Young guns looking for some guidance

General Real Estate Investing
1

Me and my best friend are both 21 year old juniors in college majoring in finance. In a few weeks we will be taking our real estate exam to receive our provisional brokers license. We both have internships/ real estate assistant opportunities on the weekends while finishing our last 2 years of school as soon as we get our license. Entrepreneurship is in our blood and we know that REI is the route we want to pursue. We have strong family and friend relationships with a loan officer, home builder, general contractor, electrician, as well as a kitchen re-modeler.

With that being said we plan on being real estate agents for 2 years after college to receive our full brokers license so we could handle transactions ourselves (no longer having to split commission with a firm). If being a agent turns out to be lucrative for both us we would continue on with that using our income to invest in properties. If not we would have our degrees to fall back on to get jobs and still have our brokers license for family and friends on the side for extra income.

Our first investments would most likely be cheap houses close to campuses to rent to college students for some steady cash flow. I know a lot can change between now and 2-3 years when we would plan to do this but as of now their are multiple foreclosures close to campus that after doing the numbers (ROI after down payment, mortgages, property taxes, and modest maintenance costs) would turn out to be good investments.

My questions would be:

What others skills and trades could me and my best friend pick up (residential appraisers license, home inspector license, labor trades etc) could we pick up while we have this down time during our summers to diversify and expand our skill set in reference to real estate?

Starting off, with not much capital, would college rentals be a good route to take? With less risk compared to other real estate investing, steady cash flow, and the ability to purchase cheaper estate.

Is there anything that I am really over looking here? Or is there any guidance you could offer to us as young guys getting into REI?

Our ultimate goal would be to get to a point where we could ditch the “day job” and focus all of our time and resources into REI

Any comments or suggestions would be greatly appreciated. Thank you for your time.

2

Hi,

Boy is this a conundrum! I bought my first property right out of high school at 18 years old, and I work in the profession I intended as a youngster which was entrepreneurial endeavors; however I had to do my time and earn my way up the ladder to success and that meant paying my dues and gaining experience.

I have never ever wanted to be a real estate agent or broker as the average yearly earnings for a real estate agent is about $53k and average broker earnings is about $70k per year. This is full time income for experienced agents and brokers!

A college degree can be great text book knowledge but the real world is far different than any of my text books prepared me for and only after getting into my profession did I really understand the experience and knowledge I needed to gain.

When your an agent or associate broker your brokerage pays your insurance and employer contributions as part of your agreement, a lot of brokerages around the country now offer 100% commission however you pay for desk space, insurance, advertising, etc. as a percentage for each month.

Now starting to handle transactions yourself is great, fine and dandy but without the business knowledge and experience seeing and handling various issues you will have problems trying to define whether certain text or written contract language meets the definition defined by state and federal laws.

My mother was a broker who got her license after college and she apprenticed as an associate broker for about 5 years before she started running an office for a franchise owner and probable worked for another 5 plus years before she bought franchise rights and operated her own office. My mother was a licensed broker in 3 states at one time and very, very knowledgeable.

But you will find that being a real estate agent / broker will be a full time occupation unless you stop before you get started! Having a finance background you could probable make better income working forty hour weeks for a fortune 500 company and invest in real estate rather than sell / list real estate. Even working as a mortgage agent / broker probable provides better yearly income without the competition from other agents and brokers.

In fact I think real estate sales / listing will become more competitive as technology moves to define real estate agencies.

In stead of screwing around with selling / listing real estate why not move to buy a property right now near campus maybe needing work and rehabbing it around classes and getting it rented, maybe remodel room by room and make it a room rental type investment where you rent rooms in a furnished home.

Remember Uncle Samuel and your state gets something like 28 to 44% of your income depending on what area of the country you live in!

Your internship will only teach you about conventional listing / selling transactions and does nothing to teach you how to invest in real estate as real estate investing involves creative finance and at least 15 or 20 major area’s of investment.

Construction experience will help so go take a 40 plus hour per week job as a construction laborer and learn from the ground up, it really made me appreciate my comfy office, fancy cars and my Italian suites!

I also have a lot of respect for those people who work for a living and value the part they play in teamwork!

Good luck,

             GR
3

Being a college landlord would be a great start. See if you can find a local seasoned landlord to birddog and follow around. He can give you lots of tips and shortcuts and you can get some experience with renovating or helping him. Really search for that guy who is willing to help you, and you then help him for free.

Other tips: Get 12-month leases so your units are not vacant all summer. Get parent co-signors always. Partially furnish your units for more rent: bed, couch, desk, table, chairs, washer, dryer, frig, stove. Buy sturdy unbreakable dorm-type furniture at thrift stores and yard sales. Parents will definitely pay more to have that shopping burden off their backs.

