This was in response to my blog post titled “How I Bought My First My First Real Estate Investment Property At The Age Of 14″. Click Here to read it.

It’s a good question, and one I probably should have mentioned in the post.

In most states you don’t have to be an adult to enter into a contract.  However the contract is not binding and you can renege on any contract signed as a minor once you become an adult making it null and void.  There are some rare exceptions for necessities like credit received to buy food and contracts with utility companies.

Oddly enough, on the application to apply for an FHA loan there were statements you had to sign stating you were 18 or over, but not on the assumption agreement.  I guess that’s because the final recourse still lies with the original borrower even though it was an assumable loan.

In any event, it was still legal for us to purchase the property as minors even though it was a risk for the seller in the event something went wrong.

Flipping real estate was one way I found to put quick cash into my pocket and I could do it with no down payment.

The key was to find sellers that had vacant property since they were generally very motivated sellers and it’s easier to work with vacant properties (I’ll explain why later). I would use my real estate agents MLS computer and pull up a complete listing of every vacant home in the area.

One day I was doing a search and found a home that looked very promising because it had lots of water damage from a broken water heater. The house was vacant and the hot water heater in the underground basement sprung a leak which flooded the entire basement and even part of the first floor. Needless to say the house smelled bad and needed electrical work, new subflooring, carpeting, sheetrock work, and paint.

When I was talking to the owners they told me not to worry about the damage because their insurance would take care of it. A light bulb went off…

I realized that I could buy the house at a bargain price because it was damaged and have the sellers insurance company pay to have it all fixed.  Then I could sell the house AFTER the repairs had been made.

It was a no brainer. The house was easily a $100,000 (over $300,000 in today’s market) but the owners were scared that it wouldn’t sell because of the damage, so they agreed to sell it for $70,000.

I put in the contract that the repairs must be made before closing and set the closing date 90 days away to give them time to make the repairs and time for me to flip the house.

I wanted to make this a no money down deal, so in the blank on the contract where it listed the amount of earnest money I wrote in “$5,000.00 promissory note”.  Then I gave my agent a $5,000 promissory note from a blank form I picked up from an office supply store.

The sellers thought nothing of the promissory note and it was held by my agents office the same as a check for earnest money.  In fact I could have made it for $10,000 or $15,000… It was just paper.  I knew that if I didn’t flip the house before the time of closing I could always void the contract by not approving the repairs or several other weasel clauses I had in the contract. This made it a true no money down deal.

Since the house was vacant I put in the contract that I would be allowed to have a key to show it to appraisers, contractors, and anyone else I saw fit.  This allowed me to run a classified ad in the paper and show the home to potential buyers.  Sometimes sellers balk at giving the buyer a key prior to closing, so I would sometimes counter with a clause that gave me the right to enter with my real estate agent at any time with her using her lock box key.  I had a good relationship with my agent, so this method worked for me.

The repairs were done in 30 days. I now have a contract allowing me to buy a $100,000 home for $70,000. Not only is it a $100,000 home but it’s a home that now has brand new carpeting, fresh paint. a newly refinished basement — It smells and looks just like a new home. And I now have 60 days to find a buyer. It wasn’t too hard. I found a buyer to buy it within a week for $90,000. In hindsight I could have probably sold it for $100,000 since the restoration made it better than the average homes in the neighborhood. It even appraised out to $135,000.

Instead of closing on it myself and then selling it to the new buyers, I simply assigned them my contract. At closing the sellers and my buyers all met with the closing attorney and I left with a check for $15,000. I gave the sellers a $5,000 kickback to keep them from objecting to anything.

Everyone left happy.

I haven’t done this type of home flipping since the 80’s but it worked so well I thought I would share it.

“I Bought My First Piece Of Real Estate Investment Property At 14 AND Put Cash Into My Pocket”

As you may know, I was first turned on to real estate investing when I was 10. But it was four years before I was able to put down a contract on my first piece of real estate.

I would have tried to buy some real estate earlier, but I was stopped by one thing… and it wasn’t lack of money (which I didn’t have any).  It was for lack of transportation. But I was lucky. A friend of mine that lived across the street from me was 16 and had a car. A few years earlier, when he was 13 I shared with him my collection of real estate investment books (The classics – Lowery and Allen) and we waited until we had wheels to get around.

