The Argument for Investing in Real Estate in Your 20’s

investing in your 20s

There is never a bad time to start investing and saving for your future. Real estate can be an especially attractive sector to invest in because it can offer consistent returns from the moment you purchase it. Let’s take a look at some specific reasons why its a good idea to start investing in real estate in your 20’s.

Live in a Home That You Also Rent

One of the best financial decisions that you can make in your 20’s is to buy a duplex or another property that has space that can be rented. Buying a property that you will both occupy and rent allows you to buy a home while also keeping your mortgage to a reasonable level. As you get older and your finances become more stable, you can buy a new principal residence and rent out the entire property.

There Are Lots of Ways to Invest in Real Estate

You don’t have to buy a home to invest in real estate. One of the easiest ways to enter the sector is to buy a REIT, which is like a mutual fund for real estate transactions. You can also buy real estate ETFs that trade like stocks and have high levels of liquidity, which allow you to buy and sell at will. It may also be possible to make small loans to those who want to buy homes to fix and flip them. Known as hard money loans, you could make an annual return of up to 12 percent with limited risk because you have a lien on the property until the loan is repaid.

Put Money In a Self-Directed IRA to Good Use

Unlike a typical IRA, you are the one who gets to decide where you invest the cash as opposed to a trustee from the institution that holds your money. This means that if you want to invest in real estate with your self-directed IRA, then you’re able to. Using money in an IRA can be doubly beneficial because you can usually take a tax deduction when you put money into the account. Any profit that is made from the investment goes back into your IRA, where you can in turn, invest it further.

Investing Now Means You Get Maximum Appreciation

A home or building that you purchase today could appreciate by as much as 5 percent per more each year. This is in addition to any rent that you receive on a monthly basis. While you may not get 5 percent every single year or in every single market, real estate appreciation rates over a 20 or 30 year period tend to be steady. This means that you can help to secure your financial situation today while also helping you prepare for retirement.

Commercial Properties May Come With Reliable Long-Term Tenants

If you can acquire a commercial building, it may be possible to negotiate what is called a triple-net lease. What this means is that the tenant is responsible for maintaining the building, paying taxes and taking care of insurance and other costs related to operating the property. In essence, you do nothing more than collect a rent check each month for as long as the lease is in effect. As your tenant wants to protect its business reputation, you can be sure that it will take the time and effort to keep it secure and free from damage.

If you have just graduated from college or otherwise starting out in life, it could be a good idea to start investing in real estate. There are many opportunities for anyone regardless of their current income or how much they have in the bank. Even if you have to get together with a group of investors, it is never too early to invest in a quality sector that can offer stable returns for years to come.

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