Answer by Chris HolmesParker:

Become a multimillionaire by age 40. This is what your path looks like:
i) Keep the $3k safe for now…:Take your $3000 that you have now. Continue saving. Work hard, pinch pennies. Save. Put the $3000 in a CD (6 months at a time is my recommendation) to ensure that you don't touch it! CD = certificate of deposit, you do this with a bank. It is essentially a low-interest savings account where you cant pull your money out for some fixed amount of time. This will be to protect yourself to ensure that you don't spend the money for an "emergency".

ii) Once 18-years old – Live for Free for a While as Follows: While I was getting my Ph.D., I did a pretty "neat trick" to live for free for the last year or so of my program. I found an affordable three-bedroom place with a 2-car garage (it was a unit in a duplex in Corvallis, OR). The rent was something like $850/month and adding in the utilities, the average total throughout the year came to a total of around $1250/month (including trash, internet, electric, water, etc.). I then rented out the three rooms at $425/month each ($1275/month total). Doing this I was able to live for free in the garage. 😀 You can do something similar if you are willing/able and want to supercharge your savings. It is interesting because not spending an extra $425+/month is the same as making an additional $425+/month. This is a way to effectively amplify your income without actually having to increase your pay, etc. This works. Many of my friends and I did this. You just have to be careful and scout out the place. If you have questions on how to do this, ping me. I am happy to help point you in the right direction.

iii) Get a Real Estate License in your Spare Time: Study for your real estate license and obtain your real estate license so that you can buy and/or sell your own real estate in the future. You should be able to get this within 6 months. Additionally, you should start studying property management and real estate investing (NOT real estate flipping and/or buying on speculation, that is a NO NO). You will only be investing in real estate that is cash flow positive.

iv) Work and save until age 21: Once you are age 18, I am guessing that you will either a) get a job or b) go to college. Either way, if you do the above, you are in GREAT shape. Next, you should get a part-time job while in college (and should work full-time during the summers). This will enable you to make between $10k – $20k per year (depending upon jobs and hours). You can work part-time during the school year and full-time during summers (get overtime if you can!). Either way, you should be able to save at least $8,000 per year in addition to what you have now. This is especially true if you follow my advice below on living for free for a while. If you can save more, great! My guess is that you may be able to save more! If you have questions on ways to make extra money, ping me and ask. It will depend upon your path forward (work or college).* I am assuming you have some way to pay for tuition/fees if you are going to college. This could be FASFA, mom and dad, or another source.

v) What Your Savings will do for You: By the time you are 19, you should have around $10000+ in savings (moderately conservatively). By the time you are 20 years old, you should have around $19000 in savings. By the time you are 21 years old, you should have $29,000 in savings (try really hard for $30k!). If you've made it this far, congratulations! You are way ahead of the curve! 

vi) Buy a 4-plex: Depending upon where you live, you can buy a 4-plex for around $200k-$300k. Lets say you have one that costs $250k and buy it with a 3.5% down payment FHA loan (this requires $9k or so of your $29,000 in savings). Additionally, there is usually about another 3.5% (or $9k in closing costs / fees for the purchasing process). However, THANKFULLY, you planned ahead in step (iii) and got a real estate license. This means that you can represent yourself as a real estate agent during your buying process, giving yourself a ~2% "kickback" during the buying process (or in other words $5k). This means that during the buying process, you will only be "spending" $13k or so (instead of $18k!).   In a place like Salem, OR you can easily find a 4-plex for around $250k where your monthly mortgage/expenses would be around $1600 (including taxes, insurance, PMI, and your mortgage). This assumes you get a 3.5% down payment FHA loan for first-time homebuyers.

Now for the GOOD PART. Now that you have purchased the 4-plex, you can typically rent the units in a place like the one described above for around $700/month. This means that you have a potential for around $2800/month in rental income. Lets say you live in one of the units, that brings your monthly average down to $2100 and then lets say that you have a 95% occupancy rate (meaning that you have to assume the other units won't "always" be rented). This means that you will have around $2000/month in rental revenue on average. Thus, your tenants in your other 3 units will be paying YOU to live there!!! Great news! You will be getting an additional $400/month in revenue beyond your baseline, meaning that you can pay down an additional $4800/year in expenses. This means that you can be paying "extra" on your mortgage. Your $700 per month plus an additional $400 per month from the tenants yields about $1100/month in “extra” payments that you can add to the mortgage. If you follow this strategy, you can pay off your mortgage in around 10-years (assuming rental rates increase each year etc.).
* You can pay the 4-plex off even faster if you have roommates and start paying your savings towards the mortgage. If you get 2 roommates, you could generate an additional $700/month in revenue. Plus you would then be living for free, so you could throw your own salary at paying down the principle. Bringing the total to $1100 (extra per month from tenants) + $700/month (or anything you can save). If you do this, you could pay the place off in around 8-years!

vi) The 4-plex is paid-off by the time you are around 30 years old: Now this place that you bought for around $250k is worth around $370k (due to standard appreciation over 10 years or so), and you have it paid for. Your rents have increased and you don’t need to live in it. This means that you now have a $370k property that is generating $3800/month in rent (rents increase at around 3% per year). This means that you have a property worth $370k and it is generating an income of around $45,600 per year. Great work! You are now WAY ahead of the curve.

vii) Continue the Growth! I would recommend that the next thing you invest in would be a commercial real estate investment at this point. Namely, an apartment complex. You have $370k in property that can be used as a “down payment” or collateral on the commercial loan and you are going to be generating around $40k/year (after expenses) from the 4-plex and another $30k+ from your own salary. You can save heavily at this point. I would recommend saving for around 12-months (around $50k you could probably save if you continue the above living arrangement). This will give you time to stack up some cash and get a buffer in your savings account, you can combine this with anything you have remaining from your additional savings before (e.g., the $16k you had leftover from step (vi)). You can use the above property as collateral to get a 20% down payment loan on a property worth around $1.5 million. You can then get the commercial loan and pay off that property within around 10-years or less (similar to what you did before). You can probably pay it off within 7 years or so. You will probably get a property with around 8-12 units for around $1.5M. If you do that, at the end of 7 years, you will have a total of two properties under ownership. One 4-plex that will be worth around $487k and an apartment complex worth around $2.0M. Thus, you will have around $2.5M in real estate holdings that are paid for out-right. The BEST part is that you will own the properties which will still be renting out for between $166k – $220k per year in revenue!
Congratulations, you are now around 38 years old, making around $200k/year, and own $2.5 million in real estate.
This is very doable. Many people do this. You can have some flexibility in the schedule by having a family and kids. You can also work into the schedule that I assumed a bare minimum earnings potential on your part, if you go to college and do engineering or a related discipline, you can really grow faster and do more. I just gave this as a template.
You are on the right road, keep going.
Here are some additional notes:

Reading: Read the following books as a baseline for business: a) Rich Dad Poor Dad, b) Think and Grow Rich, and c) The Greatest Salesman in the World. If you read these three relatively short books in the next few years, you will be on your way to becoming wealthy.

Savings: The above method ensures that you have ample savings at each step of the way so that you do not have a lot of risk as you move forward. This savings can help cover unexpected expenses, etc. Always keep a savings buffer of 6+ months of expenses. This will ensure you never “lose your shirt.”
Cash Flow: The above investing strategy is based upon cash flow investing, and NOT speculation on increased home prices. I assumed only a 4% annual increase in home prices (which is around the average). I assumed 3% increase in rental rates. Base everything you do on cash flow, never invest in speculation on prices rising. That is how people lose their shirts!

What should I do with 3,000 dollars?


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