Millennials are predicted to make up a large proportion of homebuyers in the coming years, but their impact on the real estate industry will not stop there. Millennials will also make up the next generation of real estate investors. While investing in real estate young may seem challenging, it is not impossible.
Aspiring investors should know that there are just as many solutions for real estate investing as there are challenges. Learning how to invest in real estate young will take time and research, but young investors can set themselves up for lifelong success with the right preparation. Keep reading to learn how to break into real estate at a young age.
Why You Should Start Investing At A Young Age
There are numerous benefits available to those who start investing at a young age. Perhaps most importantly is the opportunity to start on what would become a lifelong passion. Historically, real estate has proven to be a highly lucrative investment option. Those who take the time to learn about investing early can create the foundation for a worthwhile, profitable career in life.
David Wurst from Webcitz offers this insight: “real estate investing isn’t just for folks of a specific age. You can begin when you are young or when you are older. In either case, the goal is to weigh your options and choose which ones best match your risk tolerance and time commitment. But know this: Real estate can be a profitable investment for retirees, and if you missed out during your working years, it’s never too late to get in on the fun”.
While you can start investing in real estate at any age, there are certain perks Millennials can bring to the table. For example, this generation grew up in a world surrounded by new technology. Considering all of the changes in the real estate industry today, a knack for technology could help young investors succeed early on. Read this article to more about the future of real estate technology.
Young investors will often also have a higher degree of flexibility when choosing an investing strategy. For example, investors in their 20’s and 30’s may have more free time and a willingness to try alternative investments. This can open the door to unique opportunities, like house hacking, that may not be attractive options later on. Finance expert Samantha Hawrylack adds that “millennials are less likely to feel tied to traditional investment strategies and are more open to new ideas. This can give them an edge when it comes to finding innovative ways to grow their money”.
Aspiring investors should remember to use age to their advantage and test out multiple exit strategies, markets, and even property types.
When it comes to purchasing properties, starting early provides the chance to build equity over time. If you buy a home now, ten or twenty years down the road, you’ve likely built up significant equity through loan payments and property appreciation. By investing in properties now, young entrepreneurs have the chance to build up significant equity. This can pave the way to impressive, high-value portfolios over time.
Yet another benefit of investing at a young age is the chance to build up a network that will last a lifetime. Your network will be crucial to securing financing, finding contractors, and landing deals in real estate. Young investors ready to hit the ground running can start building connections that will benefit them throughout life.
All in all, there is a multitude of benefits available to those who break into real estate, investing young. While you can start at any age, young investors have the chance to lay the groundwork for a successful investing career.
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Challenges Of Being A Young Real Estate Investor
Before committing to your first investment, it is important to consider the challenges you may face along the way as a young investor. By familiarizing yourself with the potential obstacles, you can help make sure you are prepared for any potential obstacles. Here are some of the challenges of being a young real estate investor (and how to overcome them):
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Turning A Hobby Into A Business: While it may sound obvious at first, it’s important for investors to treat their new business like the business it is. Consequently, far too many new investors treat their first venture into entrepreneurship like a hobby. According to Ann Martin, Director of Operations of Credit Donkey Credit Card Processing, new investors must learn to treat their investments like a business. “By taking your real estate investments seriously, you’ll help ensure good returns,” says Martin.
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Lack Of Resources: Many young investors blame their inability to get started on a lack of resources. Some even report finding opportunities but complain they don’t have the money to take advantage of them. Others are too afraid to get started because they think they need more money. If you don’t get started, you won’t have any more than you do now. And there really are ways to invest in real estate with no money down. It’s just a matter of learning the right strategies and tactics. Have you considered a private money lender? Truth be told, a lack of capital should never be an excuse with all that is available out there. You need to know where to look and be prepared when an opportunity presents itself.
