How I Got Started in Real Estate Investing as a Broke College Kid

by Todd Smith | Articles, Flipping Houses, Rehabbing Houses

Today, I’m gonna share the story with you of how I got started as a broke college kid.

I was a sophomore electrical engineering student in college, actually, at the time and I was living in an apartment, so I actually bought my first investment property before I even bought my first house to live in.

The deal was brought to me by a Realtor that was kind of shady. They didn’t exactly do anything illegal but that’s a
story for another time, lol

The good thing about this deal, and the thing that attracted me to the deal is that I didn’t have to go get bank financing.

This property was listed in the MLS and the Seller was willing to offer seller financing on a Land Contract. That’s one of the things that I was studying (on my own, not in college) at the time was land contracts, so that was very appealing to me.

So basically I was able to buy the property by making payments. Setting up a payment plan that I would pay directly to the seller, and I didn’t have to go to the bank to get my own financing.

But I still had to come up with the down payment.

So where did I get the down payment from?

It didn’t come from my own money, it actually came from credit cards!

So you know a lot of times they send these credit card offers to college students, and I took advantage of all of those credit card offers. I collected a few of them from different banks, and that’s where I got my down payment!

So basically I didn’t have to come up with any money, and I didn’t have to go to the bank to qualify for a mortgage loan. I literally used credit cards for the down payment.

Now I just want to point out here that one of the differences in what I did, versus what most people do, is that…

I didn’t EVER use credit cards for consumer purchases unless I was planning to pay it off in full at the end of the month. I only allowed myself to carry a monthly credit card balance temporarily for investment purposes!

As you know, a lot of people get caught up in the trap of getting credit cards and maxing them out and creating all this consumer debt that starts to slowly strangle their financial future.

So to reiterate and clarify, I only used credit cards for investment purposes if there was a possibility that the debt might go more than 30 days. Anytime I used a credit card for consumer purchases, it was just a matter of convenience, and I
made sure that I paid it off at the end of the month.

So one thing I want you to take away from this video is that using credit cards for down payments is another way to get started.

I’ve actually used credit cards to come up with NOT just down payments, but ALL the cash to buy entire houses many times! I’ve used credit cards to substitute for cash!

I was able to build up a very large supply of credit card cash advance limits… over $200,000 at one time. As you can see, I had essentially created my own “lending department” where I could technically walk into any bank, and have them hand me over $200,000… NO QUESTIONS ASKED! Even if my bank account balance only said $7.23… it didn’t matter because it was all about the cash advance limits!

The reason I was able to build up this massive storehouse of cash advance limits was because…

✅ 1. When I got started, I literally had NO CREDIT, i.e. a clean slate, which is TOTALLY DIFFERENT than BAD CREDIT.

✅ 2. I DID NOT ABUSE my clean slate of no credit, by falling into the trap that most people do, because I already had an investment mindset!

Most college kids… and people in general, for that matter… start out with “no credit” which is why they get all these credit card offers.

Many of them then get caught up in consumer debt and then end up spending money they don’t have, building up a house of cards (no pun intended, lol). Then it gets to the point where they can’t make the payments, and the house of cards comes tumbling down, and that’s how their credit gets ruined.

If you’ve heard me speak before, or you’ve been following me for any length of time, then you know that I teach you how to buy properties without cash or credit, right?

Nonetheless using credit cards as a substitute for cash for investment is a way to use credit effectively, without using your own money.

But these days I recommend that you seek out private lenders to avoid that. In fact, I eventually replaced my “private bank” credit cards with private lenders… i.e. private individuals, probably just like you, who were interested in loaning me money to buy houses, because I would pay them a higher return than what they could get at their bank.

Again, I’ve NEVER gone to a bank to apply for a mortgage loan to buy an investment property, but I did get started with credit cards before slowly replacing them with private lenders. For a while, I used a combination of credit cards and private lenders, until I had enough money coming in from private lenders to replace all my credit cards.

My advice to you, though, would be to skip the credit card thing altogether and focus on my other strategies that I’ve developed for buying houses where you don’t even need private lenders.

Specifically, those strategies are…

✅ 1. Wholesaling
✅ 2. Lease Options
✅ 3. Getting the Deed (aka Subject To)
✅ 4. And Seller Financing

I don’t even want the possibility of you falling into the credit card trap, plus after you learn my other methods, you’ll quickly realize why credit cards aren’t even needed.

3 Quote Card - It doesn't matter how bad you start, it only matters how good you finish

Speaking of credit cards, I know you may be thinking… “Hey, Todd, how did you make that work since the interest rates on credit cards are super-high, especially with the cash advance fees?”

That’s right! I was paying 34% interest on some of those deals!

