Is buying real estate at a young age a smart investment? Here are 10 reasons that you should consider buying a home while you are in your twenties!
Did you know that 90% of millionaires invest in real estate? If you see real estate as an asset, buy it. If you see real estate as a liability, don't. You can pay off someone else's mortgage, or you can pay off your own.
Some people will say you shouldn't buy real estate since it requires a large down payment, there are property taxes, and there is maintenance. Buying a home isn't for everyone, and that's okay. In fact, many of these people are probably speaking from experience, and they aren't wrong. There is a flip side to this argument: buying real estate is a great investment, especially at a young age.
For those looking to secure financial freedom for their future, it starts with buying a home. You can reduce your liabilities (rent) and increase your monthly cash flow (Income) if you choose to rent out bedrooms. Everyone needs somewhere to live to provide shelter for themselves and their family. A home is tangible, it's something you can show your friends.
The people who claim buying a home is a liability rather than an asset are right by definition. A home is a liability because it costs you money and doesn't make you any. By that definition, a home is a bad investment.
But, if you don't own a home, there is a good chance you're renting one. Rent is a liability. So, while a home may be a liability, at least it's in the form of a mortgage (building equity) vs. renting (building someone else's equity).
Here is why you should buy real estate at a young age
Chapters
1. Real Estate is a Great Investment
Many people don't look at Real Estate as an investment vehicle, and that's one of the reasons they don't buy a home. Buying a house or an investment property when you're young makes a lot of sense. If you're in your twenties and just graduated college, there is a good chance you'll have roommates living with you whether you rent or buy a home. If you rent, you pay your landlord and his mortgage. If you buy, you can rent rooms to friends and pay nothing while 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, you shouldn't have a problem living with them.
In Apex, North Carolina, you pay upwards of $1,200 for a one-bedroom apartment. You can buy a better home in Apex for less than that. 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 upwards of $1,000/month because you're not paying for rent, but you're also receiving rental income that is paying off your mortgage.
There are a lot of pros and cons to the buying vs. renting debate. When you are young, take a chance, and you can count on the home appreciating faster than inflation, especially if you livein Raleigh.
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. Over time, it's around 2.5% per year on average homes appreciate here in Raleigh. 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. Contact a top local Realtor if you need help understanding what makes sense for you.
Raleigh real estate is much less volatile than the rest of the country, largely due to the number of people moving here and the local economy. This gives you the comfort of knowing your investment will be appreciated if you hold on to it, especially if it's over thirty years. You're reducing your liabilities, your home appreciates, and you're providing shelter for your family.
If you choose to rent your home out, you can find real estate investments that will rent out for more than a mortgage in Raleigh.
3. Return On Investment When Buying Real Estate
If you are in your twenties and you want to make an investment, you can do it in several ways. Let's say you want to invest $5,000 in the stock market, and it gives you a return of 10%, which means you made $500. If you use $5,000 to buy a home, you can afford 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 and building your equity, and if you want to rent out bedrooms, it's passive income.
There are 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.
4. Forced Savings Account - Start Saving Early
A home is a forced savings account for those with trouble saving or a spending problem. It gives you a way to save for retirement. If you buy a home for $200,000 that appreciates 2.5% every year, it will be worth $561,000.
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 over $5 million by age 60.
For anyone with a saving problem, their home will be their largest asset. What I mean by that is a person's home will be the largest item of value they have. From the definition of an asset and liability, it's an asset in this case, though there are definitely liabilities involved in homeownership.
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 you'll live off the equity you have built up when you retire.
Many successful landlords don't work; they are financially free because they use real estate income to live. How would you like to escape the 9-5, build equity, and create income simultaneously?
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 important to understand that if you treat your home like a business, it's absolutely an asset. It's earning you income; from this perspective, real estate is the best investment you can buy. It's tangible, and America is filled with people who want to rent. Especially here in the Raleigh 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 to update the home when things break, among other landlord requirements.
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' if you choose that route.
7. Create the Estate You want to Live In
Buying real estate at a young age allows you to customize and create what you want. 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 and renovations to the home you'd like.
After buying a property, you can customize it any 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. Learn Responsibility
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 by paying down your mortgage to gain income (should you choose to rent it out), and over the time in which you own the home, it should be appreciated.
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 will learn a lot.
9. Concept of Finance - Great Skills to Develop
Buying real estate is a great way to learn and develop new skills. When you are 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.
Buying real estate is an opportunity to diversify your investment portfolio and gain rental income and positive cash flow.Learning and understanding real estate investment comes with an education, and the best way to learn is not to be afraid to fail at first, especially when you're young and have the time and extra energy to dedicate to learning.
Real estate allows you to reduce your liabilities, gain passive income through rent, and 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
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, and understanding neighborhoods and city plans are all factors that will impact the home you purchase. These hours you put in before you start looking at homes for sale are the most important. Study the numbers of the local real estate trends, and find a top Real Estate Agent to assist you.
FAQs
What is the best age to invest in real estate?
The ideal time to start investing in real estate is in your 20s and 30s since the longer you own a property, the more valuable it becomes.
What age is too late to invest in real estate?
While buying real estate in your 20s might be preferred, It is never too late to invest in real estate as long as you have a plan and are ready to start.
Should young people buy or rent?
While buying and renting both have their own set of pros and cons, buying might be the more affordable option in the long run, especially if you want to grow equity as mortgage payments are made.
Final thoughts - Buying Real Estate When You Are 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. Buying real estate at a young age gives you more than just the ten benefits listed above. The ten benefits we have listed in our article are great reasons to consider purchasing real estate in your twenties or early thirties. It will help lead you to financial freedom in the future. With the right real estate team, your first home will be great.
Buying real estate at a young age doesn't make sense in certain situations. If you have any questions about buying real estate, please don't hesitate to contact us. We are happy to chat with you and determine your best options.
