The Important Benefits Of Investing In Real Estate At A Young Age

Investing in real estate is a good idea for anyone at any age. However, there are certain advantages to investing in real estate at a young age. One of the biggest benefits to purchasing property when you're younger is that your money will be able to grow over time, and compound interest can work its magic! 

Graph Illustrates personal gains from saving $1200/year, with a 9% interest rate. (by Iain McKelvey)

If you purchase an investment property at an earlier age, then it'll have more time for compounding interest to take effect, and it'll also have more years before taxes start eating away at the profit. According to Rich Jacobson, in looking at real estate appreciation over 39 years in Napa between 1975 and 2013, he estimates that after taking into account buying and selling costs, home maintenance and repairs, and rent collected, real estate nets about a 9% yearly return (in his Napa example).

You can also take advantage of tax benefits that allow investors to write off their capital gains from stocks and bonds. This is especially helpful you plan on selling some of your property within five years or less because you may be able to avoid paying taxes on those profits.

Another benefit is that it's a great way to diversify your portfolio with something outside of stocks and bonds. Investments like these have provided some stability during downturns in the economy because they are usually less volatile than other investments.

Many people believe investing in real estate is just for the wealthy, but this couldn't be further from the truth. So today, we'll explore some of those key benefits that make investing in property a smart decision for all ages.

You Can Avail Loans Easily

A lot of people think that it is difficult for younger generations to get a mortgage loan. But, this isn't true! There are plenty of options for mortgage loans, and with the right guidance, you can find one that will suit your needs. 

In recent years, there has been a rise in the number of young adults who have opted to apply for mortgage loans. In addition, more and more people are turning to homeownership because they want a place where they can stay with their families. 

Younger people may not have enough money saved up yet, but this does not mean that they cannot get a loan to buy a house. Some lenders offer mortgages at lower interest rates for younger applicants to make monthly payments on time without having any financial difficulties. 

If you're younger than 35, getting a loan will be easier for you because lenders may require less of an upfront deposit, or your income will be considered more stable.  What is also great about being young is that there are many loans out there with lower interest rates than what older people qualify for! The average credit score for 25-year olds is 754, while it's 706 for those aged 55+.

In addition, younger people have an easier time getting mortgage loans because they're typically considered less risky than older applicants with higher credit scores. This is due to them having more years ahead of them in which they could increase their income and pay off any debt that's incurred during their mortgage loan process. 

Get Better at Managing Your Finances

It's no secret that the younger generation is not doing well financially. Having faced a plethora of different issues, including increasing student loan debt, high home prices, and multiple economic recessions, things haven't been easy for Millennials and Generation Z. However, this doesn't have to be the case. Investing in real estate has been shown to make a difference for young people looking to buy their first home or get an investment property.

Younger people are starting to understand their financial situation better, and they are taking steps to improve on it. Investing in real estate at a young age is a way for younger people to take control of their finances, helping them build wealth as well as give them peace of mind for the future.

As an investor, you will be dealing with cash flow and handling money every month once you begin investing. This will give you important experience in managing expenses, saving money, and exercising strong financial acuity.

This will improve your financial management experience, which is one of the underrated advantages of investing in real estate at a young age. Like any other investment, real estate comes with its own set of disadvantages, as a long term time and monetary investment. As with any first time investment, there will be lessons learned, and mistakes made along the way. It's important to keep an open mind, and be aware of these disadvantages before making the investment.

Retire Early

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The Millennial generation is the largest and most educated generation in American history. Unfortunately, they are also the first to be living with student loan debt, unemployment, and underemployment rates compared with their parents. Despite the many obstacles they are facing, there is one way that Millennials can retire early: investing in real estate. 

Younger people can take advantage of the low-down-payment options available for first-time home buyers and use retirement funds to make mortgage payments. For a comprehensive look at the loan options in the market, and the credit score needed to qualify, take a look at our post.  

A few different ways to invest include buying a house and renting it out for cash flow, or investing in rental properties that generate income. The type of investment property you purchase will determine how quickly your net worth grows and the amount of money you'll earn each month. 

According to a recent article by JD Esajian, the key to retiring utilizing real estate investment is to bring in more money than you take out, and save money diligently. This is because you'll have enough time on your side to make up for any mistakes that occur with rental properties and other investments, and you'll need a cushion for unexpected maintenance and repairs. With more than 40 million Americans living paycheck-to-paycheck, this advice may be a breath of fresh air for those who want financial freedom before retirement age.

Diversifies Your Portfolio

The economy can be unpredictable, and the stock market is always in flux. This is why it's important to keep a diverse portfolio, and spread that money across many different investments. Investing in a rental property or two will help you diversify your investment without risking as much money on one thing. 

What's more, when you invest in rental properties, it can provide a passive income stream for those who don't want to be bothered with managing tenants.  With access to so many short-term loans available and low down payments (in some cases as little as 3%), this is an investment opportunity worth exploring.

The real estate market is an attractive option for younger people because it allows them to build wealth and provide housing for the future. In addition, investing in real estate diversifies your portfolio, offers stability in times of economic turmoil, and helps meet your long-term goals. 

You Have All the Time in the World

A young person's mindset when it comes to real estate is different than an older person’s. A younger investor has more time to wait for their investment to grow, meaning they can afford to take risks that older investors may be averse to.

With investing in real estate at an early age, there is less risk of losing money due to low-interest rates. However, investing when interest rates are high may not be such a good idea because your earnings won't grow as fast and could lose value.

It has been shown that the earlier an individual invests, the more they will make on their investment, and this is true for real estate as well. The benefits of investing early are not limited to just financial gains. There are also many intangible benefits, such as developing skills in management, accounting, and organization.

Many people are still skeptical about investing in real estate at a young age. They believe that it's not worth the risk to start so early when you have no experience or knowledge of how the industry works. But, what these people don't realize is just how much they can benefit from making such an investment now rather than later on in life. It gives them time for their money to grow exponentially and allows them to buy more property by the time they're older.

Conclusion

It's been said that time is money, but it could also be said that knowledge is power. The more you learn about any topic, the better your decisions are going to be. This holds true for real estate as well. Investing in real estate at a young age is doable, but you must take some time to learn how it works first. The 5 Types of Property Ownership and The Exciting Tax Benefits of Real Estate Properties are good places to start.

Many people look at investing in real estate as a way to make a lot of money. While Real Estate does offer that opportunity, it can take many years to build up a property portfolio that can give an investor large returns. But what about those who are just starting out? They may struggle with student debt, or still live paycheck to paycheck. Is it really worth the risk? It's up to the investor to decide.

If you are interested in looking for a home, or learning about co-buying, check out the Cher website.