Buying a house -- in college?

[Nocturnal]

My grandmother recently decided to sell her house and move in with my mom, and since she's having knee surgery soon, my brother and I have been doing quite a bit of work on her house so it will be ready to sell. The real estate agent she's selling it through is a friend who's stopped by a few times, and today I had a short discussion with her.

I asked how she got into real estate, and she said that with her husband working, she could focus on getting certified, etc, as a real estate agent. She asked why I was interested, so I told her that I'm considering real estate as one of a few possible investment strategies to pursue after I finish college. She asked me if I owned a house, and when I told her no, she asked, "why not?"

She had to leave but I was left in deep thought about just why I haven't considered investing NOW instead of later. After all, if I could pull it off now, by the time I got done with school I wouldn't have to worry about transitioning into it at all! I could do that now while I still have plenty of free time and options. With a loan, a small down payment would be all it would take to purchase a small property. I could rent it out and then sell it after I graduate.

I don't know how practical it would be, but I've definitely heard of people taking similar actions so I doubt it's impossible.

So I ask anyone here with experience to point me in the right direction... if I were to do this, what would I need? I have virtually no credit history so I'm sure that is my greatest disadvantage. Would I have to go into it with a parent or something? I don't know if my parents would trust me with that much responsibility, especially since they live so far from school, meaning they would be unable to get deeply involved. If I found a partner to do it with, would things be easier?

Is this at all realistic?

Thanks

 

[penkitten]

see if you qualify for a usda rural development loan or a hud loan. the interest rates are great and can be based on your income . while you are in school that would be great for you.

later you can always sell it if you want.

usdaruraldevolpement.com
hud.org

 

[DJDamage]

wow pen I think you established some kind of record, the most posts in the least amount of time..... had too much coffee before bed time or what???

 

[penkitten]

Originally posted by DJDamage
wow pen I think you established some kind of record, the most posts in the least amount of time..... had too much coffee before bed time or what???

are you spying on me?lol

 

[DJDamage]

Originally posted by penkitten
are you spying on me?lol

You wish. Your name appeared in every catagory on the DJ forum for a brief 2 mins. It seemed that there was only one poster in this entire forum.

 

[sifer]

Originally posted by Nocturnal
I don't know how practical it would be, but I've definitely heard of people taking similar actions so I doubt it's impossible.
That's right! It is not just possible, it's more than plausible, it's extremely possible!

So I ask anyone here with experience to point me in the right direction... if I were to do this, what would I need?
You need your first asset ready. This very asset is between your eyes. Develop it and you have a lot.

I'm going to say to listen to yourself. Not penkitten, not exactly I either.

A USDA Rural Development Loan or HUD Loan is not useful to you right now. You have no idea what these means!

Try finding out what you want to do. Try to find out your own niche, your own strength and weakness.

I have virtually no credit history so I'm sure that is my greatest disadvantage.
Credit history is easy, too damn easy to establish. I established mine the minute I got to the age of 18. It's developing a history that's tough because that takes time.

Would I have to go into it with a parent or something? I don't know if my parents would trust me with that much responsibility, especially since they live so far from school, meaning they would be unable to get deeply involved.
Every disadvantage is actually an advantage. By not relying on your parents, whenever you fall, you do not have to worry about your parents, you just have to worry about yourself.

If I found a partner to do it with, would things be easier?
It may be, it may not be. I currently work with a partner. My plans for this year require that I work without a partner. Just adjustments you have to make and the situation you're in, that's all.

Is this at all realistic?
Like you said, "defeat your ego". Think outside of the box. Your ego has you trapped thinking about doubts.
Imagination was said to be far more important than knowledge, yet imagination isn't real at all.

Imagine.

 

[Page]

You're on the right track, but....

Don't waste your time with getting a real estate license if you just want to invest. In fact, having a license is a hinderance b/c by law you have to mention it when you deal, (this also puts the seller on guard, and having good laid-back rapport with the seller is the source of much of your leverage) and you can't use other agents very well b/c they view you as a competitor if you have an active RE license.

