How To Get Started In Real Estate As A Teenager
Maybe you’ve heard this, You’re too young to get into multifamily real estate you should go to college you should just do what everyone else is doing and go get a job. And one day in the future, you’re going to be okay.
We’ve all heard that too many times, but I’m a 21-year-old real estate investor, and I’m here to tell you, if you want to get started investing in your teens, you can.
Rent Out Space In Your Home Or On Your Property
This is probably the easiest way to make money in real estate through direct participation. If you already own a home, you can pick up some extra income by renting out space.
Im saying space for a reason. Most people think in terms of renting out a room to a border. Thats one way to do it.
You can also rent out part or all of any of the following:
- An outbuilding on your property
- A corner of your land
Any of these rental arrangements can provide an extra income source, in the same way as renting a room to a border. People and businesses have all kinds of space needs. In a lot of cases, they just need extra space to store their stuff or vehicles.
This is easier to do in some locations than in others.
If your home is located in a rural area, an older downtown area, or in a community that has lax property use restrictions, this can be a real alternative.
But if you live in a suburban area, with tight property use restrictions, youll run into legal obstacles. And if you live in a neighborhood with a homeowners association , dont even think about it.
But if your house is located in the right area, and you have extra space, this is a pretty easy way to make extra money in real estate. Knowing where to invest in real estate is key to success in your real estate ventures.
Find The Cash For Your Down Payment Or Investment
At some point, you are going to come to the realization that you have to put away your disposable income so that you can fund your real estate investing dreams. You can do so even if you earn a meager salary, or even if you are a starving college student. You can do this, and the important thing is to begin with the end goal in mind.
You can raise funds quickly by working on your side hustle or following your new budget.
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The Best Discount Broker
Webull is a commission-free trading platform that gives you the tools you need to analyze and buy stocks.
This makes Webull a great option whether youre new to investing or an experienced trader.
Webull specializes in stocks, options, and ETFs.
You can learn more about the platform through my Webull review here.
How Much Money Do You Need To Start Investing In Real Estate
If you are wondering, how can I invest in real estate with $500 or a similar amount, then using the strategies listed in this article, you can technically invest in real estate with little or no money. However, it is always advisable to have some liquid cash depending on your strategy.
For example:
- If you pick bird-dogging, you need the cost of gas to find deals.
- If you decide to be a wholesaler, you need to spend money on bandit signs or driving for dollars.
- If you decide to house hack with an FHA loan, you need the 3.5% down payment.
- Investing in REITs can be done for less than $100 using M1Finance. VNQ is one of the largest and most popular REITs from Vanguard. You can read my complete M1 Finance review to get started investing.
- Investing in real estate crowdfunding via Fundrise can be done for only $10.
The amount of money you need to start investing in real estate depends on your strategy.
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Investing Strategies You Can Start With
There are a few things that you may start with right off the gate when it comes to investing in real estate, and one of these things is finding the ideal property to invest in. Here are some tips to get started:
1: House Hacking
The technique known as “home hacking” is an essential part of the business of investing in real estate. If you have a good awareness of the numerous factors that have an effect on the cost of housing, you will be able to more precisely estimate when and where to buy a home. This will allow you to make more informed decisions.
2: Wholesaling
3: Multifamily Rental Properties
How Much Money Should A Teenager Save
It is important for a teenager to start saving money when they are a teenager. Saving early will allow the money to grow and build a habit of saving. Starting with 10% of their income is a good starting point, and they can gradually increase this amount to a higher percentage. If they dont have much money saved, they may consider doing a side gig to earn some extra cash.
Another important aspect of saving is figuring out what is a need and what is a want. A 14-year-old may have a part-time job and have more money, but theyll have to pay gas money for driving to work. It is important for a teenager to start saving for the future and set a goal for saving a certain amount each month. While it may be tempting for a teenager to save every penny, a better approach is to save more and invest a smaller percentage each month.
