Brandon Nelson
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How a 20-Year-Old Became a Landlord
I heard a story today from a friend of mine that I MUST share.
This friend’s 20-year-old son just closed on the purchase of his first property, a duplex in Bellingham. He bought it with his own money for the down payment, his own good credit, with no co-signers on the loan, and — as a bonus — since he’s going to move into one of the units he gets the $8000 tax credit.
When I heard these details, I would’ve liked to have made a congratulatory comment, but I was too busy trying to pull my jaw off the floor. I just LOVE stories like this!!! This 20-year-old is ON…HIS…WAY!!!
When I was 20 years old I had one thing on my mind: Adventure. In the span of one year I went from being a lifeguard in Myrtle Beach, SC, to the first mate on a 50-foot catamaran sailing out of Key West, FL, to a whitewater river guide in the California Sierra Nevada.
I would occasionally meet someone in my travels who, in the same general age-group as I, had just bought a house, and I always felt a wave of envy. I knew they “were on their way” but it never occured to me that I could — or should — do something similar. Ahh…hindsight.
To anyone reading this right now: If you ARE 20 years old or have kids in high school or college, whether they have a job or not, get them started saving SOME CHUNK of EVERY dollar that crosses their palm, and get them started establishing good credit.
My friend’s 20-year-old son, as I understand it, had no savings and no credit as he came out of high school. But he had a solid work ethic and the ability to be frugal. He got a job through a temp agency, which became a full-time job after one year and he got two more promotions in two years. He worked hard, did a good job, and saved his money — something ANYONE can CHOOSE to do.
When he needed a car, his dad advised him NOT to pay cash — although he could have with the money he’d saved – but instead he put 50% down and financed the balance. After one year, guess what happened? He had a great credit rating!
At 20 years old he now had:
- Solid work history
- Money in the bank, and
- Good, established credit.
Then opportunity came knocking, and he kicked the door down!
With the help of his dad, a Realtor, this 20-year-old negotiated a good price and got a 2.5% closing cost contribution from the seller. He found a willing bank to waive the appraisal and processing fees on the loan — not at all unheard of these days. He qualifies for ALL $8000 of the tax credit, because he’s going to move into one of the units in the first 60 days and be an owner-occupant.
And on top of all that, he’ll be able to depreciate the tenant-occupied unit and capital improvements for up to 27.5 years, write off 100% of the interest paid on the mortgage AS WELL AS some closing costs and 1/2 the future repairs (because half is tenant-occupied). FURTHERMORE… he’ll realize growing equity over time through appreciation and principal paydown.
And if he gets a wild hair and wants to go off into the world for a year or ten years of adventure… well about 15 minutes on Craigslist to post a “Rental Available” ad should take care of it for him. (And yes, some property management arrangement which, as smart as this kid is, he’ll likely arrange something that will AGAIN be the stuff of envy!)
If you’ve got kids… or if you’re in the same place in life as this 20-year-old… WHATEVER your age… take a lesson from him: Get on your way!!!