The way you build a real estate empire is with borrowed money, so your ability to borrow huge ammounts of money is CRITICAL to your ability to pull this off. Bankers and other lenders take your credit into account, but not as much as the average person would think. The PRIMARY thing that determines if oyu get the loan or not is how the lender feels about you. So, if lender A says to lender B, "That Nocturnal guy has great credit, but I just don't have a good feeling about this" you're probably not going to get the loan. Lenders do all kinds of stupid sh!t that makes no sense to anyone but them, but you can easily learn the ropes and learn how to think like one of them. Be friendly with the people you borrow money from, and develop a good friendly relationship with them. In all effects, your primary lender is your new best friend b/c they're the ones that you have to go to to get cash.

Another thing that lenders take into consideration is your ability to pay the loan back, so you definitely need to have some income before you even think about starting to buy assets. Once yo ustart accumulating assets, your cashflow will ensure that this problem takes care of itself. In time you won't even need your job anymore.

In the meantime, cool your jets and relax a little bit. You're not out of school yet and now you need to get a career first to have a source of income to show your lenders. (don't worry--- you're not going to be locked into working until age 65 like everyone else, not now that you know about all this-- think of it as a short-term career) In the meantime, start working on your credit (that's what I'm currently doing) and read the following books if you haven't already:

1. Rich Dad Poor Dad by Kiyosaki -- read this one first, then read any of the others in any order. Reading this book is like getting unplugged from the matrix-- it opens you up for everything else.

2. Building Wealth by Russ Whitney -- this book has all the nuts and bolts to help you get started, namely how to get loans and how to do well as a landlord.

3. Cashflow Quadrants by Kiyosaki (I just finished this one, and it was like getting a second set of eyes) -- this teaches you all about the more advanced features of cashflow

4. The Art of the Deal by Donald Trump -- this book is worth its weight in gold to me. Although old, it is still relevant. Trump goes into how to use leverage in deals and how to look for opportunities in commercial real estate (which is something I will get into, eventually). This book is different from the others in the fact that the things oyu should learn are not spoon-fed to you here like in the other books, you have to figure it out based on what Trump has written.


Hope this helps.

 

[sifer]

Originally posted by Page
Don't waste your time with getting a real estate license if you just want to invest.
BINGO! A REA cannot invest as easily as a REI without a license can.

In fact, having a license is a hinderance b/c by law you have to mention it when you deal, (this also puts the seller on guard, and having good laid-back rapport with the seller is the source of much of your leverage) and you can't use other agents very well b/c they view you as a competitor if you have an active RE license.
Not only that, the knowledge you learn in becoming a REA is not the same knowledge you want as a REI.

The way you build a real estate empire is with borrowed money, so your ability to borrow huge ammounts of money is CRITICAL to your ability to pull this off.
From my experience, I say this is the small part, borrowing money that is. Here's why.. refer to below.

Bankers and other lenders take your credit into account, but not as much as the average person would think.
While they do so, you must account for connections! A REI with bad credits but great connections will inevitably borrow more easier than a REI with great beautiful credits but nearly no connection.

The PRIMARY thing that determines if oyu get the loan or not is how the lender feels about you. So, if lender A says to lender B, "That Nocturnal guy has great credit, but I just don't have a good feeling about this" you're probably not going to get the loan. Be friendly with the people you borrow money from, and develop a good friendly relationship with them.
EXACTLY! You hit it on spot Page! I have seen people with 100% credit rating but get rejected because in business, they have an extremely bad reputation (in fact, I know one, he's an associate of mine, he is a man with absolutely no character, like most people I have encountered in business).

In all effects, your primary lender is your new best friend b/c they're the ones that you have to go to to get cash.
Yup, be nice to everyone, be great to everyone, help everyone. By becoming a man with true virtue and character, people will be more willing to accept you. If you one day fall and lose your empire, if you are truly a man with character like Jesus Christ or George Washington or Abraham Lincoln, they wouldn't even mind supporting you while you rebuild.

