For several reasons, beginning to invest in real estate at a young age is a good idea. First, owning a home allows you to accumulate significant equity in about ten years (or less). If you buy your first house while you’re still in your twenties, for example, you’ll be young enough in ten years to carve out a career investing in real estate, perhaps starting by tapping into your equity to buy more properties.
You also have time to experiment with various investing methods to see what works best for you. People are also more adaptable before starting a family, which opens up more opportunities. When people have children, it becomes more difficult to relocate to a more favorable state for home buying or renting out your home.
All of this is not to say that there aren’t challenges for young people, most of which have to do with financing a deal. This is a particular issue for young people who have student loan debt, which causes their debt-to-income ratio to be too high for most conventional mortgages, but there are solutions.
How to Overcome Financial Difficulties
If you want to buy real estate rather than invest in REITs, look for a lender who matches your investment strategy. For example, if you want to buy a primary residence in order to build equity, look into first-time homebuyer programs, which are available in many states. You may be eligible for a down payment and closing cost assistance program, as well as a loan with lower interest rates.
Hard-money lenders are used by some investors, particularly when flipping property. These are short-term loans made possible by private lenders. What’s great about these lenders is that the loan is based on the value of the property rather than your credit score or debt-to-income ratio.
Choose your real estate investing strategy.
House hacking, house flipping, a buy-and-hold investing strategy, renting out property, and investing in real estate investment trusts are common ways for young people to get started in real estate investing (REITs).
House hacking entails purchasing property and renting out rooms within it, or purchasing a duplex, triplex, or quadplex and living in one unit while renting out the rest. The plan is to have someone else pay your mortgage.
Buying a fixer-upper home, such as a foreclosure, improving it, and then selling it for a profit is what house flipping entails.
The buy-and-hold strategy is similar to house flipping, but it does not always necessitate the property being repaired. Investors buy at a low price and simply hold onto the property until the area’s prices rise, at which point they sell for a profit.
Renting a home
Property rental is frequently combined with the buy-and-hold strategy. You can earn money as a landlord while you wait for the market to warrant a sale. If your goal is to rent out your property, you never have to sell, but you do have the option.
Investing in REITs
Investing in real estate investment trusts (REITs) is a low-cost option to enter into real estate investing. REITs are real estate investment trusts that possess income-producing properties. Apartments, warehouses, retail stores/malls, hotels, self-storage facilities, and single-family home collections are all examples. REITs, like stocks, pay dividends and can be bought and sold through a brokerage account.
Learn everything you can.
Request guidance or networking referrals from a real estate investor you know. Examine all of your investment alternatives, pick one, and act after everything is in place. New investors frequently do not conduct any research or conduct excessive research. Making an ill-informed judgment in the first case could result in an expensive mistake. The latter may result in a condition known as “analysis paralysis,” in which you become caught contemplating everything and never acting.
Keep in mind that young individuals have more time on their hands than older ones. If you make a mistake, there is plenty of time to correct it the next time.