22 Years Old and wanting more...

[geeman]

Well, here is my story. I just graduated from college in December. I found a job that pays $45,000 a year right out of school. I am a civilian system admin working for the Navy. I have just started maxing out my Roth IRA and I currently have $4,000 in it. I have some mutual funds, T Rowe Price ($4,000), Vanguard ($3,500), Money Market savings ($4,000).

I need more $$$. I don't want to be old and driving a Porsche, I want to be 23 and driving a Porsche I am thinking about investing in some real estate. Possibly flipping a couple homes and supplementing my current 9-5 job. There is no reason why I couldnt get an extra 30k, 40k, 50k a year doing this on the side...

My question is has anyone done this and what can you recommend me to do? Possible first steps. Any advise is appreciated.

 

[REWahoo]

I need more $$$. I don't want to be old and driving a Porsche, I want to be 23 and driving a Porsche ...Any advise is appreciated.

Immediate gratification...hmmmm...I advise you to buy lottery tickets.

And BTW, this is the Early Retirement forum, not the "get rich (or in debt) quick" forum.

REW

 

[Cut-Throat]

Oh! - You must be referring to the old 'Get rich quick plan'.

Not a lot of folks believe in that in this forum, but there are plenty of seminars out there that would love you as a student!

 

[greg]

In my opinion, you may want to look for the "I'm looking for a very risky but potentially lucrative, quick results investment so that I can buy a big, expensive SUV now" message board.

 

[justin]

Sell Get Rich Quick educational tapes. Start your own Get Rich Quick seminar telling others that the secret to getting rich quick can be learned by buying your Get Rich Quick educational tapes. You could makes millions!!!

*** disclaimer: results may vary

 

[BristolBane]

Geez.. lighten up people. The kid wants to know about RE investing. I think we have a few people here who made their fortune that way, at least in part. What a bunch of grumps!

I think you're off to a good start Geeman. $15,000 in savings at your age is pretty darn good. I don't have any experience in RE investing though.

 

[Martha]

Watch a new show on The Learning Channel called Property Ladder. http://money.cnn.com/2004/10/12/real_estate/investment_prop/flipping/

Sawpart of one of the shows. A young man bought a condo and rushed to fix it up to flip it for a profit. He tried to do the work himself with his dad's help, while holding down a full time job. Lots of risk. He really had to struggle to make the mortgage payments that came due as he was doing the work.

See, I can be nice.

 

[geeman]

The show Property Ladder actually peaked my interests in RE investing. There was one 23 year old girl on that show who made $37,000 in 3 months. It doesn't seem too difficult, though I understand it is a TV show... I'm not looking for a get rich quick scheme, per-se, I just want to get into the real estate business. I'm sick of a 9-5, and this is only after 5 months of the working world!!!

 

[Whakamole]

Sure, I have the investment for you.

Send me $10K. I may give you back $1M in the next year!

 

[geeman]

So I guess the concensus is to keep working my 9-5 and save every penny?

 

[justin]

I guess my joke post earlier may have been a bit harsh.

Maybe I can provide some real advice. I have some family members that are trying to make some money in the real estate game. I think they have the get rich quick mentality (for better or worse!). But what they are doing just might work. I'll explain what they do in general terms.

They will buy a house at a good price (at or below market value). Sometimes the house needs work. They work during the day as construction workers, so they know how to fix up houses themselves on the cheap. They fix the house up while they are living in it. When they finish repairing the house to a suitable condition, they will put the house up for rent for an amount sufficient to pay the mortgage, taxes, and insurance plus a little profit. When they rent the house, they buy a new house to live in and fix up and then rent out. Rinse, repeat.

Can you make money there? Maybe. But they know how to do serious home repair and construction jobs and they are willing to live the gypsy lifestyle to a certain extent. You also have to manage the tenants or pay a lot for management.

You could also try getting your real estate license and selling houses at night and on weekends. Or find a local real estate investors club and join their meetings/message board. Find out what they are doing. Chat up a few local realtors for some leads on some distressed properties. Find out from the realtors who you can talk to to find out more about real estate investing.

Change careers! Be a full time realtor. Or go work for a real estate developer. Work for a property manager. See how you like the industry. You're young enough to change jobs again if you don't like your job.

If this sounds like too much work, I have some reasonably priced Get Rich Quick tapes for sale that may interest you...

Also, more general advice: Don't buy a Porsche. Read The Millionaire Next Door or a similar book. Learn how to use Excel and start doing some financial planning .

