You’re in your twenties… it’s time to cut loose, enjoy life, and get ready to settle down, right? While this may seem like a great idea, there is a secondary option that many twenty-year-olds tend to overlook… early investing.
Investing early—in any format—will help protect your quality of life down the road. If you opt to invest in real estate, you can secure a comfortable lifestyle in your future while building the bridges of your very own career as a real estate investor.
Starting early in your real estate investment career means you’re likely to have more free time than a mid-thirty to forty-year-olds with kids, their own home, and other responsibilities. This means you’re likely to have more time to devote to finding the perfect property to suit your needs and time to put into renting it, maintaining it, and growing your investment.
Why Rental Properties:
When it comes to investing, rental properties should hit top of the list for twenty-somethings. In addition to being essentially inflation-proof, rental properties actually increase in value over time. The longer you hold a property, the more you’re likely to benefit from a sale in the future.
While appreciation—the value of the property at the sale versus the value at purchase—is a great reason to invest in rental properties, cash flow is the one of the biggest perks. Having rental property increases the average passive income you are able to reap per month.
Cash flow grows over time, as rental payments increase with inflation and cost of living rates. However, if you begin investing young—your mortgage payments won’t increase, thus padding the monthly payment with additional cash flow each year.
Know Your Financing Options:
Getting financing in your twenties can occasionally be easier than doing so at a later stage. Unless you got really crazy in your early years, your debt to income ratio is likely to be lower than it would be later in life. Your credit is likely to have fewer blemishes or discrepancies than it would if you waited another ten years.
Another great feature about purchasing your first rental property early in your twenties is that you have a little more time to recoup the investment. If you utilize an owner-occupant style of financing, you purchase the property with as little as 5% down, and in some cases, with no money down. The catch, however, is that you have to live in the home as your primary residence for up to twelve months. Purchasing a home in this manner in your twenties means you’re likely to be able to do so, without having to worry about paying for a primary residence at the same time.
In fact, if you opt to purchase your first rental property in this manner, you could essentially begin a pattern—once you reach the twelve-month period, rent the home and purchase a second property using the same financing method. You could continue this pattern for some time, building yourself a nice investment portfolio before settling down into a primary residence of your own. Doing this later in life could be complicated, as you’re likely to have a family, pets, and a houseful of furniture.
Take the Time to Find the Right Deal:
Making the decision to invest in real estate early in life gives you an opportunity that you won’t be afforded later. You can take the time to really dive into the market, learn the ins and outs of the industry. It also allows you to feel less rushed to make any purchases as you’re not in a hurry to begin for retirement. This means you can be picky—if a deal doesn’t feel 100% right, you can walk away and keep on looking.
Regardless of what your future holds, you can’t go wrong by investing in rental properties early in life. As property can take time to truly begin being profitable. Purchasing a property in your early twenties will allow you to begin raking in the rewards of long-term investing at a stage in your life when you’re ready to start slowing down.