Should young adults take the step into flipping real estate, becoming a landlord, or just becoming a homeowner?
Today’s young adult has more options when it comes to investing their money. More and more have learned the value of the dollar, invested properly, could have them set for the rest of their lives and their children’s lives. In a recent article written about real estate, the average age of first time home buyers are 25 years old. Many of these young adults interviewed stated they worked throughout their high school years and took on small jobs throughout college. By 25 years old, the majority finished their undergraduate degree, and began working full time after graduation or continued onto Grad school, worked either part time or full time, and by age 25 felt it was time to take their money and invest it into real estate.
The next question was do they invest their savings into their first home, as an investor and buying a property that needs work and then reselling it for higher profit, or buying a property to rent and taking on the role of a landlord? These options were never a question for young adults since many think of an investor in real estate or a landlord as an older person. But in today’s market, younger and younger investors have learned what it takes to make money, invest it into something that is not overly risky like the stock market, and consider a piece of property a long term investment.
Suggestions to young adults before deciding on how to invest their money in the real estate market would be to speak to a long term investor of real estate, a financial planner, a mortgage lender, and even your parents. Any home owner can share their experiences and knowledge of wealth they have learned by real estate owning. For a mortgage, many times investment properties are given a different interest rate scale comparing to a residential property. Also for flipping properties, mortgage lenders can give a bridge loan or short term loan since they understand that you will not be holding the mortgage for 30 years and plan to sell within 6 months.
Before deciding to buy that old 1900 Victorian home and spend the money and time renovating it, get all the information about the difference of buying it as a residential or investment property. Sometimes if the young adult still lives at home, the property can be bought as a residence since they may consider this first purchase a possible first home. If they decide to resell it or flip it for investment, it just brings money into their pocket and more to use on their second real estate property when they decide to purchase. Another option is renting the home after the updates are complete. Becoming a landlord requires finding renters, collecting the monthly rent, holding the security deposit in a escrow bank account, deciding on who takes care of any maintenance issues, and being responsible for your property. When deciding to rent a property, the main point is to have the renters pay the mortgage and also make some income from it. Some rental properties can make investors $500–$1500 a month.
If you are interested in investing your money but not ready to play the stock market, real estate is a long term investment and possibly a safer bet. There will also be homes and properties for sale and people who will be looking to buy. As the times change, updates need to be made to homes and flipping properties can make the right investor a large sum of profit. If you are looking to buy a residential home, this is also good choice over renting. Once you make the first step to home ownership, the doorways will begin to open and obtaining mortgages for investment properties will find you.
Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.