Another thing that lenders take into consideration is your ability to pay the loan back, so you definitely need to have some income before you even think about starting to buy assets.
This isn't hard, as I have said earlier. Yes, large national and conservative banks that consider your ability to repay also consider whether if you have a job or not. And guess what!? Most full-time landlord or REI do not have a job. A good lender (while with few downside such as high interest rate) will lend as long as you can prove that you can pay back, they'll be more than happy to lend you the money.

Remember, banks WANT to lend you money. They have to. It's how they can afford food on their table. They are there to lend as much money as possible, not reject applications.

Once yo ustart accumulating assets, your cashflow will ensure that this problem takes care of itself. In time you won't even need your job anymore.
Or invest smart and have the very first asset take care of your problems. If your building can't take care of your cashflow, it's not an asset!! It's an aligator waiting to bite you and take you in with them!

In the meantime, cool your jets and relax a little bit. You're not out of school yet and now you need to get a career first to have a source of income to show your lenders. In the meantime, start working on your credit (that's what I'm doing)
While you're in college, you have no doubt already have some debt, large or small, they are still debt. And chances are, they are also negative debt too! If you're going to do this slowly, get rid of negative debts and prepare to build yourself a balance sheets full of positive debts!

Critical question, why are you interested in getting into REI?

 

[Page]

Originally posted by sifer
While you're in college, you have no doubt already have some debt, large or small, they are still debt. And chances are, they are also negative debt too! If you're going to do this slowly, get rid of negative debts and prepare to build yourself a balance sheets full of positive debts!

From my experience, carrying a little bit of CC debt is alright, as long as you manage to keep it under control and not let it get out of hand (I know someone who maxed out a credit line of $5000 and now he's busting his a$$ to pay for it along with his tuition, etc.) I keep a spreadsheet of every credit card expense, and I know down to the last penny how much I have on my card, and I even calculate interest. My books are probably better than my creditors' books, I know for fact that they are way more current. I can carry that cost easily, and as long as I manage to pay it off in full every few months, I don't see a problem. I buy luxury items like DVDs like everyone else, I'm not made of stone. However, I keep tight control over what I buy. I treat my CC like it's cash, I only buy what I know I can afford, and i don't charge anything until I have the cash to cover it. The thing creditors want most of all is to be paid on time.

In the past, credit cards were the worst things you had to look out for, but now you have those payday advance places, and that is the absolute worst consumer debt that there is. I know someone who borrowed $1000 from one of these places and was charged 300% interest. The poor b@stard now curses the day he was born. These payday advance places are to be avoided like the plague in my book--- I'd feel better dealing with the mafia, b/c then I'd know where everything stands. These advance places try to sucker in college students that are strapped for cash, and to me that's very unscrupulous at best and illegal at worst. Some states have already made it illegal.

Bankers that issue good loans at reasonable rates are very conservative for a reason--- they want the loan repaid, and they are not willing to throw money at some fly-by-night scheme that some whino brings in. These payday advance places are totally different b/c they can carry the risk of issuing loans for paying consumer expenses (which is something that no banker in his right mind would do) b/c the advance place is gouging their other customers on interest. It's practically zero-risk for them, b/c they get every loan back at least twofold. (and get this: I've heard that the rates can go as high as 1700%) That's why you don't need proof of income or collateral at those places-- your immortal undying soul is their collateral. I'm kidding but not really.

 

[Joe The Homophobe]

Many if not most of the get rich gurus have been exposed as shady characters. Many have had troubles with the law and been in jail.

Do their systems work? what works for some might not work for you. Many have used real state buying systems and have ended up bankrupt and in jail. Becareful when it comes to buying real state buying systems. If you want to try it for yourself borrow their products from someone, get it at the library if available. Don't spend money that might be a waste. I have read of cases where people order real state buying systems by phone for less than 50 bucks just to try them out and they could be returned, and they end up getting charged in the hundreds of dollars in their credit cards for extra stuff. You have to becareful.

 

[Page]

Originally posted by Joe The Homophobe
Many if not most of the get rich gurus have been exposed as shady characters. Many have had troubles with the law and been in jail.

