You’ll thank me for this one day. You know, when you are passively wealthy. Yeah, you’ll look back and say “Wow, that real estate blog really set me on the right track!” Well, you’re welcome. Now,let’s dig in…10 Reasons why you should invest in real estate while you are young.
10 Reasons You Should Invest In Real Estate When You Are Young
1. Real Estate is a Great Investment Vehicle
Buying a house or an investment property when you’re young makes a lot of sense. If you’re in your twenties there is a good chance you’re going to have roommates living with you whether you rent or you buy a home. When you rent, you pay your landlord, and in turn you pay HIS mortgage. When you buy, you can rent out rooms to friends and pay nothing, while they are paying off YOUR mortgage.
Think about that for a second. You can live for free. Albeit with roomies, but so what? If you have great roommates than you shouldn’t have a problem living with them.
In Baytown, Texas you can expect to pay about $1,800 in rent for 3 bedroom/2 bath home. We believe you can easily find a higher quality house for less monthly investment and you would be building equity to potentially “cash out” one day. What’ s even better? Well, if you rent out the other bedrooms there is a good chance those payments will cover your principal, interest, taxes, and insurance costs!
So not only are you saving $$$ every month (because you’re not paying for rent), you’re receiving rental income as well that is paying off your mortgage. Now, keep in mind this example doesn’t factor in expenses, so it is very important to find a low maintenance home.
2. Appreciation in Real Estate Happens over Time
Homes move up and down in price. A house is still a great investment when you’re young. If you’re going to buy a home you need to have a plan, run the numbers, and make sure you’re buying at a good time, and in the right neighborhood.
History has proved that real estate will appreciate (grow in value) over time. This gives you the comfortability of knowing that your investment is going to appreciate if you hold on to it, especially if it’s over thirty years. You’re reducing your liabilities, your home is appreciating, and you’re providing shelter for your family.
Contact a one of our professional RE/MAX Premier REALTORS® if you need help understanding what makes sense for you. This is what we are trained for and in most cases, it costs nothing for the buyer to work with a REALTOR. So, what do you have to lose?
If you choose to rent your home out, often with appreciation your home could end up renting out for more than your mortgage. That mean you’ll have a positive cash flow straight to your bank account every month.
3. Return on Investment when Buying Real Estate
If you’re in your twenties and you want to make an investment you can do it several ways. Let’s say you want to invest $5,000 in the stock market and it gives you a return of 10%, that means you made $500. If you use $5,000 to buy a home you can afford one up to $142,857 (3.5% down). If you make 10% on your investment that’s $14,200.
Right off the bat it’s a total return of $13,700 more than an investment in a company. Not to mention it’s reducing your liabilities, building your equity and if you want to rent out bedrooms it’s passive income!
There’s plenty of ways to look at purchasing real estate, you can’t deny that with a great strategy you can have a great return on your investment. 80% of millionaires use their real estate return to create their wealth!
4. Forced Savings Account – Start Saving Early!
For those that have trouble saving or a spending problem, a home is a forced savings account. It gives you a way to save for retirement. If you buy a home for $200,000 and it appreciates 3.5% every year it will be worth $561,000 in 30 years.
That $200,000 is now worth over half a million. It’s a great way to build wealth. Imagine if you did it 10 times in your twenties and rented out the other properties. You’d be retiring on more than $5 million by 60.
5. Build your Equity with Real Estate
When you buy real estate at a young age you’re building your own equity. Whether you choose to rent out bedrooms to roommates or live alone, you’re building the equity you have in your home. This works well with a forced savings account because when you retire you’re going to love off the equity you have built up. 8 out of every 10 millionaires have used real estate as an investment vehicle to help build their equity.
A lot of successful landlords don’t work, they are financially free because they are using real estate income to live. How would you like to escape the 9-5, build equity, create income, all at the same time?
You can with rental properties, and it will help you to learn and earn using these techniques by buying real estate when you’re young.
6. Real Estate Income from Rental Property
Rental income is income. If you make $1,000/month in rental income, you’re earning $1,000/month. It’s as simple as it sounds.
But, you need to understand, that you must treat your home like a business for it to truly be an asset. It’s earning you income, it’s tangible and America is filled with people who want to rent. Especially here in the Southeast Texas market where rental rates are going up at some of the fastest rates in the country.
Rental income is a great way to create passive income. Although I use the words ‘passive income’ it isn’t exactly true by the definition. It is however a great way to earn income without doing much. You will be required to answer the phone when tenants call, update the home when things break, among other requirements of a landlord.
Real estate is one of the best ways to create a type of passive income, that will allow you to live without having to ‘work’ should you choose to go that route.
7. Create the Estate you want to Live in!
Buying real estate at a young age also gives you the opportunity to customize and create what you’re looking for. If you’re renting you must run things by your landlord before you can do anything and you will be at their discretion. When you own your own home, you can make the upgrades you want, decorate the way you’d like, and make any additions to the home you’d like.
After buying a property you can customize it any which way you want! Want a backyard with a fence? Build it! How about a deck that gives you a chance to entertain outside? Build one!
8. Responsibility/Freedom Life Lessons, Learned!
Buying and owning real estate when you’re young forces you to gain new responsibilities you may not otherwise have while renting. It’s an opportunity for you to force yourself to save through paying down your mortgage, gain income (should you choose to rent it out), and over the time in which you own the home it should appreciate.
Whether you plan to rent out the property you buy to tenants, live in it and rent to roommates, or live in it by yourself you are going to learn a lot along the way. These are the life lessons that will better prepare you for the challenges of tomorrow.
9. Concept of Finance – Great Skills to Develop
Want to understand what other people know that you don’t? Buying real estate is a great way to learn. When you’re young you have a much better opportunity to take risks you may not otherwise have as you grow older. When you settle down with a family and kids your time is dedicated to new things in your life that weren’t there when you were young.
Millionaires know real estate is an opportunity for them to diversify their investment portfolios, gain rental income and positive cash flow, as well as appreciation that beats their money sitting inside of a bank account.
Learning and understanding what these millionaires already know comes with an education, and the best way to learn is to not be afraid to fail at first, especially when you’re young and have the time/energy to dedicate to learning.
Real estate is an opportunity for you to reduce your liabilities, gain passive income through rent, and to pay down your mortgage with other people’s money (OPM).
Anyone who didn’t buy real estate when they were young probably will tell you they wish they did!
10. You have more Free Time when You’re Young!
One of the reasons young people don’t want to buy real estate is that they don’t have the time. Well, you’re not going to have more time when you’re older, in fact you are likely to have a lot less as you gain new responsibilities. A family and children are a responsibility you don’t have when you’re young making it a great time to learn real estate.
Buying real estate is a time requirement and most of the time should be spent BEFORE you buy anything. Researching, educating yourself, understanding neighborhoods and city plans are all factors that are going to have an impact on the home you purchase. These hours you put in before you start looking at homes for sale are the most important. Study the numbers, the local real estate trends, and call a RE/MAX Premier Agent to assist you!
Final thoughts – Invest in Real Estate when You’re Young
When you ask people who are twenty or thirty years older than you if they would buy real estate at a young age, they’re more than likely to say yes. However, as with any investing, you need to make sure it is a right decision for you. There are certain situations where buying real estate at a young age doesn’t make sense. If you have any questions about buying real estate please don’t hesitate to reach out to us. We are happy to chat with you and figure out what is the best options for you.