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Not Being Taken Seriously: While youth is frequently considered a strong asset in business, many young entrepreneurs fear they won’t be taken seriously. Unfortunately, it is a legitimate fear, but not one that can’t be worked around. Know that there are many circles in which others are specifically looking for those that are 30 and under. Opportunities are there for younger investors, but you need to be willing to put in the time to gain experience. Let your hard work be your resume. It also wouldn’t hurt to hire a veteran mentor or to partner up with a more experienced investor.
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Self-Doubt: Everyone that considers doing something different runs into the fear that they are insane for believing they can do it or should try it. Such feelings often sneak in right before the leap is made or after the initial excitement begins to wear off. Recognize that this is a way your brain sabotages you into inaction. Those in the business call it analysis paralysis. Don’t let this happen to you. Anticipate it, and realize the need to work through it to see results.
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The Process: If you haven’t been through the real estate transaction process yet, buy a home. Owning your own home creates a great financial foundation and will kick start your investing. It will also teach you a ton about the process of investing purely for profit.
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Lack Of Established Credit: Younger real estate investors often have to face the reality that they don’t have well-established credit. Maybe you are fresh out of school, still in school, or have just been strict about paying cash for everything. Credit can play a role in some types of investing and in business. However, you don’t need great credit or any credit to get started investing in property. Don’t let this excuse rob you of your potential.
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Student Loan Debt: Whether you are in college, fresh out, or dropped out for real estate purposes, there is a good chance you’re carrying some student debt. It is important to recognize that it can throw a wrench in your debt-to-income ratio, but there may be no faster way to pay off that debt than real estate investing.
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Expectations: Buying and flipping houses is often made to appear very easy. However, it is easier said than done. New investors will quickly learn that they need to start marketing for deals, learn how to evaluate properties, and write offers. Some expect to be doing a dozen deals a month right out of the gate. Money can come fast and easy in real estate, but it can take some time to build up a pipeline and close deals. The better you understand what’s really involved in getting a deal and what realistic volume is, the faster success will come.
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Connections & Relationships: One of the myths about the wealthy one percent is that they were born with money and connections. Some are, but there are even more millionaires and highly successful real estate players that have worked their way up from the bottom. Connections and relationships are some of the easiest things to build. You may need to learn or hone some communication and rapport-building skills, but nothing is stopping you from getting out there and making new contacts today. Build contacts, and you will be surprised at where some of them end up taking your business.
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Finding Customers: Stop looking for people to sell to, or for deals to fall into your lap. Start looking for as many people as possible to help with their real estate and finance problems, and everything else will fall into place.
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The What’s Next Trap: If you keep getting stuck on what you need to do next, you’ve skipped the most important step in getting into real estate investing: a business plan. Create a system that works for you, one that is tailored to your goals. Use it as a reference when you get stuck.
How To Invest In Real Estate At A Young Age
Many young investors will find it challenging to raise financing when they first start; however, this should not signal the end of the road. The key to investing at a young age will be learning how to leverage your time, motivation, and capital you have to your advantage. While it may seem difficult, finding success as a young investor will come down to learning the best ways to work with what you have.
Luckily, several investing strategies are well suited to young investors. As you gain experience (and connections), the best part is you can use the profits from these strategies to continue building an investment portfolio. Beginner-friendly exit strategies can serve as an excellent gateway to more complex investments down the line. Here are three strategies to get you started:
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House Hacking
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Multifamily Rental Property
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Wholesaling
House Hacking
House hacking refers to renting out a room in the property you are already living in. For example, if you have a second bedroom or converted garage space, you could use those rooms to generate monthly rental income. This strategy is a great way to supplement your income without purchasing a property for yourself. House hacking can also be a great way to reduce your overall living costs, as you may be able to split living expenses other than rent with your tenant.
There are a few things to keep in mind before house hacking, like understanding how to be a landlord and setting tenant boundaries. While this is a great way to generate rental income, the situation will involve taking on a roommate. Make sure you are ready to share communal spaces and manage a tenant before you list the space. If you are interested in getting started, read our ultimate guide to house hacking to learn more.
