Buying a House at Age 22
The average age of a first-time homebuyer in the USA is 34-years-old. I am 22 and just purchased my first 3 bedroom home in Columbus, Ohio.
Growing up, I was inundated with conversations around real estate. Both my dad and grandpa owned rental units and it is because of their conversations, I became remarkably interested in real estate as a form of investment.
While I am NO expert, I am sharing my journey openly so you can learn from my mistakes. For more details and live updates, follow me on Instagram.
I saved about $35,000 for a down payment
It may require a whole additional post about how I was able to save this amount of money by age 22. In short, it was a combination of not going to college (no debt), investing in bitcoin early, taking risks in the stock market starting at 16, receiving my first stipend from the Thiel Fellowship, and getting a decent salary this year.
There are different theories on how much money you can and should put down. In my scenario (being self-employed and no loan history), I was only able to get a loan if I put 20% of the total amount down.
My credit score was 720
I got my first Discover Rewards Credit Card when I was 16 (it was the only card that would approve me.) I paid off my credit card every-single-month.
Where I lost out: I never had a loan, so I have no repayment history. I have a relatively short credit history (4 years.)
I had to get someone to co-sign
Even with 20% down and a decent credit score, the four banks that I applied with did not approve me for a loan. Banks look at credit score and income history (past 2 years.) Running a startup as a single-proprietor LLC really squashed my reported income.
When banks give loans, they end up reselling those loans to other parties and my income, or lack thereof, was problematic. If I am honest, I wasn’t the most appealing candidate on paper.
This is where my privilege comes in: My dad offered to co-sign. I am VERY thankful to have a parent interested and willing to cosign for me.
With my dad co-signing, I was able to get a loan from Genoa Bank. 5 year adjustable at 4.75% (This isn’t the best rate for August 2019, but my theory was I could refinance within 12 months after I file my 2019 taxes, which will have more reported income.)
While I was working on my loan, I was starting to look at properties
I finally got pre-approval for a loan and I connected with Jake Bluvstein, who became my super rad real estate agent. He was supportive and walked me through the entire process.
Given I wanted to put 20% down and had roughly $35,000 ready to invest, I looked at properties around $150,000. I was drawn to developing areas in Columbus, Ohio. This property is an investment for the future.
I decided I want to rent out half of the property
My living situation is a bit unique. I spend half of my time traveling for work, and only 2 weeks each month in Columbus, Ohio. I wanted a home in an “up and coming area” where I could live in the basement/attic and rent out the rest of the home and make enough in rent to cover my mortgage.
Here’s how the math was looking for me:
House Price: $180k
Money Down: $36,000
Interest Rate: 4.75%
Loan Term: 30 years
Monthly Loan Payment: $751.17
Monthly Insurance/Taxes: $120
Estimated Monthly Maintenance Needs: $100
Given that I wanted to live in the property and have a renter live there too, I had to find places that could demand rent above $975.
Finding the house
Jake (my realtor) took me to visit 10+ houses. I wasn’t really sure what I was looking for exactly, until I found it.
3 bedrooms and full bath on the second floor. Large kitchen, living room, and ½ bath on the first floor. AND a fully finished basement.
Why was this the one for me? Forget the granite countertops and fancy appliances - I could live in the finished basement with a full bath and rent out the rest of the house reasonably for $1,500.
This monthly rent could cover my mortgage, taxes, insurance, and then some.
I found the house… Now what?
The house was listed for $180k, but had been on the market for 120+ days (which is a VERY long time for a house in Columbus.) I love to negotiate and I was okay with losing the house if someone else came in at a high price, so I offered $165,000 contingent on financing and inspection.
Jake put in the offer to the seller.
The seller countered with $180,000 (asking)
I countered $175,000 + they cover $1,500 closing costs.
We finalized and then …..
Lining up all the other things
Once the offer is finalized, you are officially in contract. EEK!
Get the home inspected: Mine cost $300
The inspection brought attention to a muried of needs ranging from siding falling off to electrical wires exposed. All of the problems were detailed.
My real estate agent and I worked together to determine what we were going to ask to be remedied… I asked for everything.
The seller agreed to cover all of my requests… I did ask for a brand new roof and they offered to fix the broken parks. I thought that was fine.
Work with your loan agent to finalize the loan.
The seller should arrange for the appraiser to come.
Get home-insurance. I got 5 quotes and bundled it with my car to save some monies.
Set up utilities, electric, cable, and wifi.
Get the keys!
“Lining up all the things” took about 30 days until I sat down at the Title Agency’s desk to sign all the papers. Once everything was signed, I got the keys.
Now time to find the renters….
STAY TUNED! Follow me on Instagram for live updates and more details!