Keep in mind that I was making the money back very quickly… so quickly, in fact… and so much more money than I was actually borrowing… that the interest rate really didn’t matter!

In the case of my first deal, I was just using the credit card cash advance for the down payment, so the amount of interest I would have had to pay was a lot less than if I would’ve used credit cards to pay the entire price of the house.

Now let’s just look at a real simple Lease Option example…

So let’s say that I’m gonna control this property with a down payment of let’s say $3,000.

And let’s also say that I can get my money back from a Tenant/Buyer in 30 to 60 days… in the amount of $5,000 on a Rent-To-Own.

So what difference does it make “what” the interest rate is?

Let’s say I paid $200 in interest for 60 days… plus the $3,000 for the down payment… so now I’m at $3,200 right?

And remember, I’m collecting $5,000 from my Tenant/Buyer… so $5,000 minus $3,200 still gives me an upfront profit of $1,800, right?

So if you can invest $3,200 (of money that’s not even yours, lol) and get back $5,000 in 30-60 days, that’s a GREAT investment, right?

And there’s very little risk as long as you know the right strategies, and what the market will bear for your profit potential.

Now getting back to my first deal…

So this particular deal wasn’t really the best deal suited for a brand-new college student trying to get started. It needed a lot more work to fix up than what I understood. But that wasn’t the main problem.

My main challenge with this deal was that it was in a bad location. In fact, it wasn’t just a bad location, it was a terrible location!

Now being an out-of-state college student, in a new city, and not knowing the area, I had no way of knowing this without doing more extensive research.

Especially since the deal was actually right across the street from a hospital! Actually, it was Hurley Hospital in Flint, Michigan.

At that time I don’t know what the area is like “now”, but at that time the area was rough and, as I quickly found out, highly undesirable!

So I was thinking… okay I’ve got my first investment property, and I’m going to be able to rent it out to some hospital staff, maybe a nurse, or something like that. That makes perfect sense, right?

So I put the address in my advertisement… and actually, if you know the Flint area, the address was 1226 Grand Traverse Street. I remember it like it was yesterday! Lol

So I put the exact address in the ad… 1226 Grand Traverse Street, along with the amount of the monthly rent, and I put the fact that it was right across the street from Hurley Hospital.

And despite the fact that I put all that information in my ad, people would still call me and they would ask, “Where is the property?”

And I’m thinking how can they ask me that? That’s the very first thing in the ad! The headline is the property address!

Then as soon as I would tell them the address, they wouldn’t even say goodbye or anything, they just hang!

And this kept happening, over and over again! So then I start thinking, “Man, Todd, how rough IS this area!” 😲😱😂

It’s hilarious now, but you can imagine that at the time, I wanted to cry! I had just spent credit card money that I didn’t have on the down payment for this house!

To make matters worse, I never even actually got that property rented out. In fact, the only tenant that I ever had there at that property was a dead dog that my best friend from college and I removed from the back porch of the property!

So yeah, bottom line: that’s how I got started in real estate! LOL. Now you see that if I can do it, anybody can do it, right? LOL.

That was my first deal and I didn’t make any money on the property. Fortunately, I was able to get it sold and cut my losses.

And that’s one of the reasons that I want to teach you guys to invest without using money, because if you
don’t invest any money it’s hard to lose money, right!?

I often think how that experience with that first deal could have really turned me against real estate investing, but thank God I did not allow myself to get too discouraged to stick with it!

But it all comes down to mindset. You see, even though I was broke at the time, I started out in real estate investing with a multi-million dollar mentality, and thank God it’s paid off for me just that way!

Like most people, I could have let that first deal discourage me, but I CHOSE not to!

So there’s a couple of things that I want you to take away from this story today…

✅ 1. You’re never too young, too old, or too broke to get started. I got started as a broke college student. The fact that I was young, knew very little, and had no money didn’t matter.

✅ 2. And another thing that I want you to take away from this is that I had a bad experience, but I was able to bounce back. One of the reasons I was able to bounce back is because failure was never an option for me! I got started with the idea that I was going to build a million-dollar business, and failure was not an option, and that’s the way that you should you approach this, too!

This is not a hobby. If you treat it like a hobby, then you’re going to get paid as if it’s a hobby. If you treat it like
a million-dollar business, then you can get paid as if it’s a million-dollar business!

So again the two things I want to leave with you are that you’re never too young, or too old, or too broke to get started, and…

It doesn’t matter how “bad” you start… it only matters how “good” you finish. So just focus on building your skills so that you can go from “bad” to “good”.

So remember, just stay focused on the outcome that you want, and continue to do the right things daily to work toward that outcome, then your efforts will begin to compound, and you’ll be able to have all the success that you desire!

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