From the website SmartAsset.com – https://smartasset.com/mortgage/5-reasons-why-your-first-home-should-be-an-investment-property
Thierry Godard JUL 23, 2019
An award-winning writer with more than two decades of experience in real estate.
If you’re young and you’re looking to purchase a new home to live in, maybe you should consider turning your first home into an investment property. While most people wait until after they’ve bought their first or second home to begin investing in real estate, you could start much sooner than you think. We’ll explain why jumping into the real estate investing game might be a good idea.
Many people, especially in the wake of the mortgage crisis, have found themselves wondering: “Is buying a house a good investment?” One way to ease your worries about whether buying a house will pay off is by renting out the first home you buy. By turning your home into an investment property, you can leverage your less-than-perfect credit, less-than-perfect lifestyle, and limited responsibilities into an investment. All it takes is a few smarts and real estate shrewdness.
The idea of making your first home an investment goes against the general notions of personal finance. In fact, it goes against how most people approach post-college life. The typical financial timeline for your average American adult might look like this:
- First Job
- First rental
- Second/third rental
- Starter Home
- Second Home
There’s nothing wrong with following that timeline since it can give you plenty of time to build credit, save money and enjoy being young. But if you’re a 22-year-old college graduate with a solid job (good for you), waiting until you’re well into your 30s or 40s to start investing might not be wise.
Here are five reasons why you should entertain the idea of investing in real estate while you’re still young.
1. You’re Young
Being young and independent can be pretty amazing. You can make your own rules, live where you want, buy what you want, and travel whenever you want. But that can get old pretty quickly, especially if you have other goals in mind.
All the money you’re currently spending “living the life” while living in a crappy apartment could be spent on something else. Saving money and building credit isn’t impossible and they’re part of what you’ll need to qualify for a mortgage loan (more on that below). Your current lifestyle might actually allow you to cut costs in a way that might not be possible later in life when you have larger obligations.
If you can learn how to effectively manage your money, you can come up with enough cash for a down payment.
2. Real Estate Is Cheap
According to recent reports from the National Association of Realtors home prices are on the rise. However, most real estate markets present many bargains to potential buyers in the form of distressed sales. Distressed sales are homes or properties that have usually been foreclosed on that the bank is willing to sell at a loss in order to clear its books. These distressed sales also help drive down the cost of all properties in the area.