If you want to get into real estate, these are the three big ways that you can do it right now, as a teenager

Michael has helped me out a lot with growing and jumping into the real estate space. So, check out his videos. Like, comment, and subscribe, because he is putting out a lot of content that is lifting everybody up. In fact, here’s the secret Number Four Tip – invest in your education.

You don’t have to spend a whole bunch of money to learn. Go to YouTube and watch this channel, because this stuff is real.

It happens for folks every day, they get it to click in their mind and they realize, I can go buy apartments I don’t actually have to go to college, if I don’t want to. If you want to, you should, but you don’t have to. So, check out the channel. It’s got a lot of information that will help you especially as a teenager.

Video

Coverdell Education Savings Accounts and 529 Plans

You can also invest in qualified education savings accounts for your teen. Planning for your teen’s education is a good way to stay ahead of hefty college expenses.

In just the past 20 years alone, in-state tuition and fees have increased more than 200% at public universities. Anything you can do to get ahead of those increases will provide a huge benefit.

If you’re looking for a saving instrument that can offer tax benefits and pay for college expenses, then you may want to consider a college savings plan. There are two primary options to choose from; 529 Plans and Education Savings Accounts (ESA). 

529 Education Savings Plan

This is a savings plan offered by most states that allows individuals to save for college or k-12 education expenses.

You may also use 529 plans to pay student loans and internship programs. The annual contribution limit for 529 plans is $15,000 and most States offer a tax deduction for your contribution. There is also the ability to contribute five years’ worth of contributions at once and fund up to $75,000 into a 529 plan in one year.

Distributions within these accounts are tax-free by the IRS if used for qualified education expenses. Parents, guardians, grandparents, or even family friends can establish a 529 account and choose their specified beneficiary. 

Note that if a child decides not to attend college or there are excess funds in a 529 plan, the funds can easily be transferred to another family member or be withdrawn for non-education usage. If you choose to withdraw funds for non-education expenses, there will be a 10% penalty on any earnings in the account.

Like the IRAs above, multiple brokers offer these types of plans. Betterment is one that we feel offers competitive benefits and is an easy-to-use platform for a 529 plan.

Click Here To Sign Up With Betterment!

Coverdell Education Savings Account (ESA)

An ESA is a savings plan established by the federal government which allows individuals to contribute up to $2,000 per year per beneficiary.

Unlike a 529 plan, there is no tax deduction for the contribution. This should give you pause when considering this over a 529 plan. Similar to a 529 plan, distributions will be tax-free if used for qualified education expenses. However, the ESA must be used before the beneficiary reaches age 30 or you will be subject to tax and penalties.

Contributions to ESA accounts may also be subject to income phase-out limitations. This means if you make over a certain amount of money, you will not be eligible to contribute. 

Similar to 529 plans, these funds can either be used for K-12 private education or college expenses.

Currently, there are not many compelling reasons to choose an ESA over a 529 plan.

Scaling Networking

Perhaps one of the greatest benefits of investing young is that you have time to break into the industry at your own speed and lay the right groundwork for a successful career. Many new investors of all ages are hyper-focused on landing their first deal and securing their first property. While this is a monumental feat, it is not nearly as important as establishing the foundation for a future real estate business. Young investors should pay particular attention to creating a network and establishing strong business practices.

A great place to start is getting a real estate mentor and joining networking groups around your area. Be consistent as you try to break into the industry and focus on building lasting relationships with other real estate professionals. This should include real estate agents, contractors, other investors, real estate brokers, and more. Networking is key to a successful career in real estate, and building an expansive network early will help you in more ways than one down the line.

When it comes to your business, take extra care to develop your business plan and branding. Create core values and a mission statement for your company, and choose a business name that works for you. It can be a good idea to secure the social media handles and domain names, even if you are not at that stage yet. Remember that the work you are putting in now could greatly help you as your real estate business expands throughout your career.

Partnering Up

Real estate business partnerships can be mutually beneficial for multiple reasons. A potential partner can bring financing solutions to the table as well as connections and experience. Partnering up with someone can help alleviate some of the stress and requirements of handling a business on your own. If you are running into obstacles that you do not think you can manage independently, this can be a great option for you and your business.

1. Get Educated

The best approach is to learn all that you can with the free resources available for your immediate consumption. You need to learn the basics, but you also have to ask the right questions when presented with information.

