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At my uncleís advice, I am turning to Fatwallet for financial advice. Iím somewhat at a milestone in life and am turning to the financial gurus.

I just turned 18 and am finishing up my associateís degree at a local university, after which I will be transferring to a large, rather competitive state school to finish up a degree in Economics. Right now, all of my educational costs are paid for by my local school district; starting from fall my tuition after merit scholarship is going to be about $1,500 a semester.

I work about 30 hours a week on my business and that generates anywhere from $1,500 a month to $5,000 depending on the time of year. To try and minimize the income bumps, I pay myself a ďsalaryĒ of $2,000 a month and a few thousand in bonus every few months. Iíd estimate my annual income is around $35,000. In about three months, I should be receiving a bonus from a long time client thatís almost $10,000. Other than rent, I pay all of my own expenses.†

The only debt I have is about $8,000 at 4.75% on a two-year-old car I bought brand new. For the past few months, Iíve been paying $500 a month on it just to get it paid off and done.†

Iíve got a little over $40,000 in an Ally Bank savings account, as well as about $3,000 in a credit union that I use for checking. I opened a 529 a while ago and put just under $3,000 into it. My parents set aside about $7,500 in a savings account for me that is technically for my benefit but Iím not planning on using that money.† Additionally, I have $2,000 extremely sub-prime lending club notes and $2,000 in stocks through Robinhood. Getting pretty amazing returns on both but I realize that it's mostly just luck and the market.†

Iím strongly considering buying a condo/town house in the college town I will be living in for around $40,000. Rent on a two bedroom unit like that is around $800/month. Taxes assuming owner occupancy are <$300 a year and HOA is around $150/month. I figure the odds are good I stay in the college town for law school and even if I donít it would make for a decent rental property. Is this a good idea?†

Is there anything else that I am missing/could be doing better? Are there any unforeseen costs/expenses that Iím forgetting about? Should I consider changing or double majoring in finance or accounting?

Member Summary
Most Recent Posts
I believe this is an accurate statement. †Three of our attorneys (2 partners and 1 associate) went to top 25 law schools... (more)

snnistle (Apr. 06, 2017 @ 1:11p) |

This (allegedly) 18-y-o is a quite a finance guru. I'm thinking he's at least 25.

scripta (Apr. 06, 2017 @ 3:22p) |

rather than buy a condo, I'd try to buy a duplex/triplex/quadplex if they're available. Live in one unit, rent out the r... (more)

imbatman (Apr. 09, 2017 @ 7:07p) |

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You don't need anything from us. You're already about two decades ahead of most people at your age.

Just pay off that damn car with your savings ASAP.

And what does your business do?

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You are better off than 99.999% of 18 year olds.

You got a new car loan when you were 16 years old?
Do you have a cosigner?

Yes the condo purchase looks like an OK deal. Seems a little too good. Sure there isn't a catch?
But are you planning to stay I the area long term?

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CashMeeOusside said:   At my uncleís advice, I am turning to Fatwallet for financial advice. Iím somewhat at a milestone in life and am turning to the financial gurus.

I just turned 18 and am finishing up my associateís degree at a local university, after which I will be transferring to a large, rather competitive state school to finish up a degree in Economics. Right now, all of my educational costs are paid for by my local school district; starting from fall my tuition after merit scholarship is going to be about $1,500 a semester.

I work about 30 hours a week on my business and that generates anywhere from $1,500 a month to $5,000 depending on the time of year. To try and minimize the income bumps, I pay myself a ďsalaryĒ of $2,000 a month and a few thousand in bonus every few months. Iíd estimate my annual income is around $35,000. In about three months, I should be receiving a bonus from a long time client thatís almost $10,000. Other than rent, I pay all of my own expenses.†

The only debt I have is about $8,000 at 4.75% on a two-year-old car I bought brand new. For the past few months, Iíve been paying $500 a month on it just to get it paid off and done.†