 

[Mountain_Mike]

Geeman,

Keep working, keep saving, buy some houses and fix them up if you want to---but stay away from places like this until you're about 45 years old. Otherwise, you'll end up dreaming your life away.

-Mike

 

[JPatrick]

Hey, there's nothing wrong with wanting your Porsche at 23. That's provided that is way down on your priority list. When I was twenty something I knew many guys with big buck wheels and almost all had just that---a set of big $$ wheels. No savings--no house--just nice wheels.
OK you are different as you have already said and that's good. The flipping idea to me is a really bad one unless you really know what you are doing. The fact that the word "flipping" is so commonplace tells me that the game is almost over. The seminars in real estate remind me of the 40K day trading programs of the late nineties.
Depending where you live you ought to first buy your own place. After that experience you might want to get another and play landlord for a while and then flip it. (there I said it).

You don't say anything about the type funds you own. I'd recommend at least half of them be very aggressive. You have lots of time to recover from stumbles. Of course, promise to never pay a load, read and read until you are smarter than the average financial planner, never pay a penny in credit card interest and hopefully car loan interest, and realize the incredible power of compounding.

And by the way, those dream rides are fun at most any age. In fact they are more fun after 50.
Here's one of mine that I bought long ago and found that some things get better with age.
http://www.corvetteforum.net/classics/jpatrick/

 

[tozz]

You didn't say where you lived, geeman, but this doesn't seem like the best time to get into real estate.  The trickle of media articles concerning a possible real estate bubble has turned into a torrent, enough to cause the prophesy to fulfill.  

You've heard it before, but be sure you max out your TSP contributions, preferably in the C Fund (given your age).  

 

[geeman]

Yea, I guess you are right, I should buy my own place first.

Here are my assets so far...

T Rowe Price:
I have Mid-Cap Value $1045 - invest $100 a month
New Asia $465 - invest $100 a month
Retirement 2040 $900 - invest $200
Real Estate $1030. - invest $100 a month

Vanguard (Roth IRA):
Vanguard 500 Index Fund Investor Shares ($4000) - Invest $85 a week

Capital One Money Market 3.15% (4,000) - save $500 a month

Sharebuilder:
Sirius Sat Radio = 15 shares = ($90)
Busweiser = 5 shares = ($230)



BTW: I just got Quicken 2005 Premier to help with my early retirement

 

[geeman]

You didn't say where you lived, geeman, but this doesn't seem like the best time to get into real estate. The trickle of media articles concerning a possible real estate bubble has turned into a torrent, enough to cause the prophesy to fulfill.

You've heard it before, but be sure you max out your TSP contributions, preferably in the C Fund (given your age).

I live near Baltimore, MD.

 

[justin]

The Quicken '05 is a good purchase! It is important to save some of what you earn and invest it wisely. I prefer excel to quicken, but then again I don't track every little expenditure.

You didn't mention your debt situation. Since you said you recently graduated from college 12/2004, I assume you have the credit card/college loan/car payments like most other grads. Correct me if I'm wrong though. A lot of people that end up at this board are unique when it comes to money management, and you may be unique in having no debt as well! You may want to list your debt, percentage rates and repayment structure, since getting rid of high rate debt can be the best option for many young people. Getting rid of debt can also help you get into your first home a lot easier. Although homes in the Baltimore MD area may be on the edge of a bubble. I don't know much about Baltimore real estate though.

 

[riskadverse]

I bought my current house from a doctor who flipped houses.  He bought one every 2 years, made it his principle residence, and became the general contractor for fixing it up.  He currently lives in a 2+ million dollar ocean view house which he swears is the last.   In hindsight, it looks like the smartest thing.  Your mileage might vary.  Frankly he struck me as a compulsive workaholic who could have retired at a younger age than I did - and still afforded that ocean view house.  

 

[geeman]

I don't have any debt. I can thank my parents for paying 4 years of college and I drive a 1992 Honda Accord with 200K miles that was given to me by my parents. I live with my parents for the time being.

 

[moghopper]

I don't have any debt. I can thank my parents for paying 4 years of college and I drive a 1992 Honda Accord with 200K miles that was given to me by my parents. I live with my parents for the time being.

Your parents charge rent?

Are they looking to adopt?

 

[geeman]

Your parents charge rent?

Are they looking to adopt?

Haha, no rent.

 

[SLC Tortfeasor]

Like most others here, I agree that getting into flipping probably isn't a wise move for you.  With so many people in the game now (and probably 98% of them are more experienced, and better financed than you) I would think there's really not much more "low-hanging fruit."  That means even more risk for you.  I'm no expert on the real estate business, but it seems to me that even working as a realtor these days is a lot more competitive than ever before.

