A lot of people think that in order to be successful in real estate, they need to quit their job and pursue real estate investing – full-time!
It’s a tough decision to make as there are many benefits to keeping your job as well as disadvantages to consider, especially if you’re a millennial.
One of the smartest ways to create financial freedom for the millennials is to evaluate how to invest in real estate in your 20s. Working yourself into exhaustion fifty or sixty hours per week, or going to school for years might make you money, but possibly at a significant cost to your well-being. If you can get ahead of the curve when you are thinking about real estate and start young, you can reap tremendous benefits.
One of the most significant reasons why you should invest in real estate in your 20s is because with real estate investing, the longer you own a property, the better the investment becomes. So, by starting in your twenties as opposed to in your thirties or forties, you could benefit greatly.
REASON 1: START MAKING PASSIVE INCOME AT A YOUNG AGE
If you can generate positive cash flow from your investments, you can make passive income, which can be extremely beneficial to supplement your salary. If you invest in your 20s, this can help with building an emergency fund, paying off student loans, growing a retirement account, or even providing a budget for those items you might not be able to afford otherwise. The additional income and freedom provided without needing to clock in a ridiculous amount of hours could be well worth it. Passive income also provides an added sense of security. With all the uncertainty during these times, it is nice to have an added cushion with passive income.
REASON 2: STARTING TO INVEST IN YOUR 20S WILL GIVE YOU A REMARKABLE HEAD START
Thanks to compounding, the younger you start investing, the exponentially greater profits you will see. Inflation is constantly rising, so even just a few years can make a significant difference. Additionally, cash flow increases over time because rent rises with inflation, while mortgage payments stay consistent. Over time, you will be able to pay off your loan and your cash flow will significantly increase.
REASON 3: FLEXIBILITY WHEN YOU ARE YOUNG
In your twenties, you often have much more flexibility with your time and fewer commitments. If you can start real estate investing while you are young, before you have a family to take care of or important corporate work obligations to attend to, you will have a significant advantage.
One of the most common ways to get involved in real estate investing is by house hacking, or living in the same property that you rent out. If you do this, you can buy the home as an owner occupant and can therefore put only 5% down, or even no money down with certain loans. After a year of living there, you can rent it out. You could even repeat this process every year.
REASON 4: GAINING EXPERIENCE AND BUILDING A PORTFOLIO
Investing comes with a learning curve. Some investments do a lot better than others and it takes time to learn how to pick the right properties and opportunities. You need to understand how to make them work for you. The sooner you can learn this, the better, and you will become a seasoned investor in no time.
Receiving passive income from one investment property will likely not be enough to achieve financial freedom, but this is possible with a diversified portfolio. And the sooner you can start building your portfolio, the better.
REASON 5: TAX BENEFITS
One of the many advantages of owning real estate is the incredible tax benefits. Perhaps the biggest tax advantage is the various deductions available. You can deduct any expenses that are directly correlated to the operation, management, and maintenance of the property, as well as any costs associated with running a real estate investment business. You can also deduct depreciation on the asset. There are tons of other tax benefits available for real estate investments, making it one of the best investment opportunities.
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