A week after his 16th birthday we took his parents car to a local real estate office, walked in and told the agent that we were investors and wanted to look at property. We were asked to leave. We had to visit four more real estate offices before we finally found an agent. At first she didn’t take us seriously, for obvious reasons, but as soon as we began talking about property she realized that we did mean business.  The real estate agent had nothing better to do so she took us out not expecting anything to come of it.

After showing us some of the most run down homes in the area, we found one that was perfect. It was an older home a couple blocks away from the local college. It could easily be divided up into 4 apartments and it had an FHA non-qualifying assumable loan. But the best part was, it had a dethatched garage in the backyard that was filled with used building supplies. Lumber, paint, windows, lights, plumbing supplies and more. Almost everything we would need to fix the house up.

Now I had money in the bank, but my parents would not let me touch it. So I had to figure out a way to raise the $3,000.00 I needed to assume the mortgage and pay for closing cost if I wanted to put a contract down on the house. Shouldn’t be to hard for a 14 year old kid… ha ha.

It was the summer of 1979 and I was 14. Me and my 16 year old friend, Charles, were working with a local real estate agent and looking at lower priced homes in my area when we came across a older home a couple blocks away from the local college for $10,000.

Monthly payments on the NQNE mortgage was $133 per month and we could EASILY rent out each “apartment” for $100 per month to college students which would be more than enough to cover any slow periods during the summer months.

There was a $7,000 NQNE (Non Qualifying None Escalating) mortgage on the home. So we could assume the note without any qualifications. That meant we had to come up with $3,000 down to purchase the home.

We offered to assume the $7,000 mortgage and let the seller hold a $3,000 2nd mortgage note for 10 years at 18%. This would mean that we would have to pay the seller $54 per month for the next 10 years.

The seller countered back with a $1,500 down payment and us making a $1,500 cash down payment, since he had closing cost and a commission to pay. We settled on us putting $1,000 down and him taking a $2,000 2nd mortgage.

We still needed to come up with the $1,000 needed to close on the property. Here is where we became really creative. We had a plan and had actually put in some language into our offer to advance our plan.

We stipulated in an addendum that the buyer (that’s me), before closing, would be allowed to bring inspectors and appraisers onto the property and that we could have keys and 24/7 access to property before closing. We also stipulated that we could remove any electrical items in need of repair for the purpose of repair estimates or appraisals as long as the items were returned within 24 hours.

As soon as our offer was accepted, we went into the home and removed one of the antique brass ceiling lamps that had wiring problems. The house had six of these very ornate brass lamps with painted ceramic fixtures. We took it to an antique shop that was a mile away and the owner of the shop inspected the fixture and offered to buy all six for $150 each. We were now looking at $900 towards the down payment.

We brought the antique dealer to the house and he offered to buy all the fixtures in the house, including some of the hardwood floors for a total of $2,000. We told him he could have it all for $1,500 if he would give us $1,000 down the morning we were to close and then the remaining $500 when he picked up the items after the closing. Since the antique shop owner knew he could get a better with us, we had no fear of him going around our backs to the home owner. But just in case we had him sign a non-disclosure agreement.

The day of closing Charles and I walked in with a $1,000 cashier’s check from the antique dealer.

The seller did make a fuss about our ages, but eventually calmed down.

After the closing the the antique dealer came to the house and removed all the brass lamp, brass wall plates, various other brass fixtures and some hardwood floors. He gave us another check for $500. We were able to replace everything he removed with cheaper new light fixtures, plastic wall plates, and a new floor all for $250.

In the end we closed on the home with zero-money of our own and put $250 cash into our pockets. At the age of 14 this was the first of many real estate deals.

Today, thousands of people just like you are making fantastic money in real estate without investing a penny of their own money.

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Earn Money By Becoming a Real Estate Bird Dog

Over the past few years real estate prices have dropped by as much as 50% in many areas.  So you may be asking… “Is Now The Time To Start Real Estate Investing”?

The answer is… “Now is the perfect time to start”.  Look at it this way – You can now buy property for 50 cents on the dollar.  Investing in Real Estate makes more sense now more than ever.  The market will rebound and you want to own real estate as part of your investment portfolio.

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Become a Real Estate Bird Dog