Real Estate investment college town condo?

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rai
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Real Estate investment college town condo?

Post by rai » Mon Sep 23, 2019 10:00 am

I personally don’t want to get involved with but my wife thinks we’d save money and/or make money if we bought a rental property near Clemson university. Our daughter currently rents and will be there for 3 additional years. Nice rental 3 bedrooms condos that will sell for $130-140K and would be able to rent out 2 additional rooms (plus room for daughter) the rent it seems would cover the mortgage, tax and interest.

My problems are this
1) our daughter is only there for 3 more years is it worth getting involved when rent for 3 more years is less than $30K
2) we’d need to sell or keep renting in absentee status after 3 years
3) I don’t want lift a finger on repair/upkeep we don’t live anywhere near Clemson meaning we’d need to hire a property manager
4) if the units were so great an investment why are they for sale, I mean wouldn’t the owners just want to keep the loot rolling?

Can you guys tell me if this is a waste of time or if this is a potential gold mine.

Seems like typical rent of one room is like $700-$800 and the units are 3 rooms typical less than $140K. Supposedly our daughter would be able to rent to here friends.

I am all for 3 fund low cost index fund investing but my wife thinks she has a better use of our investing attention.

We max out all tax shelters including HSA and we have some money left over to invest in taxable.
Last edited by rai on Mon Sep 23, 2019 10:10 am, edited 1 time in total.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

Jack FFR1846
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Re: RE investment college town condo?

Post by Jack FFR1846 » Mon Sep 23, 2019 10:10 am

A rental is NOT passive. It is a job. If this were my wife insisting on this, I would insist that I have zero participation in any of this. The police call because the kids are holding a keg party, I don't care. The place got burned down in a "Burning Man" recreation? Not my problem. The other kids refuse to pay rent or gas bill or electricity or cable? I'm not involved. You visit and find that all the girls have their boyfriends moved in? Nope....I'm not getting involved. I know my wife would want nothing to do with any of this. We gladly paid for DS#1's college housing. We'll pay when DS#2 transfers his community college credits and goes to a 4 year school. When the semester ends and there's a $15 damage fee, I'll gladly pay it.
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Valuethinker
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Re: RE investment college town condo?

Post by Valuethinker » Mon Sep 23, 2019 10:12 am

Jack FFR1846 wrote:
Mon Sep 23, 2019 10:10 am
A rental is NOT passive. It is a job. If this were my wife insisting on this, I would insist that I have zero participation in any of this. The police call because the kids are holding a keg party, I don't care. The place got burned down in a "Burning Man" recreation? Not my problem. The other kids refuse to pay rent or gas bill or electricity or cable? I'm not involved. You visit and find that all the girls have their boyfriends moved in? Nope....I'm not getting involved. I know my wife would want nothing to do with any of this. We gladly paid for DS#1's college housing. We'll pay when DS#2 transfers his community college credits and goes to a 4 year school. When the semester ends and there's a $15 damage fee, I'll gladly pay it.
+1

Students are tough work as tenants. Grad students are a much better bet - not perfect, but much better.

Also kids are always moving in and out, falling in and out with each other, moving in with boyfriends/ girlfriends etc. Your tenants at the end of the year may not be the tenants you started with.

TruthHurts87
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Re: Real Estate investment college town condo?

Post by TruthHurts87 » Mon Sep 23, 2019 10:24 am

If you do decide to move forward, I highly suggest you get their parents to always co-sign the lease.

jb1
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Re: Real Estate investment college town condo?

Post by jb1 » Mon Sep 23, 2019 10:31 am

What is the purpose of this?

Ironically enough my female neighbor who is 21 had he dad buy her a house (she claims she bought it), rents it to her college friends, and it has turned into a complete mess.

Bottom line, if you don’t live near it, don’t do it. Especially condos.

Valuethinker
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Re: Real Estate investment college town condo?

Post by Valuethinker » Mon Sep 23, 2019 10:32 am

rai wrote:
Mon Sep 23, 2019 10:00 am
I personally don’t want to get involved with but my wife thinks we’d save money and/or make money if we bought a rental property near Clemson university. Our daughter currently rents and will be there for 3 additional years. Nice rental 3 bedrooms condos that will sell for $130-140K and would be able to rent out 2 additional rooms (plus room for daughter) the rent it seems would cover the mortgage, tax and interest.

My problems are this
1) our daughter is only there for 3 more years is it worth getting involved when rent for 3 more years is less than $30K
You can model returns. Don't forget to include purchase and sale transactions costs - lawyers, real estate agents etc.

