College student needs help.

[lexicon]

Hi I just joined this site because I think i am interestred in real estate and I have a few questions.

***If you want to go strait to the questions, scroll down

First a little about myself- I'm 19 and in college, i'm athletic and business oriented. I'm somebody who has had to struggle most of my young life with my family to make ends meet but thankfully i'm in college and I have good friends.

I have been interestred in owning real estate and renting out apartments or homes for some time now, as that is what my grandma did and at one point she was worth over a million dollars (but has since had a stroke among other things).
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Anyway at the begining of this summer it happened that I was GIVEN an old 2 bedroom, 1 bath trailer house that has its own septic tank and electric hook up. I was also given the land surrounding it, about an acre or so. The only catch is this trailer is very old and has been vacant for about 3 years. So as a place to stay for this summer (with more ambitious plans later on- I move during the winter). I decided to put as much energy as possible into fixing up this trailer.

Since the begining of the summer I have painted and trimmed the entire trailer, put up skirting, built a new front porch, cleaned up the inside, fixed the plumbing, cleaned up the land, and am about to put new carpet in it. Besides the carpeting (which was ironically given to me also), almost everything has come out of my summer wages. The house has bedding, a refrigerator, a stove, a tv, a recliner, an A/C, and all of the plumbing now works (toilet included).

Now here's the bad news, the heater is suppose to work - however I need a 500gal propane tank to hook it up to. That being said it will take me at least until NEXT summer before I will be able to afford a propane tank (but i'd like to rent it out before then!). my question is do you know of anything else that I would need to do before i rent this place out besides put heat in it, and does this idea sound good to you? I have no real estate experience but as i stated earlier its my long term, eventual goal to own apartment complexes.

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Also I have a couple of more questions,

1) What major would best prepare me to own rental houses and rental property?
2) How difficult is it to get a loan to build an apartment complex?
3) Do you have any other suggestions for me?

oh- and I plan to be a regular member to this site!

Thanks, Lexicon

[ResaleBroker]

Hello Lexicon,

What is your desired outcome? Are you renting the property for positive cash flow or simply holding out for appreciation?

Here are two real estate concepts to consider; Return on Investment and Highest Possible Use.

ROI: Just like it sounds... when you take into account all of your costs associated with the property including repairs, management and vacancy rates, among other things, what is your return on investment.

HPU: Just like it sounds... what property use yields the highest return? For instance, if you fix up the land and sell it for a $50k profit in one (1) year is that a better return for you than renting out the trailer for 10 years and then selling?

Just a word of caution... being a landlord isn't all fun and games and there will be costs [time, money and hassle] involved. I would make sure that your rental rates reflect this.

Also, in many states there are Landlord Tenants rules/laws that you will have to comply with. Also, in many states you have to disclose the property as a rental to the county assessor which in turn changes your tax rate.

I'm not trying to put a damper on anything. It's usually best to look before you leap.

[lexicon]

What is your desired outcome? Are you renting the property for positive cash flow or simply holding out for appreciation?
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First thanks for responding -

My desired outcome on this particular property (the trailer) is to have a steady flow of extra income for college. My dad has also helped me pay for some of the building materials, etc. and I don't consider my own labor to be a cost. so in that respect, at least half of the cost so far has gone to my dad.

Also I have checked into insurance rates and I can be covered up to $25k for $190/yr and 100k for 200/yr. My dad said he would cover the extra 10 dollars if i didn't want to pay it.

As far as reporting the property adjusting my tax rate is odd because I currently don't make enough to pay taxes - as i get paid 6.25/hr for being a lifeguard in OKLA (well, i pay taxes but i get them back)

In my microeconomics class we did go over return on investment (as well as normal, and economic profit, short-run, long-run etc.) however we didn't go over highest possible use (that I can recall). However, we did, I believe have a section over gaining the highest yeild based on diminishing marginal returns from the qL (quantity of labor) and the output of labor..... which is what most of the class went over - labor, pricing and product curves

I made an A in that class, but I don't really see how any of that will really help me with real estate. (yet!)
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The total amount that's been put into the trailer (not counting my labor of course)this summer is probably around $200-$300 ( As I said I got the carpet and other things like tools for free). But the ending amount could be closer to $800 as a 500 gallon propane tank is going to cost about $1/gallon - unless i can get that tank for free somehow (doubtful).

If I sold the trailer as is I could pull in $1,000 - 1,200 (with the porch) because it is so old. 5 months rent @ $300 would exceed that... therefore I would say it is more profitable to use the trailer as a rental property.

Any other questions or advice i'd appriciate it!

[lexicon]

Oh I almost forgot, The location of the trailer is in the country and off of a dead end dirt road so the possibility for holding the property until it it is worth more is unlikely... not to mention the town is growing in the opposite direction

[ResaleBroker]

Hello Lexicon,

As long as nothing goes wrong with the property it sounds like you'll make a couple hundred dollars each month you have a renter.

If you are serious about renting out apartments and homes in the future then you'll want to do more research into investing and being a landlord. When it comes to buying and leasing investment properties there are factors that need to be considered. Ignore them at your own risk.