Top 10 Strategies To Help Millennials Tip The Real Estate Game
Millennials, also known as the Gen Y or the Net Generation, have an advantage over their preceding generations in many areas of life. They have grown up in an electronic world that is increasingly online and socially networked. They are one of the most ethnically diverse generations, which makes them more tolerant of differences. Millennials have also received the most opportunities in terms of education, opening up a world of possibilities in the job market.
With plenty of start-ups and job opportunities in bigger corporations, the earning potential of the millennials has gone up. They are earning bigger salaries than their previous generations and earlier in their careers. With this, many investment opportunities have sprouted up to cash in on this earning potential of millennials. Investment gurus say diversifying the financial instruments is the way to go.
Financial markets are typically volatile in nature, going through dips and rises every year, which are dependent on various factors. Diversifying the financial instruments minimizes the risk factor and maximizes the return on the investments. Diversification can be accomplished using various investment options like stocks, insurance, mutual funds, and retirement funds like the 401 (k). As mentioned earlier, Millennials have a wealth of choices in every aspect of their lives, which empowers them to make decisions which are economical and beneficial to their lives.
This privilege of choice extends to their financial aspect as well, allowing them to make empowering financial decisions. So, their investment choices don’t end with just few stocks and bonds, and depending on their 401(k) to see them through.
Another golden investment option for the millennials, which is also quite lucrative, is investing in real estate. For many decades now real estate investment has been considered a very profitable investment avenue, and one of the best ways to accumulate wealth. Real estate is still considered a worthy long-term investment, causing fund managers to encourage millennials to add real estate to their portfolio to increase its value.
In spite of it being a profitable option, some millennials are a little hesitant to dive into the real estate market because of the general perception that it is not meant for the younger generation. That myth couldn’t be further from the truth and the following are a few reasons why you should strongly consider adding real estate to your investment portfolio.
- It has a curb appeal that other financial instruments lack. Its tangible nature offers the investor more peace of mind as compared to stocks and bonds.
- Real estate prices are fairly cheap in many markets. States like Texas, Washington, Florida, Michigan, and Nevada are some of the best places to buy properties.
- Because of the financial meltdown of recent times, many homeowners have been displaced due to foreclosures. Hence, many renters have entered the market making it optimal for investors to buy rental properties without the burden of mortgage payments.
- The short sale market has created opportunities to snap up non-foreclosed homes at a great price.
- Real estate is still considered a golden ticket as far as long-term investment goes. The price of real estate has appreciated compared to the previous decades, which means it has the potential to rise in value overtime.
- It can also be an ongoing source of income for you, if you can buy a property, and put it on the market for rent. Having tenants pay your mortgage makes the investment that much more profitable
One of the greatest advantages with real estate is that even in a bad economy; it will fare better than stocks and other financial assets. It is a finite source. People need land to live and work. So, it is all a matter of supply and demand.
Despite the ocasional downturns in the economy, the value of real estate will continue to appreciate, and it will always assume the role of being an important source of wealth creation. You don’t have to be a genius or a millionaire, as most young people would think, to succeed in real estate. As a young adult, who is just starting out in their professional career, you may lament the fact that you have a low bank balance. But, it is still not out of your reach.
As a millennial, this might be your first step towards investing in real estate. As you begin to navigate the world of real estate, you will find there is a lot to learn. Investing in real estate requires plenty of due diligence as it involves financial, legal, and other aspects. Below is a list of the top ten tips to help you create wealth through real estate investment.
- Understand The Market
You need to gather a basic understanding of the market you are trying to enter. Like other financial instruments, real estate also experiences up and down patterns. It is important to be able to make an educated guess as to when the market will rise or fall, as that knowledge will enable you to make smart decisions about when and how to buy and sell. General market knowledge will also help you gauge the rental rates for your properties. Staying one step ahead of the market will help you receive better returns.
- Choose The Right Property
The first criteria that should be ticked off your checklist is a good location. Location is a prime determinant of the price. The one piece of advice that tops the list of real estate investment is to look for the best street and find the worst house on that street. This helps build the equity faster, as you have a house that may need some fixing but is still located in the best neighborhood. You could fix it up and sell it to someone who is looking for a ready-to-move-in house or put it on the market for rent to someone looking in that neighborhood not yet ready to buy.
- Consider Wholesale Properties
When you consider investing in real estate, you are looking for the best deal, just like the stock markets. When it comes to dealing on the stock market, it is advisable to buy stocks that are at their lowest point, and then make money when they turn around. Follow the same principle for real estate investment. As an investor, look for wholesale properties that come at dirt cheap prices. This is the best way for an up-and-comer to invest in this market. You spend money to make the necessary renovations in the house, and then recover your expense by selling it for a profitable margin.