Iíve got a little over $40,000 in an Ally Bank savings account, as well as about $3,000 in a credit union that I use for checking. I opened a 529 a while ago and put just under $3,000 into it. My parents set aside about $7,500 in a savings account for me that is technically for my benefit but Iím not planning on using that money.† Additionally, I have $2,000 extremely sub-prime lending club notes and $2,000 in stocks through Robinhood. Getting pretty amazing returns on both but I realize that it's mostly just luck and the market.†

Iím strongly considering buying a condo/town house in the college town I will be living in for around $40,000. Rent on a two bedroom unit like that is around $800/month. Taxes assuming owner occupancy are <$300 a year and HOA is around $150/month. I figure the odds are good I stay in the college town for law school and even if I donít it would make for a decent rental property. Is this a good idea?†

Is there anything else that I am missing/could be doing better? Are there any unforeseen costs/expenses that Iím forgetting about? Should I consider changing or double majoring in finance or accounting?

††
Don't buy a townhouse / condo. †That is a terrible idea. †Why? Fees. †They're $150/month right now. †What happens when the fees are raised to $300...$400 per month? †Happens more often than you think, especially if it's an old building and assessments come calling. †$150 on a $40k apartment already seems like a bit much. †

You don't need much advice on what to do right now. †With an 18 year old brain, you need advice on what NOT to do to muck up a good thing you have going. †Don't buy a condo, don't incur any more debt. Ditch the subprime lending club notes and individual stocks. † †

Get into index funds now. †Immediately pay off the car or refinance the car at a lower rate (4.75% is incredibly expensive these days for a new car). †I can' stress the house / condo thing enough. †Do not saddle yourself with that kind of debt right now. †

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CashMeeOusside said:   
The only debt I have is about $8,000 at 4.75% on a two-year-old car I bought brand new.†

† Good for you, and hope this isn't just a delayed April 1 story. How does a 16 y.o. get a new car loan? When I was 16 I wanted to buy a new Dodge Magnum (the late '70's model) and could just about make the monthly payments from an after school job. Parents said no way. Can't imagine any parent would let their newly licensed kid spend their money on a new car, let alone get a loan for one.

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Chargum85 said:   You don't need anything from us. You're already about two decades ahead of most people at your age.

Just pay off that damn car with your savings ASAP.

And what does your business do?

††
He/She''s probably a decade or so ahead of people twice his/her age...

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atikovi said:   
CashMeeOusside said:   
The only debt I have is about $8,000 at 4.75% on a two-year-old car I bought brand new.†

† Good for you, and hope this isn't just a delayed April 1 story. How does a 16 y.o. get a new car loan? When I was 16 I wanted to buy a new Dodge Magnum (the late '70's model) and could just about make the monthly payments from an after school job. Parents said no way. Can't imagine any parent would let their newly licensed kid spend their money on a new car, let alone get a loan for one.

††
I would guess that he needed a co-signer. I don't think the loan was legally binding on someone under 18.†

As for the condo, it's not too bad, capitalization rate is about 16% even factoring in a 90% occupancy rate. Purchase price will probably be a bit over 40k once you factor in all the closing costs. The other course of action would be to stick some of the money in mutual funds like the Vanguard Index 500, but the returns have ranged between 7-10% so the condo actually has higher returns right now until a special assessment hits.†

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Since you own your own business pay yourself in a dividend and or use a SEP IRA to make your income seem lower that it really is. †Probably too late for this years taxes and financial aid but it might help some for next year †Hopefully you have a a lot of scholarship opportunities and are just about getting a free ride. †Be skeptical but respectful from what you learn from professors. †Many live in book land and are not at the level of many people here or possibly yourself. †Have fun, stay away from too many parties and don't get brainwashed like the masses can be in some universities. †Pay all the car off now, I would not wait. †Dont think you can pick stocks like magic, best to think long term and if you have some extra later on you can try trading but know its not just about a good pick but about timing, leverage, diversification ect... †Many ways to lose your shirt so don't get overconfident. † You are off to a great start

These may tell you where you are and how you are doing:

https://dqydj.com/income-percentile-by-age-calculator/

https://dqydj.com/net-worth-by-age-calculator-for-the-united-states/

††

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I just saw the OP's username. †

L-O-L

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RailroadTrack said:   I just saw the OP's username. †

L-O-L

††How bout dat?

