few deals. It takes a lot of deals and time learning the industry to become a millionaire. I'd hate for someone to go into this thinking it's going to be a piece of cake money maker and that they get to live for free when that's not always the case. Falling on your a$$ and losing your $20k is a possibility, just as losing it starting a business is.


"Buy and Hold investing is a business not a passive income strategy. The wealthiest people in the world own real estate assets in some form of a holdings/investment company"

Buy and Hold can be a business depending on what you do. You can buy something that you know is worth more than what it currently is, and with some time and effort can bring its worth up to where it should be and make a decent cashpile from it if you sell the property. If you're not selling it, you raise the rents and rent it out. The large part of your income comes from sifting through tons of properties, doing deals and working. The income you get from renting the place out is low, so you need a lot of real estate to have a good rental income stream that you can actually enjoy a nice life with. So to make good money consistently, you're either constantly doing deals and selling houses, or finding someone with a lot of money and running the operation while they sit back. This is not the aspect of real estate that I'm talking about.


Passive buy and hold is when you have property managers and you're the one sitting back and chilling. The only thing you're doing is collecting checks, seeing pictures, and approving big repairs. You do the investing and everything else is done by your manager/team. It's a business yes, but it's a passive business that doesn't require your time and takes the allocation of a large amount of real estate before you're getting a large consistent income stream from the rent checks. There's no point in hiring a team until you have enough real estate that warrants it. $20k is not enough to warrant it, so you're going to be doing all the work yourself for it to make sense or else hire a property management company and losing 10% of the rental income, which is devastating to your passive income in the early stages.

Some people slowly build up a passive real estate stream over time, but the return they get from this is a lot less vs if they were to re-invest their money into a successful business. That's why I call it get rich slow because if your business has no ceiling in terms of scale, why play in real estate on the side rather than putting everything into your business. It's going to suck time and effort if you're running it yourself, and if you pay someone to do it for you, your profits are even more garbage until you actually have some real money to play with.

The smart players build a massive wealth through a business, exit and then invest into real estate to not only preserve their wealth, but also to maintain a solid income stream. Your big players you talk about that have 100 mill to 1 bill in wealth, they can be passive because the income stream is massive. But for your guys with $20k; they are either constantly hustling/working OR they are making like $500/month. If you want to constantly hustle, find deals, sell houses and build it up to a massive operation.. Why not make real estate that main thing until you can sit back and collect checks?

TL;DR I'm all for hustling and growing a real estate business, but if you're just in it for the $500/month and then you're gunna try to start your main business, you could have done it from the start. Maybe for you, you couldn't have made that e-commerce business a success without eliminating as many expenses as possible, but to me... It just sounds like the slower path to take.

I agree with a lot of what you said. I also think that 'house hacking' and having your mortgage paid for (maybe even a little monthly cashflow) is a great idea to free up more cashflow to be reinvested elsewhere (other rental properties, your business, etc.). This is my plan for this time next year, and I will be debt-free as well (car and student loans paid off, mortgage paid for).

Not everyone is business savvy or even has any business acumen to go off of. So, it takes time to learn the ins and outs of starting a business, understanding your market/target demographic, fleshing out your processes, marketing, etc. This can take months or years, and there's no guarantee for success. I think that a lot of people ("the guys with $20k") have no idea how to start a business, where/what market to focus a business, etc., so they view real estate as a means to some level of passivity and an extra income stream. Listening to Bigger Pockets' podcast and browsing their forums regularly, it's apparent that there are multitudes of people in their 20s, 30s, and 40s making a substantial amount of money in real estate (be it buy-and-hold, flipping, wholesaling). Are these typically your uber-Fastlane multimillionaire Wolf of Wall Street types? Probably not, but you can definitely make good money in real estate, and it will always be in demand.

It sounds like you have your business strategy figured out and are gearing up for massive success, which is a great thing. Can you expand on what your business is, market, demographics, etc.?

 

[Duane]

I agree with a lot of what you said. I also think that 'house hacking' and having your mortgage paid for (maybe even a little monthly cashflow) is a great idea to free up more cashflow to be reinvested elsewhere (other rental properties, your business, etc.). This is my plan for this time next year, and I will be debt-free as well (car and student loans paid off, mortgage paid for).

Not everyone is business savvy or even has any business acumen to go off of. So, it takes time to learn the ins and outs of starting a business, understanding your market/target demographic, fleshing out your processes, marketing, etc. This can take months or years, and there's no guarantee for success. I think that a lot of people ("the guys with $20k") have no idea how to start a business, where/what market to focus a business, etc., so they view real estate as a means to some level of passivity and an extra income stream. Listening to Bigger Pockets' podcast and browsing their forums regularly, it's apparent that there are multitudes of people in their 20s, 30s, and 40s making a substantial amount of money in real estate (be it buy-and-hold, flipping, wholesaling). Are these typically your uber-Fastlane multimillionaire Wolf of Wall Street types? Probably not, but you can definitely make good money in real estate, and it will always be in demand.

It sounds like you have your business strategy figured out and are gearing up for massive success, which is a great thing. Can you expand on what your business is, market, demographics, etc.?

I understand what you're saying and a lot of it is completely true, but people get burned in real estate too just like with starting businesses. I appreciate your reply, your not just claiming to know it all and then backing up your statements by saying you know wealthy people.

But I've been burned before in trying to live rent free and other people I know have. I'm definitely for it, but be cautious if you're limited on cash. Most months go smooth, but I've had some bad months where I lost a bit of money as well and had to recover using money from my business.

If you'd like to know more about my businesses, I'd be happy to expand, inbox me. A brief overview is I have two companies; one is a start up energy company and the other is in the service industry. In the second company our biggest clients are property management companies. The energy company doesn't make any money yet, we run off private investments.