Real Estate Investing at a Young Age
Investing in real estate at a young age is a great way to build wealth, but the barriers to entry can often be too high for anyone in their early to mid-20s.
Many younger people falsely believe that a successful real estate investor has to be “old,” particularly with younger people feeling discouraged by the housing market. As a result, they decide to put off the idea of investing in real estate young and don’t get started until later in life.
However, time is the most powerful financial asset that young people have, and with the right investment strategy, you can begin to make returns.
Read on to learn more about the common obstacles young people face, the benefits, and different investment options to explore in real estate investing.
The advantages of investing in real estate young
Getting started with real estate investing at a young age is a great idea for several reasons. One is that it gives you the ability to invest for the long term and allows your investment to grow and appreciate.
When you are young, you have more flexibility in life, fewer commitments, and can take more financial risks. While you may be making less money, you likely have less financial responsibility. If you wait too long to start investing, family, work, and life makes it hard to learn about and invest in real estate. Aspiring investors should remember to use age as an advantage and test out multiple strategies and property types that may become more unattractive as you get older.
The obstacles young people face
With all those advantages, young investors still face many obstacles. Investing in real estate needs money which young people tend to not have an abundance of. The majority of young people are not financially independent and are still relying on their parents for financial support. This is particularly an issue if you have student debt or start out your career with a low-wage job. So it’s not uncommon to be asking yourself, “am I too young to buy real estate?” or “when will I know that I’m ready to start investing in real estate?”
Young investors also lack life and investment experience, particularly with real estate. They probably have yet to purchase a home, making this type of investment seem intimidating. Learning how to become a real estate investor is less intimidating if they already know how the process of development and home buying works firsthand. Luckily, there are ways to get exposure to real estate investing without needing any prior experience.
Ways to start investing in real estate
The options for real estate investing can include traditional property ownership or making an investment without owning property.
Here are the best ways for young people to enter the real estate investment market and build wealth long term.
NFT Real Estate
Real estate NFTs work just like any other NFT. They're purchased using a cryptocurrency of the seller's choice, held in a digital wallet, and can be sold again for a higher profit to a buyer with the right amount of money.
NFTs are somewhat new and risky, but with the right strategies and proper knowledge, they can produce a higher rate of return. Starting young will allow you to take on the risk from this type of investment without damaging your investment portfolio long term.
This is a great option for young people that want to avoid investing in physical real estate.
Want to learn more? Check out our NFT Investment blog post.
House flipping involves buying a fixer-upper home, such as a foreclosure, improving it, and then selling it for a profit. House flipping is a more traditional form of investment in real estate that involves extensive research, credit check, and more funds than other forms of investments.
This type of investment has a lower barrier to entry than other physical forms of real estate investment. Purchasing a fixer-upper makes owning a property more attainable than owning a newly built home for most young people. However, with this comes a great deal of work and potentially a lot of extra added costs that are often not foreseen. While the returns on investment can be favorable, there can also be a lot of risks involved.
An investment property is a property that you own exclusively for generating rental income and/or an eventual profit on its sale. You typically won't use an investment property as your primary home. If you are unable to purchase the property alone, the more affordable option is to partner up.
Owning a rental property is an excellent way to invest in real estate while building wealth and generating passive income. The potential rate of return is strong due to a combination of income and equity appreciation. It is also important to keep in mind that owning an investment property can take on added work, maintenance, and costs that are unexpected and can at times be of inconvenience unless you hire a rental manager. Appliances and other household plumbing could break down at unexpected times, which you have to be responsible for and readily available to fix and pay for.
Real estate investment trusts (REITs)
REITs are specialized companies that own, operate, manage, and overall obtain their income from real estate assets. Most REITs trade on stock exchanges so that you can buy completely online and with very little capital.
A real estate investment trust (REIT) is best for young investors who want portfolio exposure to real estate without a traditional real estate transaction. Despite the positives, REITs present some drawbacks. Including the high risk of losing your investment and the lack of control compared to physically assessing the property you are investing in.
Online Real Estate Platforms
Real estate investing platforms allow you to join others in investing in a larger group of commercial or residential properties. The investment is completely online, where you can access a dashboard to track your investments. This is a great option for young people that want to avoid investing in physical real estate and provides the opportunity to gain exposure to investing while generating passive income through yielding interest.
However, many of these platforms have specific criteria for eligible investors regarding income and net worth, which are likely to be another barrier for young people. Whereas Connect Invest has made these platforms accessible to individuals who do not meet these criteria, allowing investors to begin with only $500.
Real estate investing is not easy, especially at a young age it takes time, flexibility, and ambition to make your return on investment. The younger you get started, the easier it will be and the better off you will be financially in the future.
If online real estate investing sounds like a good fit for you, Connect Invest offers crowdfunding in the form of short notes. Our Short Note investments start at a minimum investment of $500 with investment terms ranging from 6 to 24 months to provide you with a defined exit date. This type of investment allows you to purchase a fraction of real estate loans that fund various real estate projects, where you will yield interest on a single investment.
Sign up with Connect Invest to learn about more real estate investment opportunities.