It is a common misconception that to invest in real estate, you have to be super rich and a savvy big-time investor. This is most definitely not the case. To become a successful real estate investor, all it really takes is common sense and a great deal of research. Investing in real estate is fairly accessible, even for young beginners.
Investing in real estate comes in so many different forms and with so many benefits. One huge benefit of investing in real estate is that land and real property will always be worth something. In fact, real estate tends to grow in value over time: buildings and even the land that they’re on will become worth more and more over the years.
James Chen writes that one of the main ways that one could potentially make money in real estate is to become a landlord of a real estate property. However, this is only one of many countless ways. Another way is to become a flipper, or somebody who buys undervalued homes, fixes them up and sells them for a profit. A third great option is to invest in real estate investment trusts (REITs), which provide exposure to real estate without having to worry about owning, operating or financing properties.
Vanessa Nirode wrote an article about why one should consider investing in real estate. One of Nirode’s top reasons is that investing in real estate is far more profitable and reliable than investing in the stock market. According to Nirode’s research, a single-family home can offer an annual return rate of about 9% — difficult to attain with stocks. Another reason that she points out is that even though inflation affects every investment, real estate is nearly always in demand, which enables it to typically “maintain its monetary power.” The best part is that there are so many different ways that you can invest in real estate.
Some of the real estate opportunities that Nirode lists are the possibility of buying your own home, buying a fixer-upper and renovating, renting out a home, offering a lease option agreement, or investing in a REIT. Again, a great thing about investing in real estate is that no matter what your level of commitment is, it’s very easy to find a comfortable way to get involved.
Andrew Beattie also wrote an article about the different ways that one could invest in real estate. One thing that Beattie points out as a huge advantage is that aspiring real estate owners can use leverage to buy real estate. Leverage refers to using debt, or borrowed funds, to amplify returns from an investment or project.
In addition to becoming a landlord or house flipping, there is “a hands-off way to make money in real estate”: investment groups. Real estate investment trusts, or REITs, are basically dividend-paying stocks, and as previously mentioned, it’s actually more reliable than investing in the stock market.
The thing that makes investing in real estate all the better is that it is very accessible, even for the young. Paul Esajian wrote an article about how to make investing at a young age work.
Esajian starts by reassuring his audience that although becoming a young investor may seem difficult, “it is not impossible.” It’s important to realize that successfully investing in real estate will not come easy; it will take a lot of time and research. However, the perk of doing it at such a young age is that if it’s done properly, it can be the first step to being set up for long-term success.
Historically, it has been proven that real estate is a highly profitable investment option. Being a young investor can be a bonus because it allows a certain degree of flexibility when it comes to deciding upon an investment strategy. Esajian says that by beginning the process of investing in properties early in their lives, young entrepreneurs have the chance to build up equity. He says that an individual that chooses to take this path while still young is helping pave the way for future high-value portfolios. Starting so early means that one could have the chance to start building a lifelong network.
It may seem difficult, or even financially unrealistic, to become a young real estate investor. However, success as a young investor really boils down to the willingness to learn the best ways to “work with what you have.” Esajian talks about three different strategies.
The first of these strategies is house hacking. This refers to renting out one available bedroom in a property that you own — for example, owning a two-bedroom home and renting out one of the rooms to somebody. The second strategy is to look into multi-family homes. The deal here is to purchase a multi-family property and rent out the available units. The third option that Esajian writes about is wholesaling. Wholesaling refers to locating good properties, getting them under contract and then transferring that contract to a buyer. Profit comes from the contract fees.
Becoming a real estate investor at a young age comes in many different forms and brings many great benefits. However, one of the best is quite possibly the fact that a young investor has the time to break into the industry and at their own pace.
If it gets difficult to find a way to begin the journey, a great place to start is by joining local networking groups. As Esajian writes, “focus on building lasting relationships with other real estate professionals.”
Learning how to invest in real estate is not an easy task. It will require a lot of time and energy. However, this is true regardless of where you are in life when you begin the journey. With that being said, one should never be discouraged from investing at a young age, because the potential challenges do not outweigh the benefits of becoming successful. Instead of being afraid of being too young, an entrepreneur should learn how to use their age to their advantage and begin building their portfolio as soon as they can.