Saving for future events is also important. If a teenager can save for a home down payment, for instance, it will be far less expensive than saving for a car. Similarly, a teenager should also be careful to make sure that his or her goal is compatible with their parents approval. Saving for a tattoo, for example, may lead to disappointment when the parent denies the request.
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Home Equity Line Of Credit
A home equity line of credit is a line of credit secured by the equity in your primary residence. You can use the HELOC funds for home improvement. One of the ways to invest in real estate with little or no money is to tap into your HELOC and use it to add additional living space to your house.
The HELOC funds can be used to add a master bedroom or even a new accessory dwelling unit . The additional living space can be rented out or even used for Airbnb. The HELOC usually has a lower interest rate than other types of loans, and the interest may even be tax-deductible. Refer to IRS publication for tax guidance.
Invest In An S& p 500 Index Fund
This is my, and billionaire investor Warren Buffett’s recommended way of making money in the stock market.
An index fund is a fund that purchases all of the stocks that make up an index. Some stock market indexes include the S& P 500 and the Dow 30.
Investing in an S& P 500 index fund is a great way to make money on autopilot. Your money will grow by roughly 7% annually while invested in an S& P 500 index fund like iShares’ Core S& P 500 ETF.
That includes a 4.3% dividend yield, which is the income you’ll make for investing in the fund. If you invested $1,000 in the fund I mentioned, you would receive $43 in income a year on average.
The fact is that only 1/20 managed funds beat the S& P 500 index on any given year. So you might as well save money on fees and just invest in an S& P 500 index fund to grow your money.
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The Advantages Of Investing In Real Estate Young
Getting started with real estate investing at a young age is a great idea for several reasons. One is that it gives you the ability to invest for the long term and allows your investment to grow and appreciate.
When you are young, you have more flexibility in life, fewer commitments, and can take more financial risks. While you may be making less money, you likely have less financial responsibility. If you wait too long to start investing, family, work, and life makes it hard to learn about and invest in real estate. Aspiring investors should remember to use age as an advantage and test out multiple strategies and property types that may become more unattractive as you get older.
How I Make Over $250000 A Year In Real Estate Investing
Jeff Rose, CFP® | August 02, 2022
The following is a guest post from my friend Eric Moorman, who has made a killing in small-town real estate investments.
I have been a full-time Real Estate Investor for many years now. I got started with a mix of desperate needs , and the promise of huge profits with no experience or start-up money needed.
I had never taken a Real Estate class and had no idea how to fix anything. I didnt even have or know how to invest $1000! The one advantage I had was a father who was an amazing mentor, the quintessential entrepreneur.
Of course, now there are way easier ways to start investing in real estate. Online real estate investing sites like Fundrise allows you to invest a small amount of money to get exposure to real estate investments across the country. Online real estate investing is now a top way to make money in real estate and build long-term, passive wealth.
But when you hear you can buy houses with no money, believe it. Today I want to share the four best ways you can make money in real estate, with the positives and negatives to each.
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But Heres The Problem With Real Estate Investing
Youll need not only money but also time. Youll need to discover homes to remodel, renovate, and sell each step will take time and effort.
Investing also does not necessitate a significant amount of time spent researching and obtaining. It can also take time for your investments to appreciate, grow, and multiply passively.
Consider investing $10,000 every year for ten years, generating an annual return of 8% and reinvesting the profits each year . Youd have $156,455 after ten years.
But what if you give it another 20 years? Youd have $494,229 in your pocket. You get more than three times the prize if you work twice as hard.
Youd have $1,223,459 after 30 years, three times as long as the original ten-year term but nearly eight times as much money.
In other words, if given enough time to work their magic, compound investments yield exponential development. That is why you should begin investing when you are young.
How Buying A House Works
Buying a home isnt quite as simple as it may seem. Thats because houses are very expensive, and most people dont have the money to buy them upfront. This is why people take out mortgages.
A mortgage is a loan that the borrower uses to purchase or maintain a home or other form of real estate and agrees to pay back over time, typically in a series of regular payments. The property serves as collateral to secure the loan Julia Kagan, Investopedia.