What I've learned in the mere seven years since I was in your shoes is that if you want to truly make a lot of money, and escape the 9-5 grind, you need to be an entrepreneur.  But again, more risk.  There are a lot of very smart, very business savvy people in this country who have poured their hearts and souls into great business ideas, and they've failed regardless.  

On the other hand, I have to admit that there is also a disturbingly high number of average Joes who took some risks and bumbled into some good luck, and now they're driving shiny new 911s.  As a lawyer, I'm a paid servant for them, working by the hour to help them build their empires.

You're clearly willing to take some risks.  But my advice to you would be to take reasonable steps to try and minimize those risks.  Consider getting an MBA from a well-respected program before starting up your own business.  You may find it makes more sense to go to work for a big company, get some great experience, network, and build connections with people who can help you, and then set out on your own when you've built a strong foundation for success.  All the while you'll be living below your means and saving your money so that you can make smart investments when opportunities present themselves.

Don't buy a car unless you can pay cash or only need a tiny loan.  Don't try to keep up with the Joneses.  You'll end up an indentured servant to lending institutions.

My last piece of advice is to listen to this guy:

Geeman,

Keep working, keep saving, buy some houses and fix them up if you want to---but stay away from places like this until you're about 45 years old. Otherwise, you'll end up dreaming your life away.

-Mike

As for me, I'm hooked on this board at too young an age, and it's making it hard for me to concentrate on building my career. I've got to be careful that I don't end up dreaming my life away!

Good luck.

 

[HockeyMike35]

I watched that show this weekend. They had two women who made $17,000 on a 4 month flip. In small print they mentioned this was before realestate fees. The math they did....

$117,000 sale price - ($52,000 purchase price +$50,000 upgades) = $17,000

Real math

$117,000 sale price - ($3000 closing cost + $52,000 purchase price +$50,000 upgades + $6000 sales comishion) = $8,000

Not to mention split two ways, the time they spent, taxes, and to happen to be doing this during an incredible real estate boom.

I am not saying people can not make money flipping properties but it is not as easy as a TV show tries to make it look.

 

[justin]

That $8,000 is still not a realistic amount. You have the insurance, property tax, and mortgage to pay while you own the house. For 4 months, it would probably be $3000 or so. So you may net $5k to be split 2 ways. Do some sensitivity analysis on the deal. If the sales price was 5% lower ($5850 less) then you would net $2k. Or, if the time on the market to sell the house was 4 more months, you would net $5k. What if you discover that an interior load bearing wall is rotten after you start fixing it up and have to shore up the house structurally then cosmetically fix the wall. Thousands of $$ down the drain. Those last 3 what ifs could easily have happened. Bottom line, you aren't going to make a lot of money. But you will have a very hectic life for the 4 months you own the house till you sell it(or 6 months or 10 months...).

You could probably get a second job and work 10 hrs/wk and make more money than you would with house flipping. Or become an entrepreneur. Sell your services on the side and make some quick cash. Bottom line, I don't think there is an easy way to make a lot of money quick. But it sounds like you are on the right track. Heck, live with your parents for a few more years and save, save, save.

 

[P.S.]

I need more $$$.  I don't want to be old and driving a Porsche, I want to be 23 and driving a Porsche   I am thinking about investing in some real estate.  Possibly flipping a couple homes and supplementing my current 9-5 job.  There is no reason why I couldnt get an extra 30k, 40k, 50k a year doing this on the side... 

My question is has anyone done this and what can you recommend me to do?  Possible first steps.  Any advise is appreciated.

Here's my opinion, maybe will offend but I'm not feeling in a diplomatic mood.
You don't need more money, you need to rethink your priorities.

Also, you need to pay your parents rent, market value.  Doesn't matter if your parents don't need the money or don't want your money.  And if you're Asian, then you really should be insisting to pay your parents rent.  If they return your checks, set up an account in their names and deposit monthly, giving them the statements.  

And yes, I have done this, bought first property about 25 miles south of you in Chevy Chase at the age of 20.  What motivated me was not making money, but having my "own" place, someplace to fix up.  Parents walked me through it, but I used the money I saved from a summer job to pay the 20% down and closing costs.  

Read every book on real estate investing at your local library. Keep saving money.  And when you're done reading, if you still want to do RE investing, then do it the proper way, none of this interest only mortgage garbage etc.