Some of the richest people in the world have accumulated their wealth through real estate.
What makes real estate investing so great is than anyone can do it. There is no class to pass or license to obtain. There is no system you need to follow or path you need to emulate. A first time homebuyer has the same chance of getting an offer accepted as someone who owns a dozen properties. The real estate business is full of people who have started in their 20’s and gradually built portfolios that set them up nicely for retirement. The best part is that attaining this is often much easier than you may think.
Being a real estate investor doesn’t mean you buy and sell real estate all day. Real estate should be considered a building block towards wealth or financial stability. If you are currently renting you should look at starting small. One of the things that makes real estate so appealing is that is a fantastic investment in both the short and long term. As much as you may try to avoid it five, ten and twenty years happens before you know it. If you begin building your portfolio young enough you will have a nice nest egg down the road. There is nothing wrong with having your first property be small and modest. Find something where your rental payment is the same as your proposed mortgage payment. With interest rates still historically low this is a very realistic possibility.
If you are ready to move on and sell in five years you should have built a good amount of equity that you can use as a down payment for your next purchase. This allows you to keep your payments low and give you a jumpstart on owning your property outright. By keeping this equity cycle going for just three purchases over 15 or 20 years you can end up owning a property free and clear. This means years of not having a housing payment or hundreds of thousands of dollars waiting for you if you decide to sell. This all starts with one modest real estate purchase you can comfortably afford.
One of the hurdles for many young buyers is a lack of down payment. While all of the 100% financing options are gone there are still many good minimal down payment programs available. An FHA loan may be your best bet. With an FHA loan you can own a property with just 3.5% of the purchase price. The best part is that these funds do not have to come from your own bank account. There are a number of eligible down payment sources including parents, aunts, uncles, grandparents and other family members. They can contribute as much or as little as they like. If they want to gift you the entire down payment and closing costs this is allowed. Another feature that makes an FHA loan so attractive for young buyers is the option of a two family property. With a minimal down payment you can own a two family property where you live in one unit and rent the other. This will not only reduce your monthly bottom line but will also provide you with increased tax benefits. Additionally you will get valuable landlording experience that you can use if you decide to make real estate investing a career.
The idea of home ownership as an investment has been lost over the years. For young buyers there may truly be no better time than now to explore the housing market. With low interest rates, increased inventory and steady home prices you can start build your real estate portfolio today.