My gut is if you are not looking at an 8%+ return pa this is not worth doing. And the hassle factor cannot be underestimated. What if your daughter changes college?
2) we’d need to sell or keep renting in absentee status after 3 years
3) I don’t want lift a finger on repair/upkeep we don’t live anywhere near Clemson meaning we’d need to hire a property manager
4) if the units were so great an investment why are they for sale, I mean wouldn’t the owners just want to keep the loot rolling?
2 would be a stop-do-not-proceed moment for me
3 property managers are often not much use. If you have 20 units you employ someone and that works. But if you have 1 unit? You are just not going to be a big customer for them
4 the reason this works is because there are people, often 1st generation immigrants, who are prepared to put sweat equity into it. Buy 1, take the profit from that and roll it into buying another, etc. It's a business and has low barriers to entry. Because multi-tenanted units and students can be hard work, the rental yields (cap rate = net operating income/ value) are better.
Can you guys tell me if this is a waste of time or if this is a potential gold mine.

Seems like typical rent of one room is like $700-$800 and the units are 3 rooms typical less than $140K. Supposedly our daughter would be able to rent to here friends.

I am all for 3 fund low cost index fund investing but my wife thinks she has a better use of our investing attention.

We max out all tax shelters including HSA and we have some money left over to invest in taxable.
It can work well but if your daughter was not attending Clemson would you make this investment?

tigerdoc93
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Re: Real Estate investment college town condo?

Post by tigerdoc93 » Mon Sep 23, 2019 10:48 am

We bought a home for our daughter while she attended Troy University and it was a good deal. She had a roommate and her rent paid 60% of the costs associated with the home. Then we sold the home 3 years later in less than one week pocketing the equity. So it can be a good investment depending on situation. My daughter is very responsible and we never had fear that the place would be destroyed. Now my son is at Auburn University and we gladly pay rent for a condo. We don’t feel that purchasing home or condo for him is a good idea b/c he’s not as responsible. There’s a high possibility of damages or other issues in his situation. If I had a child at Clemson I would try to touch base with Chad Carson. He is known as Coach Carson and is a real estate investor in Clemson. I’m sure he’d give you some good advice. He also likely has condos available for rent.

Dave55
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Re: Real Estate investment college town condo?

Post by Dave55 » Mon Sep 23, 2019 10:57 am

rai wrote:
Mon Sep 23, 2019 10:00 am
I personally don’t want to get involved with but my wife thinks we’d save money and/or make money if we bought a rental property near Clemson university. Our daughter currently rents and will be there for 3 additional years. Nice rental 3 bedrooms condos that will sell for $130-140K and would be able to rent out 2 additional rooms (plus room for daughter) the rent it seems would cover the mortgage, tax and interest.

My problems are this
1) our daughter is only there for 3 more years is it worth getting involved when rent for 3 more years is less than $30K
2) we’d need to sell or keep renting in absentee status after 3 years
3) I don’t want lift a finger on repair/upkeep we don’t live anywhere near Clemson meaning we’d need to hire a property manager
4) if the units were so great an investment why are they for sale, I mean wouldn’t the owners just want to keep the loot rolling?

Can you guys tell me if this is a waste of time or if this is a potential gold mine.

Seems like typical rent of one room is like $700-$800 and the units are 3 rooms typical less than $140K. Supposedly our daughter would be able to rent to here friends.

I am all for 3 fund low cost index fund investing but my wife thinks she has a better use of our investing attention.

We max out all tax shelters including HSA and we have some money left over to invest in taxable.
You could potentially make money, but you could also lose money. As I learned from my commercial real estate mentor, the correct question to ask is, "What can go wrong with this property"? The correct answer is: "Everything". You listed some of what could go wrong as have other posters. Is it a gold mine? I seriously doubt it. In all likelihood, if it was a gold mine, professional property owners who invest in these types of properties would have scooped it up either right before it hit the market in an off market deal, or on day one of it being on the market.


Dave

GetSmarter
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Re: Real Estate investment college town condo?

Post by GetSmarter » Mon Sep 23, 2019 11:05 am

I know someone who owns a small apt. building next to a major university. Lots of smart undergrads. Hired a property manager who prescreened great tenants. One of whom was a first year college student, who did something in her unit that I won't repeat, and nearly burned the building down. Fire crews came immediately but there was a lot of damage in the unit and smoke damage in all the units. Fortunately, no one was hurt. To add insult to injury, this landlord is now fighting with the insurance company to get paid for the damages he paid to fix. Insurance adjuster questioned everything and wouldn't allow this or that. Or said he paid too much, say, for the new carpet, new paint job, new drapes... I'd never ever want tenants, especially young, inexperienced ones. Based on what I've observed the potential upside isn't worth the potential downside.

