The best time to invest in real estate was 20 years ago. The second best time is now. If you’re young and in your 20s (or 30s), in 20 years you’ll be glad you invested today. Today’s young people came out of school into a frightening and dysfunctional economy. The typical graduate had to take a job flipping burgers or something similar if he/she could even find a job doing that. It took years to get started in a career. Those earliest years were spent living at home with parents or cramming a ridiculous number of roommates into a small apartment. Now, economic times are good but those bitter memories linger. Along with a fear of returning to those bad days.
Overcoming those fears and instincts will serve young people better in the long term. Rather than desperately clinging onto the few dollars you might be able to save, you should consider boldly investing in real estate while still young. Generation after generation has proven real estate investing to be one of the safest and fasts paths to easy street.
Many young people receive a financial gift from parents or a wedding gift to apply towards a first home. These young people often use that opportunity to purchase the most luxuriant home they can afford. If you want to build long term wealth that’s probably not the best strategy. A better strategy can be buying a fixer to flip or a duplex. Or a fixer to flip into a duplex. More than a few people have done exactly that. I know a woman who bought her first house while still in college because it made more financial sense than renting a dorm or apartment. She quickly figured out she could cut her own housing cost to zero by renting out extra rooms to other students and even pocket some walking around money.
A proven strategy is starting with a small fixer and flipping it into a duplex. Often the rent from half of the duplex provides the investor with free housing (or close to it). And an opportunity to save for a first luxuriant home. Still, hold on to the duplex as your first cash flow investment. One couple bought a first luxuriant home (keeping the duplex) that came with a detached barn-size garage where they converted the second story into a student apartment. By the time they were in their early 30s, they had three sources of monthly cash flow from the duplex and barn/apartment. Their next move was a tax deferred 1031 Exchange flipping the duplex into a four-plex. Needless to say, this couple was well on their way to being wealthy before the age 40. A few of the immediate advantages of owning residential and investment properties includes:
Your youth is a great time to learn the industry from the ground up. Starting with that first fixer house, there are countless quality YouTube videos and other free resources showing step-by-step how to repair plumbing, install tile, install cabinets, build fences, and every other repair and improvement you want to make. At the same time, you’ll acquire tools, learn about materials, find trusted professionals, and learn many other lessons that you’ll benefit from for the rest of your life.
You can join investment clubs, decide if you want a real estate license, learn the risk-reward possibilities of more complex investing strategies, and maybe move up to commercial real estate investing. In a few short years, you’ll never have to worry about when the economy will tank again. And it will. Rarely does the residential real estate market depreciate in value as it did during the Great Recession. But it does occasionally plateau. When you have cashing flowing properties and industry knowledge, you’re well positioned to take advantage of down turns while profiting the most during upswings.
Remember, the best time to invest in real estate was 20 years ago. The second best time is now.
Your investment advice for the young? Please leave a comment.
Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.