SHARE
READ & LEAVE A COMMENT
Filed in
Millennial Investments Have More Potential In Real Estate
If your stock portfolio consists of boring but established companies that pay dividends on barely-there fluctuations in share price, then it’s time to stop playing it safe.
As most Millennials know, sound investment is based on a long-term goal. So it doesn’t come as a surprise that most Millennials are scared of investing in the stock market, since most of us lived through the “Great Recession” and still see the effects. But that is also the reason why right now is the best time to start assessing investment options. The most recent Gallup poll shows that Millennials consider real estate the best long-term investment over gold, stocks & bonds, and savings accounts.
Right now the real estate market is in a sweet spot for investors to accomplish these 3 crucial points:
- Secure a low interest rate
- Research the products available to you to find the best deals on a loan and a home
- Give it your all – invest your time and your money
Let’s apply a few age-old adages to this concept.
In order to make money you have to spend money. Think about it, you can’t see a return on an investment if you don’t invest. This seems to hold even more truth in real estate. Consider buying a home as an investment and it’s certainly more appealing than renting. You are no longer lining a landlord’s pockets – an individual who invested in the property YOU live in – you are now accumulating equity, which offers far greater value and ROI than convenience does.
Let your money work for you. A principle of finance: the highest level of personal wealth and earning potential is achieved when you let your money work for you. When you buy your “starter home” and earn equity, after a few years it is common to use the proceeds from the sale as a down payment for your next home. Buy low and you may pay off a starter home sooner than you thought. (Then you can become that landlord with nicely-lined pockets.) Buy smart and you’ll be bankrolling successful investments as many times over as possible.
High risk – high reward, no risk – no reward.The level of risk you are willing to take on in real estate may change as your experience and cash flow increase. The highest potential for returns is held in the area with the most investment: flipping. Millennials have the energy and drive, or sometimes even the naiveté, to get into flipping houses. Once the first house is flipped and you walk away on the other side with a $30,000 or $40,000 check in-hand… enough said, right?
Harness the resources at your disposal as a Millennial – technology, time, and ambition – and you will be on the path to successful real estate investing.
How else will you find out how well you can swim if you don’t jump in? Warren Buffett, the metaphorical father of great investments, certainly did. He recently purchased Prudential’s real estate arm and invested so deeply that he gave the new company his flagship name: Berkshire Hathaway. Many successful investors would be wise to take a cue from one of the wealthiest individuals in the world. If his investments lie in real estate, why shouldn’t yours?
One Response
While I think buying a home can be a good financial decision, I wouldn’t term it an “investment.” When you buy a house, you lose 10% of the purchase price in fees, and you also lose money annually in the form of interest, property taxes, and upkeep. My Vanguard funds’ 0.25% expense ratio seems downright cheap by comparison.
Further, a mortgage is a highly leveraged investment, meaning that yes, if the market rises, you could see a huge profit; however, if the market falls, it will wipe out your down payment and then some in no time. Further, if the value of your home falls below your mortgage balance, you become underwater, meaning you either have to use your savings to make up the difference or go into foreclosure/short sale.
With the low interest rates and inflated prices at the moment, I don’t foresee there being a huge price jump in the near future. I actually think it’s best to buy a house when interest rates are low. You can always refinance to a lower rate loan, but you can’t get back the value of the house you lose due to a market downturn.
This is not to say people shouldn’t buy houses: they can definitely save you money over renting if you plan to stay in one place for 5-7 years. However, I think there are much better investment options out there.