Topic Author
rai
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Re: Real Estate investment college town condo?

Post by rai » Mon Sep 23, 2019 1:32 pm

jb1 wrote:
Mon Sep 23, 2019 10:31 am
What is the purpose of this?

Ironically enough my female neighbor who is 21 had he dad buy her a house (she claims she bought it), rents it to her college friends, and it has turned into a complete mess.

Bottom line, if you don’t live near it, don’t do it. Especially condos.
What is the purpose? Wife thinks it’s like a free money stream, we are paying xxx for rent she thinks if we pay xxx + a bit more we can own real estate instead of renting and maybe profit.

It will be taking money from our savings, there is only x amount of money to go around so paying for another property will cost us money.
"Life is what happens to you while you're busy making other plans" - John Lennon. | | "You say that money, isn't everything | But I'd like to see you live without it." - Silverchair

NotWhoYouThink
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Re: Real Estate investment college town condo?

Post by NotWhoYouThink » Mon Sep 23, 2019 1:42 pm

What do you know about real estate in this area that other property owners don't know?

gougou
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Re: Real Estate investment college town condo?

Post by gougou » Mon Sep 23, 2019 2:07 pm

rai wrote:
Mon Sep 23, 2019 10:00 am

Seems like typical rent of one room is like $700-$800 and the units are 3 rooms typical less than $140K. Supposedly our daughter would be able to rent to here friends.
This sounds too good to be true. If a $140K condo can rent out 3 rooms for 2.1K - 2.4K/month total then I am going there to buy one myself.

I quickly looked on Zillow and it looks like a typical room can be rented for around $500. With private bathroom around $600.

PartIrish
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Re: Real Estate investment college town condo?

Post by PartIrish » Mon Sep 23, 2019 2:33 pm

We did this when our son attended a state university in California, but several variables were different, and plenty of things can go wrong. Our experience, for better and worse:

1. We got lucky in the boom-bust cycle of CA property. We purchased a short sale 2bd/2ba condo in 2012 for $175K, at the bottom of the market in this coastal town. We sold the unit this spring for $375K.

2. We paid cash, so our carrying costs were limited to HOAs, taxes and utilities. When he had a roommate (they came and went during undergraduate years), these costs were covered.

3. Our son ended up going to graduate school at the same university, so he was in the condo seven years, which helped him borrow less money for his graduate degree. A fellow grad student was his roommate, and just as studious, which was important. Even during undergrad years, our son was selective in his choice of roommates so that helped reduce tenant issues.

4. We estimate that we (parents during undergrad years and our son during his grad school years) saved over $100K in rent, as rents shot up steeply during his 7 years there. He now lives in a one-bedroom apt. for which he pays over $2000/month; he is on his own and working, but looking to move to a lower COL area.

It is work. Plumbing and other issues that come up have to be dealt with by the owners, which wasn't always convenient from another state. And, there were periods in which he lived alone, which gave us a place to stay when we visited once or twice a year. In sum, I don't think I would do this in a period of inflated property values, and with a mortgage. The whole venture could have gone the other way, with us buying during the boom part of the cycle and having to sell during the bust period, although I did research local rent costs and vacancy rates closely before buying.

renue74
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Re: Real Estate investment college town condo?

Post by renue74 » Mon Sep 23, 2019 3:16 pm

My 14 year old is planning to go to Clemson and I've thought about purchasing a rental. I own 10 properties near Charlotte.

I probably won't do it. From my local landlording, I've found this absentee landlords have issues. I live within 15 minutes of all our properties. Are you potentially prepared to buy a new HVAC system? Have a natural gas leak? Have a water leak that needs the water turned off at the road? (all of these things have happened to me within the last 2 years.)

There's a company in Rock Hill, SC called Walk2Campus that buys up all the properties around campus and rents to students....rents a house by the bedroom and provides utilities within the rent cost. I think the cost is $550 to $650 per bedroom, including utilities. They have a cap on utilities and most parents end up paying about $20-$30 more per month on top of their base price.

Students are rough on properties. Real rough. I bought a 3 bedroom house 3 blocks from campus and was going to make it a rental...but ended up making it into a full time airbnb property. I don't think I'm ready to rent to students.

aristotelian
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Re: Real Estate investment college town condo?

