One of the hardest parts of being successful so young is convincing the people around me of my entrepreneur ideas. Im 19 years old and make I 200,000 a year by working all the time when other 19 year old are making 11k a year by partying all the time. So this situation puts me in a pickle… Ok, I will first tell you my plan, then I will tell you my situation. It will be easier that way, ehh?
So I talked to my accountant last Friday. I need to get a forecast from him. A forecast is when a account finds out how much money I owe the IRS as to this point. So I told him all my write offs, I told him exactly how much I make, and tomorrow I will find out how much I owe the IRS as of today. Which will not be a pretty number.
The reason I have been talking to my accountant is because I been putting my income into savings accounts instead of assets. Assets such as real estate, mutual funds, 401k, bonds, stocks, anything! My money has been earning 3% interest when it should be like 15% 
(15% will take some smartness)
Anyways, this is my plan. Take 80k and buy a decent house. Take another 5k and fix it up, new roof, carpet, paint, etc. Then rent the house out for like 600$ a month. So I will have this asset that I will gain money from every month from tenets and then I can sell it for more than I paid for it in a few years. I will not mortgage it so I will make about 95% of what I get from the house. I will have to pay taxes, property taxes, insurance, etc.
So say in 3 years I decide to sell the house. I kick out the renters and then fix the house up a little bit more. Make it look pretty and do some landscaping. Sell the house for 90k.
Here is some math…
36 months x $600 mo. rent = 21600
Sell house for 10k than originally paid = 10k
——————————————
I make $31600 in 3 years off the house
I then have 111,600 than I can buy more real estate with after the 3 years.
Now your probably thinking that “what the hell could a 19 year old kid know about being a landlord?”
Well its simple. Books and smart people. I read books about renting, such like I will when I get done writing this blog. And then I also consult smart people. Like my accountant and my lawyer. I then figure out a plan. Then write a business plan. Then go along with it.
Now to do this, I would incorporate my company to protect me from the IRS and get some benefits such as more write offs (I could buy another car ) You do know that a corporation is a rich persons best friend Anyways, I already picked up the name. But I cant tell you that because I don’t want you taking the name since I haven’t registered it yet.
I will also have my lawyer write up a professional lease so that my asset will be safe. I will talk with my accountant and try to reduce taxes.
But here is the fun part!! hehe! Who would want to rent a house from a 19 year old? I mean come on? Who would? So I planned that out… I simply tell them that its my dads company/house and I work for him. I show prospects the house and ack like my dad is the owner of the house/company. Is there anything wrong with that? Besides morals?
Ok, now that I told you my story, I will tell you my situation. How will I convince the people that are close to me that this is a good idea? This is a pretty big risk for me. What is the property depreciation and I loose money? But thats a rish I am willing to take…
The reason I want to do this is because I think this will be the best investment for me since I am so young. If for some reason I loose all my money, I still have this house with people giving me 600$ a month to live in. So what if I have 2 houses? $1200 a month? Thats more than what any of my friends make a month around here! I think that this idea is a good one, but tell me what you guys think?
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Excellant idea dude, my dad has lots of property here in the UK and it’s the best invesmtment you could make.
I would alter the idea slightly and NOT sell the property. Keep it and after three years buy another. Obtain a portfolio of about 5 properties, you can’t go wrong, especially if they are in areas where the rental market isn’t saturated.
The internet may burn down tomorrow haha, invest in bricks and mortar, don’t put all your eggs in one basket with websites.
That’s just my views,
Khalid.
I would definately go for properties if I had that kind of money to invest.
Surely one of the best investements you can make.
Go for it man, its passive income!
// Andreas Bard
Tell you what - residential real estate has a major-league PITA factor and is anything but passive income.
Commercial is the way to go… very little hassle. Trust me, renters usually suck and to make any real money in residential you need to ride it out for around 7 years, have a ton of properties, or be in the right place at the right time.
If you are resolute on the residential tack, another way is to go into phase 1 neighborhoods and buy a property pre-construction. You put down a grand or two for the contract which is then applied to the house. Sit on it until construction and sell. You can even save on the upgrades by doing some trivial ones yourself (crown moulding, etc), then charge what the builder does for the same options. If you can’t sell right off the bat, you can then try the rental bit.
Of course phase-1 flipping is a bit tougher with the way interest rates are moving. Not sure what the market is doing in Idaho, but you can still pull that off in minor metros like Charleston, SC.
Think about it like you were in Vegas. Should you bet with the house in vegas or against the house? Depends on the game, but if you could play how vegas plays, bet with the house. Who is the house in the case of real-estate? The U.S. Government (if you like in the usa).. Not banks and certainly not being a landlord…
How can you do this? Well.. I have a tax lien that I have invested in that makes 14% per year… It’s a tough industry to make money in.. but that’s because you’ll be competing with banks for the best notes and liens…
A short summery is this:
You put your money in a 12 month CD at 4%…
The bank takes your money, and invests it in a tax lien or mortgage note at upwards of 25%
They take your money, and make 20% or more and give you 4%…
I like to cut out the middleman..