Weekly Roundup: Teenager Buys House With Cash

Earlier this week, a friend passed along a great news story that I shared with fans on Facebook. An 18 year-old girl bought a house for cash with savings she earned participating in 4-H events beginning at the age of four. Yes, you read that right. She paid $40,000 cash for a four-bedroom, two-bathroom house. She splashed a little paint on it, fixed up the carpet, and now rents it to a relative.

What’s she doing with the $450/month rental income? Pocketing it to buy another home for her and her fiance after they get married. I wish I had half her financial-savvy at that age.

The Frugal Roundup

Nine Things I Do to Make Each Day Great. Great tips on reducing stress and building up some energy. (@The Simple Dollar)

How to Avoid Giving Gifts at Work. Ugh, this is a tough one. I typically get suckered in but these can really add up and bust a good budget. (@brip blap)

8 Tips to Effective Coupon Stacking. I haven’t tried this yet but I might give it a try in the future. (@Coupon Sherpa)

Best of the Rest

Comments

  1. I agree with her being financially-savvy to save enough money as a child to buy a house, but I don’t agree with her decision to rent her property to a relative. Too many things can happen that could sour her relationship with her family member. It’s easier to start eviction procedures on a tenant then a family member; just my 2 cents.

    • @John: I had the same thought, unless the relative was in dire need of shelter. Ideally, I would rather see her lease it to a stranger to avoid having to collect rent, or evict, a relative.

  2. A frugal teen buys a house at an auction run by her dad. Ahem. If I were the beneficiary of that estate sale, that would raise a flag for me.

    • I wondered about that side of the story. Seems a conflict of interest for an auction company to allow a family member to purchase a property you represent – not exactly an “arm’s length transaction.” Then again, I’m sure it was legal or they wouldn’t want that aspect of the story publicized.

      • It’s an auction – the sale is done publicly, so if anyone wants to bid higher than her everyone would know. The auctioneer doesn’t set the price or reject bids from interested parties who can pay.

        I agree it would be a conflict of interest if he had the ability to influence which bidder won.

  3. I think one should also credit the kid’s savvy parent. No way a 4-year-old’s first thought is “hmm….I’ll go buy a house in 14 years.” Mom and Pop probably taught her a trick or two and encouraged her along the way. Still, way cool that a kiddo would be so far-thinking. How many kids would’ve blown that money on a hot car, a fancy computer, clothes, or the latest tech gadget. Kudos to the whole family.
    I agree that renting to a relative could cause major issues; however, the girl is in the position to do as she pleases. She has only taxes, insurance and maintenance to consider, and on a $40K house the first two should be relatively cheap. I own several houses in that price range, and it’s about $500 a year for taxes and insurance combined.

  4. This is a great story. Thanks for sharing. I’m 23 and looking to buy my first house and still think that is a little on the young side! I’m a little jealous because I doubt I would be able to find a house for $40,000 where I live…

  5. wow great story and good for her. I just wish houses could be bought for 40k where i live, that would be the price of my 10% downpayment in my area=(

  6. This is exactly the kind of story they should be sharing with kids at school… It really is time financial literacy and responsibility becomes a standard class in schools.

  7. It really is time people stop thinking it is impossible to buy a house with cash or that a mortgage is a necessity. Start saving/investing while young/renting and most people could actually get a house for cash faster than trying to pay off a mortgage early.

    Obviously this is situation-dependent but not nearly as impossible as most want you to believe.

    • josh i disagree, unlesss you live in an area where sub 150k houses are the norm, paying cash for a home before 50 is not realistic. homes in my area average well over 300k, and with student loans to pay off, there is no way i could save 300k in a reasonable amount of time!

      • I disagree Stephan, but in your location (and other expensive areas) renting is almost always the better option than owning, from a strictly financial standpoint.

        Using your 300k price, if you could save $1000/month, at 5% interest, you could buy a 300k house for cash 195 months (16 years, 3 months). For a $150k house that is more than reasonable in most parts of the country, it would only take 117 months (just under 10 years). Obviously the amount you can save will vary wildly by person, but I think that is a good median point for anyone with an average career and any sense of financial discipline.

        I used 5% just because that is the average mortgage rate, and I also believe it to be a decent return you could fairly safely expect to get on average. Obviously, your actual rate of return could be significantly higher or lower.

        On a $300k loan, you would pay $280k interest, for a total of $580k over 30 years. I’d much prefer to let compounding interest work for me than against me.

        Personally, I would much rather spend my early 20′s renting (most likely with roommates) to be able to buy a house for cash in my early 30′s than being trapped in debt for my entire life.

        Student loans are completely other subject. I went to a good public university and came out with less thank $5k in student loan debt, because I went to an affordable college with a good program, and got a degree in a higher paying field. On the opposite end of the spectrum, if you burden yourself with $100k or more in private tuition debt to become a social worker, well then you are pretty much committing financial suicide. Kids should go to college with a plan, not the finance it at any cost mentality that persists today.

        Also, please note these numbers are based only form a purely financial perspective. I know there are other reasons (emotional) that may make spending that money worth it to you.

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