There is a real estate guy that has a web site teaching how to do college rentals. I can’t remember who is is, but you can find it if you search. This is a niche market with guaranteed tenants. But it takes special rules to keep a lid on student rowdiness and unit damage.

Good luck and let us know how it goes. It’s a great plan and you will grow up much faster than your peers if you become the landlord.

Furnishedowner

4

Congratulations on having a goal.

If you want to learn how to invest, you might consider commercial brokerage. You can earn while you learn.

Your rehabber and banking contacts will be helpful for feedback and experience.

You’ll need to learn how to creatively finance real estate. Eventually you’re gonna run out of credit and down payments to qualify for conventional financing.

One of the best creative financing experts is Robert Allen. “Nothing Down: How to Buy Real Estate with Little or No Money Down” is his most well known book.

Meantime, anything you can get from the late Barney Zick is a great resource for both negotiations and options education.

You’re not going to get any creative financing ideas or training as a residential agent/broker. Mostly you’ll be taught that child molesters are more ethical and honorable than creative investors.

Creative finance is an anathema to agents, brokers, and re trainers. Don’t believe me?

Just make a ‘no down sub2’ offer on a house through an agent, and see how that goes.

Meantime, it’ll take you eons to create wealth following the convention of a residential real estate agent.

So, if I were 21 and wanting to use my knowledge and training for real estate investing, I would become a commercial broker first, and then learn to use OPM to invest in value-added projects.

Meantime, your skills and knowledge will become WAY more marketable and valuable in the multifamily orbit.

And just for giggles, commercial level sellers are easier to buy from and negotiate with then residential sellers. Commercial sellers won’t be struggling with moving away from the house where Jr. died, in the basement, after overdosing on a case of Twinkies. You know what a struggle that could be. :slight_smile:

Regarding your other questions…

Money: Use as little of your own money as possible. If you lose someone else’s money? Well, at least it’s NOT your money! (I’m just being a little facetious here.)

The best way to go broke fast, is to use your own money to buy real estate.

Finally, and this will sound harsh and mean, but you’re not really ready to succeed yet. You’ve already expressed doubt that you can succeed. You’ve outlined your “I’m gonna fail at this” back-up and fall-back positions. Forget that.

So, until you’ll decide that you’re going to succeed, period, you’re not really ready for prime time.

Did you have a back-up plan if you failed to get an education? Or did you just expect to graduate? If you maintained a backup plan, than you’ve short-changed yourself. Backup plans are for those who expect to lose, or are afraid to experience loss.

That’s not a winner’s attitude or mindset. That’s reserved for liberals and socialists.

Here’s a great video presentation by Tony Robbins (nothing to do with real estate) that addresses belief, modeling, and taking action.

http://sub2marketdomination.com/evp/?seed=tony-robbins

I could say much more, but I’ve got a box of Twinkies in the basement waiting for me. j/k!

5

Thank you all for your time and feedback.

Javipa,

I will definitely look into commercial brokerage. I will go out and get Rober Allen’s book sometime this week. And no offense taken I want the flat out truth, but I can assure you that fortitude and desire to succeed from past endeavors.

Furnishedowner,

I currently live in a duplex. After your post I called my landlord and it turns out he owns multiple college rental properties. He told me he would gladly meet with me and discuss some of his previous investments and help me out.

Gold River,

I hear what you are saying. I really don’t have much desire to be a full time real estate agent as a career. I just want to get my foot in the door and get some real estate experience and at this age and with some of the opportunities that me and my best friend have it just seems like a good start. My real goal out of this is to get my brokers license so that I can have the ability to be a buyer and seller agent from here on out to bring in some extra income from family and friends. I know that already from my class I have learned a lot that is absolutely necessary to have down for real estate investing (Liens, property taxes, real estate laws etc).

6

You have gotten some good responses. I started investing a week after my 16th birthday inspired by a brand new car called a corvette. I teamed with my older brother who was 19 and married thus having the legal capacity to contract, back then you needed to be 21. Ten years later I got licensed and as soon as I could I became a broker. You won’t regret it but don’t gear yourself toward the typical agent career.You will work niches that go along with your investing and team with a agent that has the normal career to handle the run of the normal type activity, giving you an income stream from that activity and not using much of you time.

I later had multiple offices but still focused mainly on my investing but that overhead in time and money of those offices was weighing me down, so I closed or sold all the offices except one small one and just kept 7 of my best agents and 12 good assistants that wanted to stay with the company. A few months later a broker friend of mine with a 500 agent company did the same thing. My only criticism, forget about a home inspection company, an appraiser, and other time wasting actions. Yes they can make you some money but the net income from that to you verses your staying on the mainline business income will result in less gross income to you. Even just owning those companies is not worth it, been there, done that.