- Managing The Property
A lot of time and effort goes into managing a property. If the property is rented it then becomes your responsibility to collect the rent, file taxes, look after the maintenance of the property, work out the contracts and insurance plans, etc. If this sounds too overwhelming or you are pressed for time, looking into hiring a property management company could be a valuable solution. It could decrease your return from the property, but it can be a well worthy investment for busy professionals.
- Be Aware Of The Tax Benefits
Private investors looking to invest in real estate receive a lot of encouragement from the government. If private investors do not provide housing for people, then the government will have to take up that responsibility. So, to that end the government offers various tax benefits to encourage more investors to jump into the fray. The most lucrative benefit you can avail as an investor is the depreciation write-off. This means that when you invest in a property, you get to write off the depreciation of that property as a tax deduction. As a property owner you can write off costs for money spent on repairs, mortgage interest, insurance, and general maintenance. Hire a licensed tax adviser who can advise you on the specifics as it can be a complicated task.
- Keep A Tab On The Credit Report
As a millennial, there is a high probability that you will have or want to borrow funds to invest in the property. The stronger your credit rating, the better you will be able to borrow the required funds. The Gen-Yers are usually saddled with high student loans among other debts. Making sure that you make timely payments on loans and credit cards will ensure that you maintain a strong credit rating. However, there are other options such as private loans or hard money loans that are ideal for millennials who want to invest in real estate without worrying about their credit score.
- Ensure Financial Stability
It’s important to keep in mind, you don’t just need money for the initial down payment, but also for the closing costs and other fees and expenses related to the loan. Reserves available to bear the ups and downs the property will go through over the years are equally important. If the property is rented, you’ll want to have money set aside for maintenance, unforeseen repairs or expenses, and of course for the mortgage payment during the times the property is not producing income. So, before venturing out into the business of real estate investment, ensure that your finances are healthy. If traditional loan options are not for you, consider private lenders or hard money lenders to assist with your investments.
- Consider Various Options
As a first time investor you might find it tempting to grab the first property that you think looks “nice”. It takes a little work to look into what’s really out there. More than personal preferences, the investment value and the future worth of the property should be considered. Do a thorough analysis of the location, the condition of the property, the maintenance and renovation costs, the amount of financing required, and how much you can maximize your return. Give yourself a wide range of options to choose from, but at the same time, don’t make the mistake of falling into the trap of analysis paralysis.
- Don’t Postpone The Investment
Don’t wait for the perfect opportunity to present itself. Grab an investment opportunity when you see one. Don’t fall prey to the “a better deal might be just around the corner” syndrome. While waiting for all the circumstances to be perfect, you could end up losing on a great deal, holding out for something better. Strike the deal when it meets most of the criteria. As a newbie in this business, it is all too common to be a victim of waiting around for the perfect deal that meets your complete checklist. Play your cards wisely and take swift action when the opportunity arises.
- Stay The Course
As a new entrant, it can feel a little staggering, given all the details you have to consider. Trying to navigate the market, scouring for the right property and getting the loan in place are all part of the learning process. This is a long-term game so, to be a successful investor, take your time and stay the course. Consider having your goals and plans reviewed by an experienced investor. Be prepared to face the highs and lows the market is bound to go through. Take baby steps, breaking down all the plans into small actionable to-do items. It is an oft-seen tendency among the Millennials to think only about the short-term gains, but to maximize your return on real estate investment you must be forward thinking in this market.
Millennials tend to tip any scale that they touch because of their sheer number, and the housing market is no exception. Millennials are also a lucrative group for the fund managers, as baby boomers are increasingly marching towards retirement. Given the high earning potential of millennials, investment companies are lining up thematic investments geared specifically for this market.
Millennials are investing earlier than their preceding generations and are more open to taking risks. To that end, real estate is an ideal investment option to be considered in their portfolio. Since Millennials are investing at younger ages than their generational forebears, they have a long time horizon. This makes real estate the quintessential instrument to diversify their portfolio, and create long-term wealth, as long as they follow the above mentioned tips, be patient, and play it smart, while dipping their toes into this profitable pool.
How Hanson Capital Can Help!
Hanson Capital is a private, collateral-based, hard money lender within the real estate market. Hard money loans are a quick and easy solution for millennials since they do not need to meet any stringent loan requirements unlike those of traditional loans. There are investment programs available with no credit score checks or income verification. Because there are no lengthy procedures associated with getting a hard money loan, it can be secured quickly, and offers the borrower a lot of flexibility.
For a millennial investor, this is a great option as they might not have long and solid credit history to fall back on. Hanson Capital possesses a wide network of lending options and an exceptional process, which enables you quick and easy access to the loan, ensuring that you do not miss a golden investment opportunity.