Do their systems work? what works for some might not work for you. Many have used real state buying systems and have ended up bankrupt and in jail. Becareful when it comes to buying real state buying systems. If you want to try it for yourself borrow their products from someone, get it at the library if available. Don't spend money that might be a waste. I have read of cases where people order real state buying systems by phone for less than 50 bucks just to try them out and they could be returned, and they end up getting charged in the hundreds of dollars in their credit cards for extra stuff. You have to becareful.

While you should take the info with a grain of salt, what people like sifer, Str8up, Kiyosaki, Whitney, myself, and many others advocate is to acquire income-producing assets to create a perpetually positive cashflow.

There's no gimmick involved, it's simply acquiring things that place money into your pocket instead of acquiring things that take money out of your pocket. This is hardly a get rich quick scheme--- you will spend years doing it, and you will have to bust your a$$ at first until the process becomes self-sustaining, but it sure beats the alternative of working hard for money your whole life and retiring with barely anything.

Now some people's motives are questionable-- John T. Reed, for example. He visibly goes out of his way to defame kiyosaki and his techniques, but the bad part is that Reed is at the same time advocating his own system. To me, that's a conflict of interest. I haven't reviewed Reed's system, but while the info itself may be good, the way he trys to sell the system isn't good at all.

 

[SheepSter]

I don't know how this is arranged in the States. I only know that the saving quota is very low, so it might be easier to get a mortgage. Here in the Netherlands it's impossible if you can't prove you have a steady monthly income. However there is a way to get a huge amount of money. And I believe that this might work in the States too. Unfortunitly it's quitte risky.

What I know is that the credit card providers have no trouble giving out credit cards to students/young people that basically can't prove they can pay. I saw a program the other day and there was some headman of a commission complaining how these credit providers lack the moral obligation to thoroughly check out some of their customers before they start providing. Along with this guy were four young people ranging from 18 to 22. The lowest had a debt of 6000 euro, the highest a debt of 32000 euro. The guy that had the highest debt didn't even have a job. So basically you can get in alot of trouble with these credit cards but it does give you the oppertunity to get your hands on money.

Ofcourse the people that get in these huge debts by plain consuming are utterly stupid. You can however put money in obligations or futures by using a credit card. You could try to use different credit cards and put more money in there. Now especially triple A rank obligations are very safe, the problem is most of the time you'll have to wait three to five years before you get cashed out. Here comes the risky part if you want the cash ASAP. You'll have to go into warrants or stock options. The key here is information. There's enough out there, if you an find the correct, big profits await. Still if you just diversify your portfolio (considering you'll know what you're doing) chances are you'll make a profit. Maybe not so big but that doesn't really matter. And since you're thinking short term it's likely you'll play equal.

Most importantly though you will be cashed out. Unfortunitly taxes will have to be paid. Most countries like their investors though and these taxes aren't the highest out there, for example in the Netherlands it's 1,2% (4% over 30% of your assets). So now that you have the credit in your bankaccount you're officially financially independent (ofcourse that is just a farce). Now you can get the mortgage. Never give a down payment with loaned money though, that's just increasing the risk. And talking about risk, if your investment failes using this method you will be in big trouble.

Best is to let your parents invest with the money they can get from the space between their mortgage and the absolute value of their house (taking that the value rised). This has many advantages. Still I would never go into real estate if I did not have a buffer of some kind.

 

[Reiki]

I live in the netherlands too (Den haag), and I've been reading alot of books since I read RDPD, in a few years I want to get into REI.

The question I want to ask is, how much of the knowledge in REI books can apply to the Netherlands? I think that its harder to get a loan here, and even harder to be financially independent..

 

[sifer]

Originally posted by Joe The Homophobe
Many if not most of the get rich gurus have been exposed as shady characters. Many have had troubles with the law and been in jail.

Yes. This is something I want to cover if I can write about it. I just need to find time for it.

Do their systems work?

You must remember, exactly what system?

As a Don Juan, were there any specific system given to you? As in, "say exactly this in 4 second, take 17 steps back, walk right, etcetc"? Everything were handed to you as a guide and you developed yourself. In REI and in business, it works exactly the same way. The thing about the two field is this, you MUST take your own action whereas a job, they give you job training, they give you the time on when to get to work, etcetc. You do exactly as they tell you. You don't make decision in your job.

what works for some might not work for you.