While you may be bombarded with images of expensive real estate investment seminars, that is not a requirement to be successful in real estate investing. You can learn the basics from useful free guides online to get a jump start on the basics. There are plenty of real estate books, podcasts, and free information online as a good place to start. You can also speak with other real estate investors.

Here are the main types of properties and investments available for real estate investment. Each type of investment has its own nuances that you should understand before you invest.

  • Vacant Land
  • Single Family Homes
  • Small Multifamily Properties
  • Large Multifamily Properties
  • Commercial Real Estate
  • Mobile Homes
  • Notes/Paper/Mortgages

Once you learn about the different types of options for the real estate listed above, you will want to think about the one that fits your budget, time, and requirements.

You will also want to learn how to properly evaluate a neighborhood in order to make the best investment. You may not be familiar with the city or locality where you are investing, so you will definitely want to check out how to evaluate the locality or neighborhood you are investing in to make an informed decision.

Setting Up a Custodial Account UGMA/UTMA

Minor accounts, created in part by the Uniform Transfers To Minors Act and the Uniform Gift To Minors Act (UTMA/UGMA), are excellent options if you are investing for your teenager. You can establish these minor accounts and begin investing within them almost immediately. This money can be used for any purpose including education expenses as well as any other needs the child may have. 

The purpose of these accounts is to provide monetary benefits to teenagers and you can establish a custodial UGMA/UTMA account with a brokerage such as Firstrade.

The profit from these investment accounts will be taxed according to the child’s tax rate or potentially the parent’s tax rates if the child makes enough money and is subject to kiddie tax limitations.

Custodial UGMA/UTMA accounts are one of the excellent options for teenagers who want to begin investing. The parents have the final decision over the account until the child reaches 18 or 21 (depending on the State). 

At the age of majority, ownership of the account will be transferred fully to the child and the parent will no longer have any control over the account. The child will be free to cash out the account for whatever they please, so it’s important to talk with your child about the intended purpose of the account beforehand.

How to start investing in real estate

Feeling discouraged? Don’t throw in the towel just yet.

Learning how to invest in real estate is not rocket science. Start with a simple question: How do you want to invest in real estate?

There are plenty of ways to invest in real estate, from buy-and-hold to house hacking to REITs to flipping houses for a living to rental properties. Decide on your personal financial goals first, and it will be clearer to you how to start investing in real estate.

If you’re looking to build capital quickly, consider flipping houses as a first real estate investing strategy. The turnaround is relatively fast, and it can help you quickly overcome some of the challenges outlined above. (Recommended reading: How to Flip a House in 8 Steps.)

Another advantage to flipping houses when you’re getting started in real estate investing is that financing can be straightforward and relatively easy. Case in point: in addition to quick settlements, Kiavi finances up to 90% of the purchase price on flips with hard loans, and 100% of the renovation costs. Kiavi also has experts to help your business in crafting a house flipping business plan.

But whether you finance your house fix and flips through Kiavi or another lender, make sure to talk to your lender before you have a contract signed. Line up your financing beforehand, so that when you put a deal under contract, you’re not left scrambling to figure out how to fund it.

Having a lender in place will also free you up to focus on finding deals, finding contractors, and the other fundamentals of learning how to invest in real estate.

ETFs / Index Funds

ETFs and index funds are just bundles of stocks. Instead of buying just one stock, if you buy an ETF or index fund, you automatically buy a whole bunch.

For example, the S&P 500 Index tracks the 500 biggest stocks in the United States (Apple, Amazon, Google, Facebook, etc.) They work exactly like stocks where you can make money through capital gains or dividends. The only difference is that they are highly diversified.

There’s a lot of debate regarding . Some say “buy stocks because they have higher upside potential,” others say “no no no if a stock plummets you ain’t getting your money back.” Personally, I don’t trust myself enough to buy stocks that will go up… so I just buy them all using an ETF! Great investors always say that diversity is key, so what’s more diverse than owning as many stocks as you can!

Of course, like anybody, a small voice in my head tells me “You can do it! You can beat the market!” So just to satisfy that part of my brain, I allocate a tiny amount of my total portfolio to picking individual stocks. I probably won’t end up beating the market, but this is money that I’m okay with losing.

