How to Get Ahead of Peers With Real Estate Investing

How to Get Ahead of Your Peers With Real EstateBuying a home seems like such a common act, that it may not seem obvious what a good investment real estate can be. Everyone needs some form of housing, which means that access to affordable real estate will always be in some sort of demand. The benefits of homeownership are many, and people who tap into real estate investment when they are young adults have the opportunity to build great wealth, often without a ton of maintenance to keep the investment going. Investors who can make the monetary investment and buy properties with growth potential may find that their futures are set long before they are ready to retire.

Accumulating Wealth with Real Estate Investment

For many people, real estate investment is the first kind of investment they make and one of the first steps they take outside of basic budgeting. After all, people have to live somewhere. In areas where the cost of rent is competitive to the cost of housing, buying a home and transitioning from renter to homeowner is a very reasonable way to create a passive source of wealth accumulation for the future while providing a place to live in the present. In most cases and over a period of many years, homes and properties will gain in value, so long as the owner performs basic maintenance and upgrades to ensure that it remains a viable place to live. Buying a first home often gives people the confidence they need to branch out into other forms of real estate investment, such as the purchasing of investment properties or real estate investment trusts. The end result is an increase of passive income that can snowball over time, and help to secure a person's financial future.

Real Estate Investing in Your 20s and 30s

Probably the biggest hurdle that younger adults have to contend with as they start to investigate real estate investment is cash flow and the idea of having to pay student loans while buying a home. It's the bottom line of virtually any small business, making sure that there is enough money coming in to keep the banks happy and the bills paid. People who are hoping to buy homes on the cheap, fix them up and sell them quickly at a higher price (i.e. “house flipping”) should be able to cover the mortgage while they make upgrades and get the home ready to sell. Investors who want to purchase a property to rent out to a tenant need to be ready to make payments until they can secure a tenancy and be able to ride out periodic vacancies. The earlier people start the process, however, the more wealth they can build over time.

Real Estate Investment Types

Although the idea of buying a single-family property and renting it out to tenants is a common example of real estate investment, it's hardly the only choice available. Some people have the income and available assets to purchase a multi-family property, such as a duplex or four-unit apartment building, with a goal of living in one of the units and renting out the others to qualified tenants. With experience and increased cash flow, investors can consider these investment types:

  • residential real estate
  • commercial real estate
  • industrial real estate
  • retail real estate
  • mixed-use real estate

There are plenty of options for first time home buyers, even those hoping to get into investing. People who want to break into real estate investment but don't want to deal with the individual properties, or who have limited assets available, might also consider real estate investment trusts. This concept involves purchasing shares in a corporation that owns real estate properties and splits income from rentals or sales to its shareholders.

Factors to Consider Before Getting Started

The biggest thing to remember is that investing in real estate is almost always a long-term endeavor. People who get into it hoping to become a millionaire within a few years are falling victim to common home-buying misconceptions and will probably be disappointed, and anyone pitching that kind of return may not be on the level. Instead, would-be investors will be best off if they plan carefully and choose properties that are likely to gain a good return over a period of several years. Areas with a high cost of living could be harder to start with but provide a higher rate of return over time. Similarly, regions where the cost of real estate properties is low may have a lower barrier to entry, but might not be able to guarantee a steady rate of growth or an easy selling process.

One useful trick is to research the common problems with real estate in the local neighborhoods and commercial spaces, and identify niches or possible ways to solve those problems. Offering real estate options that are in high demand, with low market saturation, is a great way to establish an investor's relevance at first and preserve that relevance in the years to come.

It's wise for anyone looking to get involved with real estate, outside of personal ownership by themselves or with a partner, to establish themselves as a business so that their personal lives have some basic protections. Real estate investment can lead to millions of dollars in revenue, but it sometimes leads to losses. Creating a barrier between the actions of the business and its owners helps to protect their financial futures.

Contrary to common Millennial myths, real estate investment might be one of the most practical and easily accessible methods of investing, particularly for people who have several decades before retirement and have a chance to take advantage of tax benefits that help millennials. By starting early and buying wisely, people can enjoy the profits of their investment and allow the growing wealth to finance their lives as they see fit.

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