This isn't always so.

Many have used real state buying systems and have ended up bankrupt and in jail.

While I do know people do go bankrupt, this isn't a problem, the problem is going to jail.

I don't know about this, I think you're talking about illegal schemes and people advocating the extremes. Otherwise do you have some sort of links or something to show people have gone to jail for buying real estates?

Becareful when it comes to buying real state buying systems. If you want to try it for yourself borrow their products from someone, get it at the library if available. Don't spend money that might be a waste. I have read of cases where people order real state buying systems by phone for less than 50 bucks just to try them out and they could be returned, and they end up getting charged in the hundreds of dollars in their credit cards for extra stuff. You have to becareful.

Yes, this is exactly what happens when you get greedy!!! I have described this before, I have said that if you see a course that says you can get rich in a short timely manner with no risk, inevitably it's a scam! Most of these scam guarantee it too!

 

[sifer]

Originally posted by Reiki
I live in the netherlands too (Den haag), and I've been reading alot of books since I read RDPD, in a few years I want to get into REI.

Great, the most important thing is that you want in. When there is will, anything is possible!!

The question I want to ask is, how much of the knowledge in REI books can apply to the Netherlands?

Since I do not live in Netherlands, I cannot answer you directly. I shall tell you this, laws in the United States are different from state to state. Paperwork will be different, etcetc. In a way you can say that each state is its own country.

So to answer that question, I'll say that none of the knowledge you read in the books can be applied as per se, it must be tailored to your state, law, and position you're in.

I think that its harder to get a loan here, and even harder to be financially independent..

Perhaps it is, perhaps not. Unless you live in a Communist-based nation like China where you must work, this attitude you have now isn't adviseable. Anything you do not understand or do not know you shall fear. What you fear you shall back away from. Do not let fear defeat you! Learn about your country's law! Learn about real estate and how it works in your country! Defeat your fear! Tell it that you shall do this no matter what! Tell your biggest fear that if you don't make it, you will die! You will go through all hell necessary to make this!

 

[Reiki]

Perhaps it is fear, since I don't really know how it works, I am pretty sure I will reach financial independence though! I've been thinking about it since I was 15 years old, its the same thing I think about when I go to bed, right now, im taking Kiyosaki's advice, invest in yourself first.

I was originally going to be a computer science major, I've changed my mind and im going to be an entrepreneurship major instead, my parents want to pay for college, so I might just use it as a tool to create contacts, establish a profitable business, and invest my hard earned money into RE.

I got 1 more year of highschool to go, still learning/reading alot about creativity/entrepreneurship/RE/interpersonal relations.

 

[Nocturnal]

Re: Re: Buying a house -- in college?

sifer:

Originally posted by sifer
Try finding out what you want to do. Try to find out your own niche, your own strength and weakness.

That is absolutely my plan in the long term, as well as the short term. But short term I'm really trying to find something to give me a head start by the time I graduate, and REI seems like a good opportunity for that.

Originally posted by sifer
It's developing a history that's tough because that takes time.

I do have a credit history established, but it has not been developed at all. What are some guidelines I should follow to develop it quickly?

Really what I mean when I ask about doing it with a partner or my parents, is whether it is possible for me to do it myself at the moment. The more I inquire, however, the more plausible and possible it appears to be.

sifer -response to Page

Originally posted by sifer
Most full-time landlord or REI do not have a job. A good lender (while with few downside such as high interest rate) will lend as long as you can prove that you can pay back, they'll be more than happy to lend you the money.

Ok. What I really need to know is HOW do I prove that I can pay the loan back? I have no real investing history, no real source of income, no business reputation. I have no experience as a landlord so the best I can do is tell them my plan... but will that be enough?

Originally posted by sifer
While you're in college, you have no doubt already have some debt, large or small, they are still debt

When my grandfather passed away, my uncle took control of a trust that he set up before he died that basically pays for any education expenses I have. I haven't taken out any student loans, I don't even receive financial aid. I do have debt (about $1500 now), but it is to my father for crashing my friends car last year.