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You just might be the most successful 18-year-old ever.

If a $40K condo rents out for $800/mo, I would buy the whole town. That's a very high ROI for a rental.

If you don't go that route, I'd consider contributing some of your income to Roth and/or SEP IRA. If you do any investing at all, you should do so in tax-deferred accounts.

I don't think your undergrad major matters much if you're definitely going to law school after.

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CashMeeOusside said:   Iím strongly considering buying a condo/town house in the college town I will be living in for around $40,000. Rent on a two bedroom unit like that is around $800/month. Taxes assuming owner occupancy are <$300 a year and HOA is around $150/month. I figure the odds are good I stay in the college town for law school and even if I donít it would make for a decent rental property. Is this a good idea?†
††
The rental is a no brainer, and you wouldn't need a roommate which is better than it sounds. †You're going to make a few friends and since there's no roommate hassle they'll be naked most of the time.

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I would venture to guess that most 18 year olds are still in high school and if they have a job, it is doing retail, fast food, or other minimum wage job. †

You don't need advice from this forum... keep doing what you are doing

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You're ahead of 99% of people twice your age.

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So successful but needing your e-peen stroked? I don't get it.

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Nothing new or too horrible about some e-peen strutting. Obviously, you're doing great OP.

The new car could be a red flag. You can, and many do, burn a ton of money on cars. That may be very easy to manage if you continue to do everything else so well, but keep in mind the long-term costs. I estimate my somewhat extreme car-frugality has added up to almost $500k over around 30 years - factoring in the returns from saving & investing typical car money over that time. If you stick with this car for 10-20 years, then this car purchase won't be holding you back either.

Rentals are going to be a very big local issue in a college town - if that's part of your plan for the condo, make sure you find out both the condo and city's rules about renters. There may be limits that would prevent you from renting specific condos at all, or zoned limits on number of unrelated renters allowed in one condo.

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Quack

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HOA fees never go down...they always go UP and after a while it seems you are paying for a dead horse....renters frequently stop paying the rent and then it costs you thousands to get them evicted... buying the condo is one of the worst investments you can make.....period...buy Apple Computer...its cheap and their are no fees monthly and its a great investment,

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belgique said:   HOA fees never go down...they always go UP and after a while it seems you are paying for a dead horse....renters frequently stop paying the rent and then it costs you thousands to get them evicted... buying the condo is one of the worst investments you can make.....period...buy Apple Computer...its cheap and their are no fees monthly and its a great investment,
††
Rents also go up. Most of my renters pay the rent, the key is to screen your tenants, but that doesn't always help because life happens, but at least they pay for a little while before things happen.†

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Congrats op. Just stopping in to tell you not to go to law school unless it's at T14 and even then probably don't go to law school. It is a career limiting move, insanely expensive, and has garbage job prospects in most markets.

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My $0.02...

Take the advice about refinancing or paying off your car with a grain of salt. †Assuming you had a 60 month loan and you continue paying $500/month, you will pay the vehicle off in 16 months and spend a whopping $280 in interest. †If you pay your normal payments, which should be right around $240/month, you will pay about $600 in interest over the next 3 years. †

Also, law school costs a fortune and you have to be very good and/or work a ton of hours to make good money. †I currently manage a law firm and each of the partners have been practicing law for over 20 years each. †They don't work long hours and the highest paid is around $70K, including distributions. †To put that in perspective, I am a high-school graduate, and I made $118K in the last 12 months of my previous job, which was in a different industry. †At the law firm, my payroll check (not including distributions) is still more than the partners. †You can do better than they do, but you have to put in the time and effort, something I would never be willing to do... "work smarter, not harder."

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Figured I would wait a day and see if this "kid" came back considering several parts of his story were quite unbelievable. Not surprised we haven't heard back.

