If you happen to meet real estate investors, you’ll find out that their biggest regret is investing late. They wish they would have done so when they’re still young and with lesser commitments.
Do you know the reason behind this wish? Well, it’s because they have enjoyed the benefits of investing in real estate.
So, what do you need to know so that you can tap into the real estate business when you are still in your early 20s? Let’s find out.
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The Reality of Real Estate Investment
Every business has its pros and cons, and real estate is not an exception. As an ambitious youth, you will have put higher expectations that might not match what the real business entails. On the other hand, you might have your own fears which could prevent you from diving into the idea of generating income in real estate.
Let’s first look at the advantages and the disadvantages that you will encounter in the real estate industry so that you can prepare your mind on what to anticipate.
Advantages
- Steady Passive Income
When you invest in real estate, you don’t always have to be engaged in the hustle and bustle that other businesses require. If the investment generates a consistent and positive cash flow, you will enjoy the benefit of making passive income.
This income can be directed towards savings, retirement accounts, or to pay a pending loan. Therefore, you have the opportunity to engage in other income-generating activities while you earn from real estate.
- Gain Investment Experience
The real estate business comes with decent lessons that can be applied to other businesses. While in it, you will learn about how to generate money depending on seasons, locations, and other economic trends that might affect business.
With time, you will know when to add your investments or wait for a particular economic period to start.
- Chance to Build a Collection of Assets
If your first investment turns out to be good, you will put extra effort into investing more in order to gain financial freedom. With time, you will have diversified in assets by buying your first rental property.
Disadvantages
- Managing Property is Challenging
The act of leasing properties requires you to have the necessary rental agreements and permits. The process will also require you to constantly market your premises and also do necessary screening tests for the tenants.
Needless to say, you will also have to bear the cost of maintenance to make the premises more attractive and comfortable for your clients.
- The high upfront cost of property investment
The high upfront cost required in property investment might discourage the majority from investing. For instance, buying a house will require one to make a high down payment followed by other installments. It might take several years to acquire one and also drain you financially. However, you will come to realize the benefits later.
- Low levels of liquidity
Compared to other types of investments, real estate is low in liquidity. You will not always have cash at hand every other time because the agreements signed will dictate payments to be paid either monthly or at stipulated periods of time. In addition, the value of these properties might take a long time before rising. Therefore, patience is a key asset for real estate investors.
The Process of Investing
Having known what the real estate investment entails, it’s time to strategize and set a good foundation for the plan. Here are tips that will help you accomplish this dream.
- Sharpen your property analysis skills
Every industry has its intricate details that need thorough research. In order to become a successful property investor, it is critical to amass enough knowledge of the true values needed for the investment.
If you need to invest in the local market, research either by making face-to-face inquiries or through reading. However, many people might not be willing to share exact information about their success stories. Therefore, if you do not achieve your objective of acquiring enough knowledge, it is essential that you consider the services of an expert to guide you through the entire process.
While doing your research, it is essential to consider available options in real estate investment. For instance, you do not always have to purchase a property for you to invest in the industry. This knowledge is critical since it will give you a strong foundation for your goals. House hacking is also another option that can help you minimize the expenses of managing a property. Therefore, gather enough knowledge also in the trending ideas in the industry because you might need to apply them at some point.
When you have gathered enough finances and you are ready to purchase a property, a real estate broker might be a good choice for a start-up. Such brokers will give you the necessary information about the local market and also recommend better properties. However, you should take due diligence when involving a broker to avoid being conned.
- Have a healthy financial plan
Once you decide to invest in your 20s, you will need high financial discipline. This discipline will particularly involve how you spend your money on different items and activities. Unfortunately, this age is considered as that of adventure where a person spends more on parties, travel, and personal items. However, when you are intentional about what you want to achieve, it is possible to minimize such expenditures.
You will also need to consider that finances can never be enough because you will always need to upgrade from one level to another. The best way of controlling your spending is by writing down the essential activities and items that you need. This plan will assist in eliminating unnecessary bills which can wait or rather be avoided altogether.
You will also need to consider how your decisions impact your future life. At this age, you might be influenced to think at the moment and forget the consequences of your actions. Rather than learning about the outcomes of something while you’ve already started it, it is critical to consider the possible results before engaging in any activity.
While intending to start a career or a business, you have to change your way of thinking. Avoid impulsive actions by understanding how they can influence your short-term and long-term goals. You can do this by considering your opportunities, weaknesses, and strengths. For instance, every job, expenditure, or credit decision, or income-generating activity should be well thought out to allow you to make good financial decisions.
- Have a good credit history
Having a good credit history is one way that can help you access loans faster. If you have finished school, it is crucial to start paying student loans so that you can have a clean loan record. On the other hand, you should consider paying your bills on time or make amicable solutions with the creditor so that your credibility is not soiled.
You should avoid credit at all costs. Credit is so sweet when you get it, but paying becomes an uphill task. If you are not attending to a primary need or emergency, avoid credit. Avoiding credit will help you source funds fast whenever a great opportunity arises.
Good credit history will help you whenever you are borrowing money. You will not be denied access to acquire these loans because the record shows that you can be entrusted with loans. At times, you can get a good deal in the real estate sector, but you might not be having enough finances. Borrowing some from a lending institution will help you grab the opportunity in time.