Post by aristotelian » Mon Sep 23, 2019 3:21 pm

I don't understand the point of this. If you are looking to get involved in landlording, you should do it in your own location. I would not touch anything in real estate unless my timeframe was at least 10 years.

Has your wife actually done the numbers, accounting for property management, maintenance, realtor fees when you sell, vacancy during summer etc? Also is she assuming that your daughter would pay rent? That would defeat the purpose but I can't imagine the numbers working if in essence you will have one unrented unit.

Also does your daughter want to be her friends' landlord?

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JoeRetire
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Re: Real Estate investment college town condo?

Post by JoeRetire » Mon Sep 23, 2019 3:45 pm

rai wrote:
Mon Sep 23, 2019 10:00 am
if the units were so great an investment why are they for sale, I mean wouldn’t the owners just want to keep the loot rolling?
Everything has a price. I doubt you'll get any bargains, as the potential rental income would be priced into the sale price.
Seems like typical rent of one room is like $700-$800 and the units are 3 rooms typical less than $140K. Supposedly our daughter would be able to rent to here friends.
Don't mix business and friendship. Never rent to friends. Never. If you value money, or value the friendship, just don't do it.

Have you ever seen what a room looks like at the end of the semester? How much money are you allocating for cleanup and repairs?
Are you aware of the laws regarding tenants (and in particular student tenants)?

Personally, I'd never want to be an absentee landlord.

I do know a few friends who purchased property for their college student children. In some cases it worked okay. In a few cases it was horrible. Everyone I know happily got rid of the property as soon as the student graduated. Nobody got rich.

If you choose to go this route, talk with your lawyer and your insurance agent first. Make sure you understand what you are getting into as far as liability.
Very Stable Genius

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AerialWombat
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Re: Real Estate investment college town condo?

Post by AerialWombat » Mon Sep 23, 2019 4:46 pm

I love rental properties, even in other states. I like the cash flow, and I like the equity buildup, and I like the tax benefits.

I made a conscious choice to build a rental portfolio to accelerate my path to retirement. I accepted the risks, costs, and hassles.

You do not sound interested in any of that.

So walk away quickly. In fact, run. Very far, very fast. One of the worst kinds of landlords is a reluctant landlord.
“Life doesn’t come with a warranty.” -Michael LeBoeuf

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Sandtrap
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Re: Real Estate investment college town condo?

Post by Sandtrap » Mon Sep 23, 2019 5:40 pm

rai wrote:
Mon Sep 23, 2019 10:00 am
I personally don’t want to get involved with but my wife thinks we’d save money and/or make money if we bought a rental property near Clemson university. Our daughter currently rents and will be there for 3 additional years. Nice rental 3 bedrooms condos that will sell for $130-140K and would be able to rent out 2 additional rooms (plus room for daughter) the rent it seems would cover the mortgage, tax and interest.

My problems are this
1) our daughter is only there for 3 more years is it worth getting involved when rent for 3 more years is less than $30K
2) we’d need to sell or keep renting in absentee status after 3 years
3) I don’t want lift a finger on repair/upkeep we don’t live anywhere near Clemson meaning we’d need to hire a property manager
4) if the units were so great an investment why are they for sale, I mean wouldn’t the owners just want to keep the loot rolling?

5) Can you guys tell me if this is a waste of time or if this is a potential gold mine.

Seems like typical rent of one room is like $700-$800 and the units are 3 rooms typical less than $140K.

6) Supposedly our daughter would be able to rent to here friends.

7) I am all for 3 fund low cost index fund investing but my wife thinks she has a better use of our investing attention.

We max out all tax shelters including HSA and we have some money left over to invest in taxable.
Considerations:
1. No. Not worth getting involved. Not even a little.
2. Condo renting with distance ownership sounds easy and like free passive income. It is not.
3. All of your profits will go towards the property manager and expenses.
4. Absolutely true. If anything is so great, why is it for sale?
5. In no way are rental properties, especially distance ownership and with the owner having a "hands off" attitude, a gold mine, not even a silver mine, not even a copper mine.

6. Renting individual rooms, to students, or even to other than students, is a nightmare. Renting to "friends" is worse than a nightmare.

7. Stick with what works.

j :happy
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StealthRabbit
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Re: Real Estate investment college town condo?

Post by StealthRabbit » Mon Sep 23, 2019 5:51 pm

AerialWombat wrote:
Mon Sep 23, 2019 4:46 pm
I love rental properties, even in other states....l...
You do not sound interested in any of that.

