If you’re in your twenty’s or thirty’s it’s important to look at why the 10 reasons to *buying a house young* are so critical.
Investment
There are a lot of people who don’t look at Real Estate as an investment vehicle and that’s one of the reasons they don’t buy a home. Buying a house or an investment property when you’re young makes a lot of sense. If you’re in your twenties there is a good chance you’re going to have roommates living with you whether you rent or you buy a home. If you rent, you pay your landlord, and his mortgage. If you buy, you can rent out rooms to friends and pay nothing, while paying off your own mortgage.
Appreciation
Homes move up and down in price. A house is still a great investment when you’re young. Over time it’s around 3.5% per year on average homes appreciate in British Columbia. If you’re going to buy a home you need to have a plan, run the numbers, and make sure you’re buying at a good time, and in the right neighbourhood. Contact me if you need help understanding what makes sense for you.
Return on Investment
If you’re in your twenties and you want to make an investment you can do it several ways. Let’s say you want to invest $10,000 in the stock market and it gives you a return of 10% that means you made $1,000. If you use $10,000 to buy a home you can afford one up to $200,000 (5% down). If you make 10% on your investment that’s $20,000.
There’s plenty of ways to look at purchasing real estate. You can’t deny that with a great strategy you can have a great return on your investment.
80% of millionaires use their real estate return to create their wealth!
Forced Savings
For those that have trouble saving or a spending problem, a home is a forced savings account. It gives you a way to save for retirement. If you buy a home for $200,000 and it appreciates 3.5% every year it will be worth $561,000.
That $200,000 is now worth over half a million. It’s a great way to build wealth. For anyone who has a saving problem their home is going to be their largest asset. What I mean by that is a person’s home is going to be the largest item of value they have. From the definition of an asset and liability it’s an asset in this case, though there are definitely liabilities involved in homeownership.
Build Your Equity
When you buy real estate at a young age you’re building your own equity. Whether you choose to rent out bedrooms to roommates or live alone, you’re building the equity you have in your home. This works well with a forced savings account because when you retire you’re going to live off the equity you have built up. 8 out of every 10 millionaires have used real estate as an investment vehicle to help build their equity.
Rental Income
Rental income is income. If you make $1,000/month in rental income, you’re earning $1,000/month.
It’s important to understand that if you treat your home like a business it’s absolutely an asset. It’s earning you income and from this perspective real estate is the best investment you can buy. Rental income is a great way to create passive income. Although I use the words ‘passive income’ it isn’t exactly true by the definition. It is however a great way to earn income without doing much. You will be required to answer the phone when tenants call, update the home when things break, among other requirements of a landlord.
Creativity
Buying real estate at a young age also gives you the opportunity to customize and create what you’re looking for. If you’re renting you have to run things by your landlord before you can do anything and you will be at their discretion. When you own your own home you can make the upgrades you want, decorate the way you’d like, and make any additions to the home you’d like.
After buying a property you can customize it any which way you want! Want a backyard with a fence? Build it! How about a deck that gives you a chance to entertain outside? Build one!
Responsibility/Freedom
Buying and owning real estate when you’re young forces you to gain new responsibilities you may not otherwise have while renting. It’s an opportunity for you to force yourself to save through paying down your mortgage, gain income (should you choose to rent it out), and over the time in which you own the home it should appreciate.
Concept of Finance
Want to understand what other people know that you don’t? Buying real estate is a great way to learn. When you’re young you have a much better opportunity to take risks you may not otherwise have as you grow older. When you settle down with a family and kids your time is dedicated to new things in your life that weren’t there when you were young.
It shouldn’t come as a surprise that eight out ten millionaires own real estate. It’s an opportunity for them to diversify their investment portfolios, gain rental income and positive cash flow, as well as appreciation that beats their money sitting inside of a bank account.
Real estate is an opportunity for you to reduce your liabilities, gain passive income through rent, and to pay down your mortgage with other people’s money.
Anyone who didn’t buy real estate when they were young probably will tell you they wish they did!
Free Time
One of the reasons young people don’t want to buy real estate is that they don’t have the time. Well, you’re not going to have more time when you’re older; in fact, you are likely to have a lot less as you gain new responsibilities. A family and children are a responsibility you don’t have when you’re young making it a great time to learn real estate.
Buying real estate is a time requirement and most of the time should be spent BEFORE you buy anything. Researching, educating yourself, understanding neighbourhoods and city plans are all factors that are going to have an impact on the home you purchase. These hours you put in before you start looking at homes for sale are the most important as are understanding why the 10 reasons to *buying a house young* are so critical. Study the numbers, the local real estate trends, and find a good Real Estate Agent to assist you!