There are several financial strategies, like buying stocks, that generate good profits and returns. However, investing in real estate is one of the best options to consider because it brings multiple short and long-term advantages. Specially for millennials, those born between 1982 and 2002, it represents an opportunity to step ahead of everyone else and make money in a convenient way.
Investing while you are in your 20’s is the best moment to do so because you have more motivation, energy, technology experience, and time than any moment later in your life. When you are young you have more flexibility, less commitments, and you can take more risks. As the time passes by, investing becomes a more difficult option because of family, work, time constraints and life responsibilities, meaning it is harder to learn about and buy rental properties. Moreover, the older you get, the more complacent in your situation you get and the less willing you are to change or try to improve your quality of life.
This type of investment also helps you learn financial responsibility. It is an opportunity to grow, think in new ways and see life with a different perspective. In fact, you will develop disciplined spending habits by focusing on your budget, spending money on what is relevant, and cutting expenses when needed. This leads you to become the decisions maker on your property, in aspects such as the tenants you want to have, how much to charge for rent, and whether to buy and sell.
Another reason to buy a house, an apartment, a condo, a single-family home, a town-home, or any other type of property in your 20’s is that if you make a wise decision, you can generate great returns on your investment. Thus, owning a residence is an excellent strategy to help solidify your financial future because the earlier you begin, the greater your potential return on the investment will be.
It is important to consider as well that buying real estate early in your life represents an income producing investment. Owning a property gives you cash flows, which is the money you make every month from renting a property and after paying all its expenses. So, if you buy a property and rent it, you will generate positive cash flows and a steady passive income. After you do the down payment, which is generally 20% of the property price, by renting out you will have a guaranteed source of income, and you will be able to pay your mortgage while earning extra money on top. In other words, your debt will pay-off itself in the long-term and you will make money off your real estate.
One more motivation is that interest rates have been low for the past few years, which gives you an advantage if you want to invest in real estate. With 30-year fixed loans typically at around 4%, you will have time enough to earn money on your property and enjoy the low interest rates on your bank loan. Besides, you have tax advantages, meaning that you are allowed to depreciate your property over 27.5 years and save a lot of money on taxes. Additionally, if you live in your property for the last two years before sale, the first $250,000 in profits for singles and $500,000 for couples is tax free!
One more reason to consider is that real estate appreciates over time. Since property prices, rents, and inflation rates tend to go hand in hand, your cash flows will also increase every year while your mortgage payments will stay the same. This means you will be able to pay off your loan by benefiting from the increase of your property price or rent. That being said, the longer you rent your property, the better investment it becomes.
Furthermore, early investment will reduce the risk of having to make reckless decisions in the future to secure a stable retirement. Owning your own place from a young age is a great retirement plan and will contribute to your stability and peace because you will receive increasing cash flow over time without ever eating away at your principal investment.
Whether you invest in real estate to live or to rent, the sooner the better. Investing while you are young carry benefits that will last for a lifetime, including an income stability, positive cash flows, and great returns. Thereby, it is important to research, plan, ask for advisory and be well informed to make the best choice on buying property.