- Prioritize saving
The culture of saving is closely tied to having a good financial foundation. However, it is critical to note that people that showcase financial control in spending might not be equally good at saving. The best way to start up a business is to use accumulated savings rather than borrowing from family or institutions.
Because you are not so sure of the outcome of the businesses, always consider using your own money. In your 20s, you might feel too pressed to save the pocket money given by parents or guardians. But wait, do you know a small saving can enable you to open a small business that, in the long run, will increase your income?
No amount is too little to save. In fact, maintaining a good saving history can open more opportunities for you. Most lending institutions will go through your account to analyze the amount of loan that they will give you. In some cases, they can multiply the figure in your account twice or thrice. Thus, the higher the amount, the more finances that you can borrow.
Saving can also assist you in cases where the money lent to you is not enough. Rather than borrowing from different people or institutions, you can boost your capital with savings. Such finances can also assist in the cost of maintaining your property.
- Ask the experts
You can never go wrong with experts. People who have undergone the process of owning property are in a better position to give advice than those who have not yet achieved this milestone. These individuals will share the real figures and values attached to different types of properties because they have a lot of experience in the field.
If you show commitment, some experts can have a face-to-face or online discussion about their experiences. Through these discussions, you will learn about different ideas that they implemented in their investment journey and also learn what to avoid.
If you are privileged enough to acquire one, a mentor will be the right match for you. A mentor will offer to give you a step-by-step guide in your real estate investment. Other than giving guidance, some mentors also offer financial support to boost your finances that will unlock more possibilities.
While acquiring a mentor might be hard, you can consider enrolling in a real estate institute where you will meet practitioners that offer guidance at a fee through online classes.
- Set realistic and attainable goals
Goals can be set and achieved through a proper investment strategy. Goals need to be set according to priorities and ease of achieving them. For instance, when your ultimate goal is buying an expensive property, you can have short-term goals of engaging in other investments that are in line with real estate investment. REIT, real estate wholesaling, and flip properties are realistic goals that can be achieved more easily than buying property. The income generated from these investments can be combined or saved to buy a property.
You need to develop a long-term plan that will keep you grounded on your vision. The plan assists you in maintaining stability and avoiding veering off. With a plan in mind, you will not stay too far from the path that leads you to your goal.
Being aware that you cannot achieve the long-term plan in a single day or year is critical in helping you to remain resilient and determined. Therefore, you can break down your long-term goal into various short-term goals that will eventually lead you to your vision. Setting and achieving milestones for short-term goals sounds more realistic and attainable.
While setting the long-term goal of owning a property, you should set a realistic picture of what to expect in the journey. Be mindful of the challenges that might discourage you from your objective, so you can know how to deal with them. Therefore, allocate room for uncertainties and also set up possible solutions to the setbacks. This plan will help you prepare for disappointments that might derail your long-term plan.
A good plan entails the ability to believe in starting small and expanding with time. Rather than getting excited with the farfetched dream of owning a property, it is important to start at the bottom and allow room for growth. It is better to celebrate small wins rather than handle disappointment.
- Networking
The greatest advantage of investing in real estate at a younger age is that you have all the time to climb up the ladder by building yourself through critical lessons learned on the way.
Despite having all this time to yourself, getting the first deal is not always easy. However, you can shorten the time taken to get the deal by having a good network in the industry.
When you establish the right business practices, you should look forward to practicing them by acquiring investment deals. You need to connect with like-minded people through conferences and online meetings. You need to build long-lasting relationships that will propel your real estate investment.
Learn to interact with other investors, contractors, real estate agents, and brokers. Apart from giving you investment ideas, these people can also give you a job in this area, which will assist in sharpening your skills.
After gaining a proper foundation in this sector, focus on developing a good business plan and branding. Create a vision and mission and share it on these meetings and social media platforms. If your network is strong, the above-mentioned people will share this information or connect you to opportunities.
In the event of connecting with other people, you will notice that you can also create real estate business partnerships that will be of great benefit to you. Partners will search for more opportunities or fund the business. Such a plan can help you gain a breakthrough easily without engaging in the stressful process of handling business on your own. Therefore, make your network your net worth. If you need to have more income, then network more in your line of business.
You can choose to start your networking journey with auctions. These events have all sorts of buyers that bid tirelessly to win the property. When you attend these events, you meet many investors with whom you could discuss various issues in the real estate sector.
Your network will largely be determined by your ability to connect through communication. If you maintain effective communications between professionals and other investors, there is a high likelihood that you will build a great relationship that will bear positive outcomes. Concentrate on building this block that will strengthen your success.
The Bottom Line
Irrespective of age, investing in real estate requires a well-crafted strategy. This strategy can act as a level that will propel you to higher levels of owning a property. Although it sounds insane to invest in real estate in your 20s, I bet it is possible by observing the above-mentioned tips. During this age, you stand in a better position to build a firm foundation since you have enough time.
However, it is critical to learn that the sector is competitive with various challenges, especially for young people. The best way to counter these challenges is to do thorough research, build connections, look for starting capital and start small. With patience and determination to succeed, you will ultimately become a renowned investor in the real estate sector.
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