Multifamily Rental Property
Multifamily rental properties can be another great option for those wondering how to invest in real estate at a young age. This strategy involves purchasing a multifamily property and living in one unit while renting out the rest. This can be a great option for investors who like the benefits of house hacking but not the idea of an actual roommate. That being said, multifamily properties offer shared maintenance costs, steady cash flow, and in some cases, better financing when compared to single-family homes.
There are several types of multifamily properties investors can look into. These include duplexes, townhouses, and even small apartment complexes. You should learn how to evaluate different markets, potential cash flow, and financing sources to get started. If you play your cards right, multifamily rental properties can turn out to be highly lucrative for young investors.
Wholesaling
Wholesaling refers to finding properties, getting them under contract, and then assigning that contract to a buyer. Wholesalers will earn money through contract fees. This process does require a strong understanding of your market area and an ability to network effectively. However, it is a great strategy to learn a lot about real estate and fast.
This real estate exit strategy is actually where a lot of real estate investors get their starts. While wholesaling revolves around buying and selling houses, the wholesaler never actually purchases the property. Therefore, it does not require significant capital to get started. If you are interested in learning more about wholesaling, be sure to watch this video.
Increasing Income And Savings
If your goal is to increase your funds to begin investing, look for ways to increase your income in the meantime. For many people, this means starting a side hustle. Successful side hustles range from selling photography, to working online as a virtual assistant, to delivering Postmates. You may also be eligible for a promotion at your current job, and can negotiate a raise.
Once you are able to increase your income, treat the extra amount as savings. Set aside this money as you get paid. Gradually, you will build up enough cash for your first investment. From there, you can keep growing your funds and so on.
[ Learning how to invest in real estate doesn’t have to be hard! Our online real estate investing class has everything you need to shorten the learning curve and start investing in real estate in your area. ]
Scaling & Networking
Perhaps one of the greatest benefits of investing young is that you have time to break into the industry at your own speed and lay the right groundwork for a successful career. Many new investors of all ages are hyper-focused on landing their first deal and securing their first property. While this is a monumental feat, it is not nearly as important as establishing the foundation for a future real estate business. Young investors should pay particular attention to creating a network and establishing strong business practices.
A great place to start is getting a real estate mentor and joining networking groups around your area. Be consistent as you try to break into the industry and focus on building lasting relationships with other real estate professionals. This should include real estate agents, contractors, other investors, real estate brokers, and more. Networking is key to a successful career in real estate, and building an expansive network early will help you in more ways than one down the line.
When it comes to your business, take extra care to develop your business plan and branding. Create core values and a mission statement for your company, and choose a business name that works for you. It can be a good idea to secure the social media handles and domain names, even if you are not at that stage yet. Remember that the work you are putting in now could greatly help you as your real estate business expands throughout your career.
Partnering Up
Real estate business partnerships can be mutually beneficial for multiple reasons. A potential partner can bring financing solutions to the table as well as connections and experience. Partnering up with someone can help alleviate some of the stress and requirements of handling a business on your own. If you are running into obstacles that you do not think you can manage independently, this can be a great option for you and your business.
Educate Yourself
Before you get started, one of the best ways to ensure your success is to spend time educating yourself. Frankly any investor continues educating themselves throughout their career; consider it a never-ending process. Not only does the real estate market trend over time, investing strategies and industry trends are in a constant state of change as well. There are plenty of free online resources, podcasts, books and expert blogs at your disposal so that you can start teaching yourself the ins and outs of the industry.
Summary
Learning how to invest in real estate takes careful planning, no matter where you are in life. That’s why young entrepreneurs should not be scared away by the potential challenges of starting an investing career. Instead, learn to use your age to your advantage and start building a portfolio today. There are financing opportunities available, connections to be made, and numerous markets worth researching. Whether it is house hacking, rental properties, or wholesaling, there are several beginner-friendly entry points for young investors to break into real estate. With the right dedication, investing in real estate young can help you set yourself up for the life you want.
What questions do you still have about breaking into real estate at a young age? Or, what is one thing you wish you knew before getting started? Share your thoughts in the comments below.
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