Real estate investing in your 20’s may sound hopelessly ambitious but the expression, “don’t put off until tomorrow what you can do today” applies to investing more than anything.
How many investors that started making money from real estate investing, when they finally had the confidence to do so, in their 50’s and 60’s are saying to themselves, ‘I wish I had started sooner’?
To say that buying an investment property wisely when in your 20’s can set you up nicely for the future is an understatement.
One 24 year old who dropped out from Central Michigan University started his investment career in 2010 with just $10,000 in savings, within 5 years his property portfolio was worth $4 million.
Ok so we’ve established that you are not crazy to be thinking about doing this in your 20’s, but what practical advice is there for you to think about before taking the plunge?
Clearly Defined Goals
“WHEN a man does not know what harbor he is making for, no wind is the right wind.” These wise words of Roman philosopher Seneca teach us that for success in business and in life it is necessary to set goals.
Writing down your specific property investment goals is essential in your journey toward financial independence.
Before setting your investment goals:-
- Research the property market
- Set minimum targets as to the rate of return that you will accept
- Determine your time frame to achieve certain financial targets
- Think about which marketing strategies you will use to find motivated sellers or investors
- Review your financial situation and determine the degree and type of funding you require
Your goals can also include the number of properties you need to acquire each year, the annual cash-flow they generate, the type of property, and the location of each.
Once you’ve set your goals and written them down, you will have a strong incentive to work hard and reach those goals, you will not waste time and energy constantly questioning why you are doing what you are doing and you will not be easily distracted from your targets.
One of the safest and most sensible ways to begin real estate investing is by “house hacking.”
The premise is that you purchase a property to live in while renting out part of it. This allows you to collect money that pays your own housing expenses.
This strategy means that you are paying for your own residence and also making money from the rental.
To give a very simple example you might purchase a two-bedroom condo and rent out the spare room, on the other end of the scale you might buy a multi-family and live in one unit while leasing the others.
House hacking is a very popular way to gain experience with everything connected with real estate investment.
Before diving into your first investment you should have realistic expectations and that begins with a realistic appraisal of your current situation.
By being aware of common hurdles along the way you can ensure that you are prepared.
Here are a few to look out for:-
Lack of Investment Capital
Finding opportunities is only part of the battle when it comes to real estate investment. Many young investors lament the fact that although they are good at sourcing deals they can’t find the dollars to complete those deals. This is a reality that investors have to confront regardless of age. The fact is that being a real estate investor is just as much about finding the dollars as it is about finding the deals. Accepting that real estate investment is about working to find opportunities AND about working to find the dollars to fund those opportunities is an important step in finding success.
Lack of Experience
There will be some individuals that you have to deal with in the real estate ecosystem that may put a roadblock in your way just because of your youth. Just when you need a certain player in a particular deal to have confidence in you, that individual may get cold feet just because of your youth and lack of experience. Although the ultimate remedy for this will be the track record that you build up over time there are things that you can do to help the situation in the meantime. One of the best ways is to partner with other individuals who do have experience such as accountants, lawyers, and property managers. Pointing to the experience that other members of your investment team have acquired will help reassure any parties that may be skeptical of your resume.
One of the most powerful qualities that you can develop in business and in life is the ability to cultivate “rapport” with others. The word basically means having a good understanding with someone and an ability to communicate well with them. It’s true that you may be starting from scratch when it comes to building these types of investor relationships. How can you overcome this hurdle? Living in the age of social media brings a huge advantage since it’s easier than ever to make connections and build your network but the biggest asset you have is your positive personality traits. Putting yourself out there and having a likable personality will enable you to build rapport with individuals and establish a network in short order.
Although it’s true that your youth brings certain limitations, because of your inexperience, being aware of these and having a strategy to deal with them will enable you to overcome them.
On the flip side, youth brings many priceless advantages including energy, enthusiasm, and drive.
When it comes to building wealth it stands to reason that the earlier you start the better.
Take time to educate yourself about the real estate investment market and make your ongoing education something that you regularly invest time in.
Understand clearly what your own life objectives are and align these with your investment goals by actually writing down your goals.
Recognize the limitations that you have but don’t allow these to cause you to give up.
And finally, bring your sunny personality to the table whenever you connect with people and pretty soon you’ll find that you have people around you that are invested in your success.
With the right attitude and application, as a young investor in your 20’s youcan be successful in the world of real estate investing.