At last week's REI meeting, someone asked what is the best way to start investing in real estate if they have $100,000 in cash (an inheritance).

He is 21,has a good job in IT, and is debt free.

He has a "serious" girlfriend. She attends the meetings with him. She will graduate next May with an IT degree.

They have attended the last 4 - 6 meetings weekly meetings.

He lives at home with Mom (rent free). He lives on the ground floor and Mom lives on the second floor of an A class house in an A neighborhood). Mom is happy with the living arrangement.

How would you suggest he invest his inheritance?

Thanks

not enough info.

What is his goal (at age 21) !!

Long term (slow) growth - buy & hold?

Some (fast - hopefully) growth - flips?

Hands on?

What does a 2 unit cost in this area?

What does a starter 3 bedroom/1 bath/garage/smallish yard cost?

Stocks and bonds. My first 5 years in IT was extensive. Classes, certifications, lots of studying after work, during lunch, etc. Plus you're working long hours, especially after-hours when you can take a system down for maintenance, and their jobs may involve travel.

Furthermore, they do not know if they're going to remain in the town they live in or not.

Now's not the time in THEIR lives to invest in a property that will tie them to one city, and rob them of the extra time they might not have to manage the property.

I would advise them to put it in either blue chip stocks or safe govt tax free bonds and enjoy the dividends or interest payments. Then when they have a good job, know what city they're going to live in, and have more time on their hands, they can sell the investments and purchase real estate.

It's good that he has family ties in the area, and a solid job--- but how certain is he that that town and that company are his future? I remember being laid off during the dot-com bust... I was pretty much ready to reroute my entire career through IT, and was looking at classes I could take to become a more valuable asset, but oops, I got laid off after my first three or four months. (Then they had to hire two people to replace me, lol.) :P They also got rid tech-ier veterans than I. And the ones who were kept didn't like the shuffled org chart, or the new management priorities, and quickly jumped ship for other places, like Microsoft.

The point being, tech is stable... up to a point... but it's constantly changing by its nature. Technology itself changes, making old skills obsolete and needing to constantly accrue experience with the latest and greatest. Likewise, IT is affected by what's going on in the world it supports. So even though he's happy at 21 (how long has he been working there?), it may or may not be what he wants at 26.

The job we had when we were 21-- how long did we keep that job? :)

He needs to get the rest of his life stabilized before real estate makes sense, because he has such a variety of paths open to him right now, and real estate ties you down. Is he going to go for an advanced degree? Is he going to get married? Is he going to start a family? Is he going to need to get a place for himself, or are they going to live with Mom? If he gets married, is *she* going to get a job locally, or will her job be elsewhere, and they'll need to shift geography a smidge to accommodate both jobs?

Once the big picture starts to solidify, and you get the important Life details pinned down, you can start thinking about the little extras, like "investments", and how hands-on or hands-off, how long-term or short-term, how much you're willing to risk, and so on. Now's the time for him to do his research, and read like a maniac, and attend meetings, just like he's doing. He gets to figure out where his comfort zone is, what his risk tolerance is, what his market's like and what sort of niche to pursue. He gets to figure out what kind of properties come on the market how regularly, the ups and downs and cycles of the market, with the freedom of not being married to actively looking for an investment property, but just being in research mode, so that he can develop an eye for "this is a deal" and "this is nice, but nothing special".

He needs to be able to get to the point where he doesn't ask "what's the best way to start"--- he should be able to ask 50 people, "How did you start?" and then distill the lessons into what applies to him, what's not really his style, what's something to avoid, what's something to emulate.

If he does ask, "What's the best way to start", you need to turn it around and ask him, "Who do you want to be like?" Because if you have 50 people in the room, you have 50 different success stories. And you can't be 50 different people at once-- he needs to figure out what paths are compatible with his personality/goals/situation, and part of that is being able to contrast them with the incompatible paths. He needs to be aware not only of what he wants to do, but why that particular way makes sense for his situation.

That's something he needs to determine for himself.

Location! Location! Location! $100K in the right location...

foreclosure, or short sale, or fixer upper...

At 21, a mixture of aggressive growth and index mutual funds will be better than a real estate investment like a rental.

When I was 18, I started to invest in real estate back in 1978 spending $100,000 as the down payments for six single family homes. I had to be responsible, discipline and on top of things. Responsive to tenants needs, repairs and maintenance -- all while working full time and going to college.

No one, I mean no one would put themselves though this kind of torture unless they had the vision and knowledge of: tax benefits, appreciation, devaluation of the dollar and long term goals. 40 years later these homes would be worth together two million dollars.

I needed a support group. My realtor to advise on types of homes and benefits of one home over another. Pool, central air, location, main street vs side street, school district, shopping, transportation, etc. How to rent. How to obtain credit and background information.

I needed other landlords to answer basic questions. A handyman to take care of things I wasn't able to jump on because I was too far away or working/school.

I needed cash reserves to hold me over for those unexpected repairs.

Step 1-Stash away 3-6 months of living expenses in a highly liquid account (savings, money market)

Step 2-Buy a reasonable house to live in.

Step 3-Anything left over, put towards that first rental.

Step Whenever (optional) - Pay cash for a wedding w/serious girlfriend.

6 month emergency fund.

Rent an apartment./house.

Attend Mr LL bootcamp.

Then determine the best type/location RE for his life at this time.