Originally posted by sifer
Critical question, why are you interested in getting into REI?

Answer: I want freedom. I don't want to end up working for someone for the rest of my life. I don't want to have to worry about money. I want to be able to not work. And REI sounds like a good option.

Page:

Originally posted by Page Don't waste your time with getting a real estate license if you just want to invest.

That's what I figured.

Originally posted by Page The PRIMARY thing that determines if oyu get the loan or not is how the lender feels about you.

What different kind of lenders are there, and which would be best for my situation?

Originally posted by Page Another thing that lenders take into consideration is your ability to pay the loan back, so you definitely need to have some income before you even think about starting to buy assets.

This seems like a very important point. I have no physical assets so I'm guessing that having a job becomes an important issue... this last year I had a 10 hr/week minimum wage job, would I need to seek out something that would pay substantially more? Since my job would be my only source of positive cashflow, what would I realistically need to convince lenders that I won't bring them down with me if my plan falls through?

Originally posted by Page
In the meantime, cool your jets and relax a little bit. You're not out of school yet and now you need to get a career first to have a source of income to show your lenders.

That's what I was worried about, it seems having an initial source of income is my problem...

Originally posted by Page In the meantime, start working on your credit (that's what I'm currently doing) and read the following books if you haven't already:

My credit is definitely something I want to work on. Thanks for the book recommendations. I've read rich dad/poor dad a while ago, and I got the idea of "have assets, avoid too many liabilities," but I suppose it wouldn't hurt to re-read to jog my memory.

Originally posted by Joe The Homophobe
Becareful when it comes to buying real state buying systems.

I never really planned on buying a 'system.' I think my plan is pretty straightfoward, I'm just curious about whether it is reasonable or not.

SheepSter:

That doesn't sound like a good idea at all... First of all, the interest you would pay on a monthly basis would easily be more than any profit you would be making. There are so many bad things I could imagine happening from doing this... I hope you don't plan on it.


Thanks for all the help guys, especially sifer and Page.

I'll be sure to start researching as much as I can...

 

[Page]

Re: Re: Re: Buying a house -- in college?

Originally posted by Nocturnal



What different kind of lenders are there, and which would be best for my situation?

there are many kinds of lenders.

Commercial banks are your average bank, like Washington Mutual or Citibank. These places are FDIC insured and provide a lot of different types of loans. These places tend to be conservative in who they give loans to, b/c they offer lower interest rates on average. You should start with these places first, and if it doesn't work out, check out one of these other places.

Another kind of lender is the savings and loan. In the 1980s a ton of these went bankrupt b/c they attempted to diversify. They offer home mortgage loans and also accept savings. Think of it as a mini-bank.

There are also credit unions. these places are usually nonprofit, require a membership, and offer most of the services provided by commercial banks. They have lower operating costs than regular banks and that lets them offer more attractive loan rates and savings interest rates. However, the level of financial expertise and credentials at these places is lower than a regular bank.

Mortgage companies are devoted to the business of lending money for mortgages. Some are owned by other banks, others are independent.

Hard money lenders are also called Equity lender. This place will finance about 65% of the equity in the property, and do it very leniently, without credit or background checks--- very low key. They use the property to guarantee the loan, and their interest rates are higher than other lenders. Go to these places last.

There might be others I forgot, I'm going by what I can remember off the top of my head. check Chapter 12 of Building Wealth.

This seems like a very important point. I have no physical assets so I'm guessing that having a job becomes an important issue... this last year I had a 10 hr/week minimum wage job, would I need to seek out something that would pay substantially more? Since my job would be my only source of positive cashflow, what would I realistically need to convince lenders that I won't bring them down with me if my plan falls through?

your part time job won't be enough to satisy a commercial bank's income requirements. I know, I've already tried. I wouldn't go to them unless you're making at least $25,000 a year and are working full time.

like I said earlier, you have plenty of time, and you're still young, so many people might not take you seriously. Take this time now to learn as much as you can, and start moving on it in your early to mid 20's. You'll still be way ahead of the game.