Challenges Of Being A Young Real Estate Investor

Before committing to your first investment, it is important to consider the challenges you may face along the way as a young investor. By familiarizing yourself with the potential obstacles, you can help make sure you are prepared for any potential obstacles. Here are some of the challenges of being a young real estate investor (and how to overcome them):

  • Turning A Hobby Into A Business: While it may sound obvious at first, it’s important for investors to treat their new business like the business it is. Consequently, far too many new investors treat their first venture into entrepreneurship like a hobby. According to Ann Martin, Director of Operations of Credit Donkey Credit Card Processing, new investors must learn to treat their investments like a business. “By taking your real estate investments seriously, you’ll help ensure good returns,” says Martin.

  • Lack Of Resources: Many young investors blame their inability to get started on a lack of resources. Some even report finding opportunities but complain they don’t have the money to take advantage of them. Others are too afraid to get started because they think they need more money. If you don’t get started, you won’t have any more than you do now. And there really are ways to invest in real estate with no money down. It’s just a matter of learning the right strategies and tactics. Have you considered a private money lender? Truth be told, a lack of capital should never be an excuse with all that is available out there. You need to know where to look and be prepared when an opportunity presents itself.

  • Not Being Taken Seriously: While youth is frequently considered a strong asset in business, many young entrepreneurs fear they won’t be taken seriously. Unfortunately, it is a legitimate fear, but not one that can’t be worked around. Know that there are many circles in which others are specifically looking for those that are 30 and under. Opportunities are there for younger investors, but you need to be willing to put in the time to gain experience. Let your hard work be your resume. It also wouldn’t hurt to hire a veteran mentor or to partner up with a more experienced investor.

  • Self-Doubt: Everyone that considers doing something different runs into the fear that they are insane for believing they can do it or should try it. Such feelings often sneak in right before the leap is made or after the initial excitement begins to wear off. Recognize that this is a way your brain sabotages you into inaction. Those in the business call it analysis paralysis. Don’t let this happen to you. Anticipate it, and realize the need to work through it to see results.

  • The Process: If you haven’t been through the real estate transaction process yet, buy a home. Owning your own home creates a great financial foundation and will kick start your investing. It will also teach you a ton about the process of investing purely for profit.

  • Lack Of Established Credit: Younger real estate investors often have to face the reality that they don’t have well-established credit. Maybe you are fresh out of school, still in school, or have just been strict about paying cash for everything. Credit can play a role in some types of investing and in business. However, you don’t need great credit or any credit to get started investing in property. Don’t let this excuse rob you of your potential.

  • Student Loan Debt: Whether you are in college, fresh out, or dropped out for real estate purposes, there is a good chance you’re carrying some student debt. It is important to recognize that it can throw a wrench in your debt-to-income ratio, but there may be no faster way to pay off that debt than real estate investing.

  • Expectations: Buying and flipping houses is often made to appear very easy. However, it is easier said than done. New investors will quickly learn that they need to start marketing for deals, learn how to evaluate properties, and write offers. Some expect to be doing a dozen deals a month right out of the gate. Money can come fast and easy in real estate, but it can take some time to build up a pipeline and close deals. The better you understand what’s really involved in getting a deal and what realistic volume is, the faster success will come.

  • Connections & Relationships: One of the myths about the wealthy one percent is that they were born with money and connections. Some are, but there are even more millionaires and highly successful real estate players that have worked their way up from the bottom. Connections and relationships are some of the easiest things to build. You may need to learn or hone some communication and rapport-building skills, but nothing is stopping you from getting out there and making new contacts today. Build contacts, and you will be surprised at where some of them end up taking your business.

  • Finding Customers: Stop looking for people to sell to, or for deals to fall into your lap. Start looking for as many people as possible to help with their real estate and finance problems, and everything else will fall into place.

  • The What’s Next Trap: If you keep getting stuck on what you need to do next, you’ve skipped the most important step in getting into real estate investing: a business plan. Create a system that works for you, one that is tailored to your goals. Use it as a reference when you get stuck.

Bottom Line

Bottom Line

Having cash is not necessary to make money in Real Estate investing, but it does make the process easier. 

As you advance in your career, you will want to find a way to acquire some cash, whether it be from private money lenders or banks. 

The transactions are cleaner and with experience, your confidence to properly manage a deal and the money at risk will increase. But for now, make a mess with as little risk as possible and keep the faith that there is a check at the end of the tunnel. 

For me, the first check I earned was small, but it gave me the confidence to keep going. It was nice to see the bigger checks follow suit. I promise, they were not easy to come by, but with the proper training, hard work, and a little luck, it can easily be your name on these checks. 

Let me show you how to get there.

Tags

Leave a Reply

Your email address will not be published.