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I called it first. Heard stories of parents buying brand new cars for their 16 y.o. kids, but never of one where the kid took out a loan to buy it.

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"mid-life crisis" at age 30. I called it.

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A big thank you to everyone who contributed! Your views are very helpful and thought provoking. To those who think this is an April foolís jokeÖ Itís not. Yes, I realize my timing is subpar, and I was swamped and unable to reply for a while. Studying and dealing with angry people takes up a lot of time. †

To answer some questions: The car is financed through a local, one-branch community bank under both my name and my parents. I was making a modest amount of money when I bought it and my parents were OK with the risk of me not being able to pay. I bought the most stripped down new car at the same price equivalent used cars were going for.

I was searching around and found references to United States Senate Credit Union? Apparently, they are at 1.24% on a car refi. Is it worth the trouble of refinancing and keeping my cash or should I just pay it off?

My business is centered around brokering large lots of goods to resellers (thatís the best way I can phrase it). I also moonlight in other capacities when things are slow, and that often pays very well.

The reason condos are so cheap is because itís a smaller college town without any major job prospects outside of the university. Most of whatís priced around $40,000 is built between 1975 and 1990. Iíve noticed the market is A LOT hotter now than it was at the end of 2016, because college acceptances went out not that long ago. The prospect of a special assessment is definitely worrying and something Iíve considered. IF I decide to buy, at minimum I would review the budget and board meeting minutes to see if anything sticks up as being problematic. Iím not really sure what other red flags to look for.† I just cringe at the idea of paying rent, especially since Iím probably going to cheap out to save money.

FWIW, the law school thatís associated with this college is a top-50 school. My biggest concern, like some have shared, is the prospect of six figures of student loan debt and a job that pays less than 50k a year. I know a few people like that. One works at a Dunkin Donuts.† If not law, whatís the best path for an Economics major?†

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OP, you are doing a great job making & saving money, congrats! I would not buy an old condo. I would not want the headache of maintenance and collecting rent from my roommates. You're going to be very busy with school and your business. Focus on learning and making friends; you're going to have such a great time, why spoil it with the headache of being a landlord? I would just suck it up and pay rent if I had no long term plans on an area.

The best part about owning your own business is the ability to set up a SEP/401K. I would sock away the maximum you're entitled to. Since you're so young, this money will really grow!

I used to be a landlord of an old condo property. Now, I made good money when I sold it, but I must say I hated every minute of being a landlord. I owned my own business, so I was able to set up a 401K, that is the best move I made. I never would have been able to accumulate that kind of wealth without using that strategy. I repeat, the single best thing about owning your own business is the ability to set up a 401K and shelter it from taxes, don't let this train leave without you!

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atikovi said:   I called it first. Heard stories of parents buying brand new cars for their 16 y.o. kids, but never of one where the kid took out a loan to buy it.
I bought a new car with my parents backing the loan when I was around 16. I paid it all off. I had a janitor job and also did a paper route (~250 papers/morning) (didn't do both jobs at the same time). I made ~1000/month 20 years ago. †

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Don't forget to have some H&B. You are doing A+ awesome, but have some fun too!

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wp746911 said:   Don't forget to have some H&B. You are doing A+ awesome, but have some fun too!
††
In case you didn't notice... he just said his "business" was dealing drugs, so I don't think our "OP" needs your advice on H&B lol

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CashMee, a "top 50" law school does not offer a valuable law degree. There is a set of Top 14 that do - outside of that, the school would need to cover all your expenses and then some to be a smart choice. The industry has been through big cycles, but that's how it looks for the foreseeable future. "Top 50" in general sounds great, but for law schools it's not. Talk to practicing attorneys about who gets hired and recent grads about their experience and whether they went to T-14 or "other".

And don't cringe about paying rent. If that's the big motivation behind buying a condo, it sounds like a mistake. There have been a lot of drawbacks to buying already posted, and these are only the most general and obvious. For an 18 year old in a college-only town, chances are owned property is not going to be worth it for you. Wait until you anticipate some stability in where you live.

