About 85% of millennials believe real estate is a good financial investment — and they aren't wrong. Unlike the stock market, real estate investing allows you to collect cash flow — or immediate financial returns. Plus, there are tax benefits, the possible appreciation of your property and equity paydown. At the very least, your profits will help you pay the mortgage — and even your own bills.
Here are a few ways to enter the industry and start investing in your 20s.
1. Educate Yourself
Investing in real estate doesn't require formal training or a college degree. However, if you want to succeed, you must educate yourself. Read articles and books about basic concepts, terminology and strategies. Listen to podcasts and talk radio and learn how to analyze properties and invest with little to no money.
Be sure to gather information from a variety of sources to explore different approaches and perspectives.
2. Start Saving
Once you have a working knowledge of investing in real estate, it's time to start saving your pennies. In most cases, you'll need a relatively large sum of money to make your first downpayment. Skip that morning coffee run and pass up that new pair of boots, and prioritize your investment instead.
Additionally, continue to pay down debt. Doing so will help you save money and establish good credit, which you'll also need to purchase your first property.
3. Make Connections
Build a network as soon as possible by making connections with others in the real estate industry. Join an investor group, follow blogs, attend meetings and completely immerse yourself in this new world of buying and selling. Learn from others' mistakes and listen to any advice they have to give.
Connecting with professionals will ensure you start off on the right foot and may even help you find a partner or mentor.
4. Research Financing Options
Generally, financial experts recommend gathering cash upfront or making a standard down payment to avoid private mortgage insurance. You want to save as much as you can and put 20% down to kick off an initial property investment. However, if you can't afford a conventional mortgage, you may investigate alternative financing options.
Hard money loans, private lenders and even Federal Housing Administration loans may offer possible solutions. Research the requirements as well as the pros and cons of each option to understand which ones are best for your particular situation.
5. Consider House-Hacking
Recently, millennials have made house-hacking one of the more popular real estate investment strategies. This creative method entails renting out portions of your primary residence and using the income to pay for your personal expenses.
House-hacking can lower your taxable income and help you earn. Multifamily properties, additional dwelling units and multiple bedroom houses typically make for lucrative hacking.
6. Rethink Your Strategy
You might also consider a few other popular strategies if you don't have the means to make a conventional entrance into the real estate market. For instance, you might try wholesaling or flipping homes. These investments are short term and usually more affordable.
Crowdfunding may be a profitable option, too. This method is similar to real estate investment trusts, but now you can invest online with just a few hundred dollars.
Real Estate Investing is Possible in Your 20s
When it comes to making a profit in real estate, the sooner you invest, the better. When you're in your 20s, there's truly no limit to how much you can make. However, to be successful, you must start now. Homes are long-term investments, so waiting won't do you any favors.
Write down a plan and stick to it. Set deadlines and create a feasible timeline. Then, spend time learning all there is to know about the industry. With a little luck and a whole lot of dedication, your investment will prove to be more than worth the time and effort you put into it.