Author Topic: Advice for 24 yr old (real estate/investing)  (Read 1866 times)

Ricky

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Advice for 24 yr old (real estate/investing)
« on: August 31, 2014, 05:12:50 PM »
So, I'm going to try to make this as succinct as possible, so as to try to limit any convoluted scenarios.

First, the back story.

I'm 24, have a bachelors in MIS, pretty well proficient in Mac/PC with the basics like repair, troubleshooting, light coding, etc...Honestly my degree is pretty broad and not necessarily technical. It's more people/business oriented I would say. I graduated with a ~3.5GPA from a regional University (not name brand, but popular within the state). I did this all online over the course of the past 4 years. It took me two extra years longer than it would have because I was working.

I've worked basically for the past 6 years. I basically worked and still work at a local cell phone shop. On the side, I had several clients whom I routed audio cables for, designed home theater setups, and worked on their networks and computers. I kept it at residential house calls mainly. I also did some other technician work for another company. Anyway, those were my side hustles, combined with my day job, which allowed me to save quite a bit. So fast forward 4 years and I already have decent passive income, a small rental, and I'm looking to make another move.

I'm already invested in stocks, but really real estate is what piques my interest. Specifically, high quality real estate. And I must admit I am a bit cramped at my house because I still live at home (part of the reason I was able to save so much). I've come to a crossroads where I actually feel like I need to get out because I live in such a rural area. I've grown up here and lived here all of my life but there are NO opportunities in tech really. Those that are available are quickly filled by experienced professionals who more than likely want to move to this area for the great quality of living/no pollution/greenery/etc. That doesn't help me. It also doesn't help that I'm at least 5 hours away from a decent sized tech city, which I don't even really like.

So, I am going to put a down payment towards something. The Seattle area is really where I want to be: in a good neighborhood, close to things where I can ride my bike pretty much everywhere, close to work, etc. Long term, I'm interested in coding, specifically front-end web development and design. I'm also interested in Business Intelligence. Problem is, I'm definitely "entry-level" material. I know that Seattle is competitive but I still feel I have a much better shot of finding opportunities that make me happy in a place like this. I recognize money doesn't go far in Seattle and it's hard to cash flow. I think a beginners mistake is to bank on appreciation, but I really don't see how you can go wrong in such a high growth area. Basically, I want to establish roots in an area where I have opportunities for myself, an asset I have also invested in obviously by going to school. I would shoot for a 2-3 bedroom and rent out the rooms I'm not using via Airbnb or even a short term lease. I picked Seattle because of the similar people-mindset, similar quality of living, opportunities, etc. I'm not sure I'll end up there but this is where I'm thinking at least initially. We'll call this scenario "A".

That said, I could also put the down payment on at least 2-3 different properties in an area where cash flow is much greater. I've ran the numbers and if I did this I could probably have enough cash flow to actually exceed any rent I would have living in Seattle, or whatever city I was in. This is scenario "B".

But my long term goals are to have 2-3 high end rentals in nice neighborhoods with good quality tenants. I realize "B" is probably the better short term investment. "A" just sounds so appealing and less headache though. Conversely, I understand that I would have to put more money down for "A" to cash-flow. "B", provided I found the ideal properties should cash-flow with much less down and would have better cap rates than I could ever find in Seattle city limits.

So, I basically know how to weigh these decisions out on my own, by determining opportunity costs, happiness levels, etc, but I just wanted to see if there was something I'm missing by posting this here, since everyone here has similar mindsets. It's a major decision.

Sorry for the long read, but thanks for making it this far if you did!

Joel

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Re: Advice for 24 yr old (real estate/investing)
« Reply #1 on: August 31, 2014, 05:43:51 PM »
Why not try to move there and rent for awhile? Buying a house is a long term commitment to an area and you have only ever lived in your parents house.

thedayisbrave

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Re: Advice for 24 yr old (real estate/investing)
« Reply #2 on: August 31, 2014, 05:59:45 PM »
Wow... um, I think we might be twins (other than the coding and west coast living part).  I'm 24 as well, finishing up with school, and have a rental.  I'm under contract on a house in a new city where I'll be relocating for my new job (about 2.5 hours away).  For me, too, it was a battle of head vs. heart.  The investor in me wanted to get something that I could live in for a year or two then rent out.  Unfortunately what I felt I could comfortably afford were mostly condos/townhouses in the area and a lot of the HOAs there have restrictions on the # of units that can be non owner occupants, and all the ones I'd looked at were at capacity.

So, I decided to actually get a house that I liked and wanted to live in.  It's affordable, but I went with what I wanted rather than thinking of it from an investment point of view.  I have a spare bedroom with a bathroom so its ideal for a roommate situation which would essentially cover the mortgage.  I'll be on the hook for maintenance, HOA fee, insurance and taxes but in the end I'll be coming out ahead, given that rent for a one bedroom in the area is about $300-$400 more than my mortgage payment.  Who knows how long I'll stay there but it'll be dependent on the external situation (how the job goes, etc.) rather than being a financial/investment decision.  I got lucky; I had a great agent who knew what I wanted and was very accommodating.  He saw the listing come on the MLS and went over to see the property the next day, and I put it under contract that same day (yes, without seeing it... remember, 2.5 hour drive away).  The seller was basically asking exactly what it was worth (I'd seen enough in the area to have an idea) and I didn't want to miss this one.  I'm still not banking on appreciation, but when I go to sell, if I break even, awesome.  If I'd have to take a loss, I guess it depends on how large of a loss it would be... I bought with a pretty large margin of safety, so I'm confident if the market goes sour for any weird reason, I could hold until I could reach break even point.

Anyway, I digress.  According to your post, I went with "Plan A."  Yes, it's risky buying in a new city.  Others told me to rent first too.  But I know myself and I know that having a place of my own would help make the city feel like home a LOT faster.  Maybe for you it's a different reason.  Just be smart about it, know your limits, and work with people you trust.  And rent out those extra rooms ;)

Good luck!!

YoungConsultant

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Re: Advice for 24 yr old (real estate/investing)
« Reply #3 on: September 01, 2014, 09:26:12 AM »
I'm 23 and thought about rental property from time to time myself. I haven't dipped my toes in yet so I can't help you there.  But, as far as saving up the capital to invest: since you have an MIS degree (like I do) and are interested in business intelligence (which I work in) you might consider getting into a consulting job.

You didn't say how much money you make doing your current work, but as of right now I work as a consultant for a BI software company in Michigan.  good salary and bonus, $6k so far this year of tax-free meals per diem allowance (I travel all over the US frequently) and have a really low cost of living due to my travel. Considering all the BI companies headquartered in the west coast, you could easily make much more salary than I am just because of the cost of living differences. It's pretty easy work, either I'm training customers or just consulting with them so they can pick my brain about my knowledge of the software we sell, or sometimes just doing development work for them. Super easy work for guys like us with a natural talent for IT, and heavily utilizes those people/business skills you learned in school.

I don't know how much you make now, but I make WAY more money than I did doing tech support, with much less stress too. Just an idea you could look into. I've been able to save 75% of my take home pay with this job.

As a matter of fact, if you are willing to move to the Midwest, my company is hiring, and it sounds like you might enjoy the job (there's definitely a design aspect to the work, even though its not web development. If you want to learn SQL coding, that's a bonus). I can send you details if you want to know more