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CashMeeOusside said:   My business is centered around brokering large lots of goods to resellers (thatís the best way I can phrase it).†

Call Saul Goodman to hook you up with a nail salon.

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OP, do you live in a state where buying an RV to live in would make sense? That is, you don't have frigid winters. Check out this article http://heathandalyssa.com/six-reasons-why-you-should-live-in-an-...

This guy bought his for $11,500. If you paid $400/month for 48 months, that's $19,200 for rent you would save.

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luvdoublebrats said:   OP, do you live in a state where buying an RV to live in would make sense? That is, you don't have frigid winters. Check out this article http://heathandalyssa.com/six-reasons-why-you-should-live-in-an-...

This guy bought his for $11,500. If you paid $400/month for 48 months, that's $19,200 for rent you would save.

† That's an interesting idea. I think my biggest issue would be parking.

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SlimTim said:   CashMee, a "top 50" law school does not offer a valuable law degree. There is a set of Top 14 that do - outside of that, the school would need to cover all your expenses and then some to be a smart choice. The industry has been through big cycles, but that's how it looks for the foreseeable future. "Top 50" in general sounds great, but for law schools it's not. Talk to practicing attorneys about who gets hired and recent grads about their experience and whether they went to T-14 or "other".

And don't cringe about paying rent. If that's the big motivation behind buying a condo, it sounds like a mistake. There have been a lot of drawbacks to buying already posted, and these are only the most general and obvious. For an 18 year old in a college-only town, chances are owned property is not going to be worth it for you. Wait until you anticipate some stability in where you live.

† Thanks for the help! I feel like the legal industry is somewhat of a mess. The law firm I use to send out demand letters to clients is run by and employs mostly those from a fourth tier, for-profit law school, and yet many of them seem like they have so much money they don't know what to do with it. I guess I really need to do some more research. I would be content with making ~100k, just the thought of student loans scares me.†


Not paying rent is 99% my motivation for buying a condo. Appreciation is practically non-existent in that area. Much of the market is worth the same as it was two years ago with the main outliers being properties that were initially under priced.



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CashMeeOusside said:   
SlimTim said:   CashMee, a "top 50" law school does not offer a valuable law degree. There is a set of Top 14 that do - outside of that, the school would need to cover all your expenses and then some to be a smart choice. The industry has been through big cycles, but that's how it looks for the foreseeable future. "Top 50" in general sounds great, but for law schools it's not. Talk to practicing attorneys about who gets hired and recent grads about their experience and whether they went to T-14 or "other".
† Thanks for the help! I feel like the legal industry is somewhat of a mess. The law firm I use to send out demand letters to clients is run by and employs mostly those from a fourth tier, for-profit law school, and yet many of them seem like they have so much money they don't know what to do with it. I guess I really need to do some more research. I would be content with making ~100k, just the thought of student loans scares me.†



† I believe this is an accurate statement. †Three of our attorneys (2 partners and 1 associate) went to top 25 law schools and make way under $100k. †I also know two relatively young lawyers (under 35) who are no longer practicing, because they make more in other industries. †One is from a top 25 law school. †With your "common sense" you would probably very successfuly in life in a different field, without breaking the bank on extra education. †

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CashMeeOusside said:   Not paying rent is 99% my motivation for buying a condo. Appreciation is practically non-existent in that area. Much of the market is worth the same as it was two years ago with the main outliers being properties that were initially under priced.This (allegedly) 18-y-o is a quite a finance guru. I'm thinking he's at least 25.

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rather than buy a condo, I'd try to buy a duplex/triplex/quadplex if they're available. Live in one unit, rent out the rest.
That way you own the entire structure, and likely won't have to deal with association fees.
with 40k liquid you likely have enough for down payment, and the rent from the other units would likely more than cover your mortgage payment. You'd also set yourself up with rental income when you finish school.

If you're in one of the units, then property maintenance should be relatively easy for you.

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