First Step To Financial Stability for 20-somethings

[KneghtRyder]

Renting is basically throwing your money away . There was a study done. that those who rented vs bought a Condo/townhouse etc. The people who bought ended up way wealthier at the end of their lives. Why ?

Because buying a property forces you to save your money every month which you get back at time you sell your property.

The Very first step is this:
The quicker you are able to save 250K and buy yourself a condo/townhouse the quicker you will be able to begin accumulating money , about 20K / PER year ( IN SAVINGS FROM OWNING YOUR PAD) , all the while having YOUR own PAD for free ! ( of course you pay a measy 1-2% property tax ).


e.g. taking out a 200K+ loan is stupid. your paying 5-6% or 12K / year for mortgage plus taxes and fees adding up to 20K per year to the mortgage company. This is pretty much the same as renting at $1500 per month.


whats the negatives involved in buying your properties in cash, is that your basically tying up your money into a house. STocks, mutual funds can probably generate greater growth a year from a saving account, but that doesn't make much financial sense as your saving about the same by not paying rent or mortgages interest.

So , the moral of the story is ...

First and foremost save yourself a good 200K...Making money in real estate is kinda like stocks. YOu want to buy a property thats really worth more , at a lower price , keep it for a minimum of 2 years ( avoid capital gains taxes) , make it look better, sell and take your appreication and monies and trade up to a bigger place. Repeat so on and so forth.

i'd say once your pad is set , saving money becomes a lot easier. You Never have to worry about going back to your parents ..but more importantly if you move you just sell and buy a new condo in the new area and you still have a free pad. If you lose your job, you don't have to worry about next months Rent. Of course, it will take your a good 2-3 years @80K/year to make 200K.

as a side note : I perfer condos/townhouses as opposed to homes because most of us are single and its more approriate but you may like single family homes because they are easier to sell. Btw, I am sure prices are different in different parts of the country < 200K is only as an example.

any opinions ?

 

[SamePendo]

My financial plan of action. That has a link to STR8UP's guide to wealth.

Your plan is kind of ok. But you can make much more money with less. In how much time do you plan someone will save 200k? Maybe for someone not willing to take any risks it's ok, but not taking risks isn't DJ.

 

[Bible_Belt]

In a rural area, a duplex can be had for $40-$60K. It's easy to live in one side and rent the other out.

Generally speaking, rental units are more profitable when they are lower-priced. 1% of value is a rough guideline for rent, but lower-priced units bring in more than that. New investors tend to want to own nice properties, but seasoned investors want nice profits. Trailer homes are an easy way to start. You can buy trailer for $5-10K and rent it for $250-$400/month. Also, section 8 housing, which is usually in the rough neighborhood, can be very profitable. The tenants are poor, but the government pays you their rent every month.

What I never liked about condos are the association fees. I rented a condo in Florida where my rent was only $550/month, but the fees were $350/month, which was ridiculous. I didn't pay the condo fees or taxes because I was renting, and in that particular circumstance, renting was a smarter choice than buying. Although I do agree that most people come out better after buying, holding, and reselling. The real estate market has gone up dramatically, and some people think this will not continue, but it is impossible to call a top on any boom; any market can always go even higher.

If you want to be a landlord, it helps to learn basic maintenance skills. Having to call tradesmen to fix everything hurts your profits. At a minimum, you need a handyman you can trust who charges you reasonable rates.

 

[KneghtRyder]

idenitifying good prospects in real estate is key.

how do you identity ? YOu want a property that is in high demand. e.g....

location is in a good school district, is it close to transportation systems..

the Per capital income is very wealthy ...are all good signs.

and you have to consider the future ..will there will more jobs in the future in this area
e.g. are the companies expanding or imploding..

and you have to consider, are there more rental units or homes that are coming online in
the next few years as potential competition.


This is also an important point...one key item you can look for is how much more land is there
to build in this region. IF there is no more land, but alot of people still want to live there because
its a popular location for whatever reason. That is a safe bet that the property you are interested in
will appreciate in the future.

also, I'd like to see trends what the last owner paid for it , what the property next to it sold for. IS this a place you actually Like ? More bathrooms and bedrooms and open spaces are a plus. Can you work it to make it look more new , less run down ?

Keep your cash growing in savings/mutual funds and keep a watch on the real estate market for lender foreclosures. WHen a propective property comes up , research it and evaluate it to see if meets the above criteria. YOu need to live there for a minimum of two years so you don't have to pay any TAXEs on the profit ...... So IF YOU BOUGHT a foreclosure property YOu made, 20K / yr in rent savings plus tax-savings on foreclosure + appreciation tax-savings, plus appreciation on whatever your property gets you .


Then you take your money and repeat for the next two years ...

 

[wayword]

Well, owning a condo IS slightly more economical than renting.

BUT, your main added costs will be your monthly association fee (usually at least $100) and the big killer, PROPERTY TAX - usually $1500-$3000/year (or $100-$250/mo). End result is that you may spend $200-$350/mo on these 2 costs alone - which is almost like rent for a small 1 bdrm.

HOWEVER, you will likely get a much nicer, larger 2-bdrm pad for that same price - or if you choose to rent out a bdrm - then you will essentially be living there for free while your property slowly appreciates in value.

The key is to work hard and generate ~$200K in capital in your 20s so that you have something to invest by your 30s. You will never get rich off a salary - the salary is just to allow you to generate the initial capital to invest later.

 

[sparky0000]

only a fool listens to financial advice given on an internet message board. keep that in mind.

 

[KneghtRyder]

only a fool listens to financial advice given on an internet message board. keep that in mind.

well, all internet message boards are for discussion only , everyone knows that. Consider yourself exposed to an idea, and if it suits you; good and if not ; you might be come a poor old man and its up to you whatever you want to do. this is not a get rich scheme . this is backed up by studies that you can read up on msn real estate.

 

[gliderman]

Renting is basically throwing your money away . There was a study done. that those who rented vs bought a Condo/townhouse etc.

If you invest the money you save while renting which would otherwise be spent on the mortgage of the same type of house (if you owned it) it is possible to come out infront.

 

[rsxtreme]

saving 200k sounds easy