So walk away quickly.
In fact, run. Very far, very fast. One of the worst kinds of landlords is a reluctant landlord.
agree... if it is not your bag, don't mess with it.
If you would be doing this to train your daughter in doing the RE and capital $$ management, fine. (there are easier ways to learn, but not as effective (hands-on)...)

We advised our kids to do it with their $100k RE equity they had at age 16, and we desired them to manage it themselves (since they were paying for college themselves, and had helped with our commercial and personal income props.) Each said definitively NO. That was a good choice for them, at significant 'opportunity cost'. That is OK.

Their friends bought 4 plexes w/ 4 bdrms each unit, and rented rooms for $400/ month (Great cash flows)
This bought their friend's;
1) College +
2) equity gains paid for 2 yrs travel + grad school.

Ours chose to trade stocks during college and do very interesting high paid summer jobs, and did OK too (with a lot less hassle, and made decent earnings and education for their next life).

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Wiggums
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Re: Real Estate investment college town condo?

Post by Wiggums » Mon Sep 23, 2019 6:41 pm

This is not something that would interest me. It’s possible that your student will change schools or not want to be the onsite landlord. I could be wrong, but it doesn’t sound like you have realistic ROE numbers. Possibly because you don’t like the idea of a rental and also because this will be your first rental.

Good luck with your decision.

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LilyFleur
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Re: Real Estate investment college town condo?

Post by LilyFleur » Mon Sep 23, 2019 9:33 pm

How much are the HOAs? That can really dig into a rental profit margin.

Condo associations can hit all the owners with a unexpected special assessment that could be quite pricey (replumb, new roof, etc.) In fact, an assessment is in the wings for the development in which I live, and a great many of our 3-bedroom units went on the market last summer.

Is it a unit with neighbors above it? I would not want to have college students living above me in a condo development. The CC&Rs in my association require that the unit with water damage run it through their own homeowners insurance (even if it was the fault of the upstairs neighbors). This happened to me, and now I cannot put in a claim for five years without being knocked off my insurance plan. My insurance also doubled for several years.

Is parking adequate, or would an additional parking permit or two have to be purchased?

I have been a landlord (for a single family home in my own town) and I have no desire to be one again. And I had great tenants who did their own repairs.

I was the kind of parent who wouldn't want to upset my children the week before finals. Some things are avoidable in that respect... but being a landlord is completely avoidable, and I wouldn't want to ask a responsible child to handle bad tenant problems, or any other type of condo problem, to the detriment of their course work.

texasdiver
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Re: Real Estate investment college town condo?

Post by texasdiver » Mon Sep 23, 2019 9:58 pm

My daughter is a senior at an SEC university. Her freshman year was dorms, her sophomore year was a shared suite in a privately operated dorm apartment. Her junior and senior years have been renting a duplex with roommates.

At both the private suite style dorm and the current duplex the property managers required:

1. Each student must have a parent co-sign the lease and they ran a credit check on each parent. Was a PITA for me because I had to go through the process of lifting the credit freezes and putting them back into place.

2. Separate lease and separate rent bill for each occupant.

3. Proof of rental insurance was required or they would buy it for you and add it to the rent.

4. Rent was paid through automatic electronic transfers from PARENT's bank account every month.

I would never ever think of renting to students without all of these conditions in place.

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unclescrooge
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Re: Real Estate investment college town condo?

Post by unclescrooge » Mon Sep 23, 2019 10:46 pm

StealthRabbit wrote:
Mon Sep 23, 2019 5:51 pm
AerialWombat wrote:
Mon Sep 23, 2019 4:46 pm
I love rental properties, even in other states....l...
You do not sound interested in any of that.

So walk away quickly.
In fact, run. Very far, very fast. One of the worst kinds of landlords is a reluctant landlord.
agree... if it is not your bag, don't mess with it.
If you would be doing this to train your daughter in doing the RE and capital $$ management, fine. (there are easier ways to learn, but not as effective (hands-on)...)

We advised our kids to do it with their $100k RE equity they had at age 16, and we desired them to manage it themselves (since they were paying for college themselves, and had helped with our commercial and personal income props.) Each said definitively NO. That was a good choice for them, at significant 'opportunity cost'. That is OK.

Their friends bought 4 plexes w/ 4 bdrms each unit, and rented rooms for $400/ month (Great cash flows)
This bought their friend's;
1) College +
2) equity gains paid for 2 yrs travel + grad school.

Ours chose to trade stocks during college and do very interesting high paid summer jobs, and did OK too (with a lot less hassle, and made decent earnings and education for their next life).
What's the story behind a 16 year old with $100k in equity? :shock:

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