So even if you dont have enough money to buy a house upfront, you can take out a loan and pay it off over time. Usually, mortgages are paid off over 15 or 30 years by making monthly payments. But if you cant make the monthly mortgage payments, your house will get foreclosed.
Foreclosure is the legal process by which a lender attempts to recover the amount owed on a defaulted loan by taking ownership of and selling the mortgaged property. Typically, default is triggered when a borrower misses a specific number of monthly payments, but it can also happen when the borrower fails to meet other terms in the mortgage document James Chen, Investopedia.
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How I Bought My First Investment Property As A Teenager
Get to know everything about real estate investing by reading everything you can. Youll rapidly figure out which blunders to avoid. Dont get too worked up youll still make blunders.
Determine if you will manage your properties yourself or hire a management company. If I were you, I would engage a management firm to focus on your studies. It will make things a lot easier for you than if you were managing the properties independently. So:
- Create an LLC, hire a good realtor in your region, and go for it.
- On your first or second deal, youll almost certainly have to team up with your parents.
- If you want to accelerate your growth, gather a group of friends and have them all contribute money to the group to begin investing.
How Can A Teen Make Money With Real Estate
With all of these factors working against them, its no wonder most teen investors choose to invest in other options such as stocks or mutual funds. However, some teens manage to break through these barriers and invest in real estate sometimes with great success!
Despite the setbacks, there are some investment opportunities you can take advantage of in your teens. These include:
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What Age Should I Start Investing In Real Estate
While the investment potential of real estate is vast, the barriers to entry are high for young people. Housing market problems discourage many young people from making real estate investments. Time, however, is one of the greatest financial assets young people have. With the right investment strategy, young people can earn significant returns on their money. To make the most of your time, start investing in real estate early. Here are some of the advantages of starting young.
Young people are typically more flexible and less committed. They also can take more risks financially. However, they may make less money, as they have fewer financial obligations. Waiting too long to invest can make learning the industry difficult. Young investors should experiment with several types and strategies so they can find out what works best for them. In addition, investing in real estate offers a passive income stream that is ideal for retirement.
Real Estate Limited Partnerships
Why invest in Real Estate limited partnerships?
These investments are even more like mutual funds than REITs. Theyre organized by a general partner, who actually handles the direct management of the properties held in the partnership. All other investors are limited partners.
That means that while you participate in the profits, your losses are limited to your actual investment. This is referred to as limited liability.
Much like REITs, limited partnerships give you an opportunity to invest in larger, more complicated real estate deals with just a few thousand dollars.
Real estate limited partnerships are a lot like owning stocks. If the partnership has good management and invests in successful deals, it can be very profitable. You can earn a steady stream of dividends that are higher than what you can get on stocks.
But at the opposite end, a poorly managed LP can cost you your entire investment. For LPs with extensive knowledge of how to invest in real estate to mitigate risk and provide consistent gains, this investment can be very profitable. Many are set up primarily as tax shelters.
Since real estate generates large amounts of depreciation, the tax loss that LPs generate may be more important than producing any actual profits.
Real estate LPs are not particularly liquid. If you decide that youre not happy with your investment, you may not be able to get out of it.
Real estate LPs are one of those who proceed with caution investments.
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Invest In Mutual Funds
The Power of Diversification
One of the disadvantages of investing in individual stocks is that its extremely risky to put all of your money behind one or two companies. Individual stocks tend to be very volatilemeaning they can go up rapidly, but they can go down just as quickly.
A competitor might develop a superior product, or popular trends can pull people away from a companys offering. And unless you happen to know the exact right time to sell your stock at the top , massive losses can erode your savings.
Thats why almost every investment professional providing financial advice will tell you to diversify, or spread your risk around many stocks and other types of investments. And one of the easiest ways to do that is investing in a mutual fund.
Mutual funds pool many investors money to purchase a basket of investments. A mutual fund might provide you with exposure to the performance of 30, 300 or 3,000 stocks. Or it might invest you in bonds, real estate or other assetsor even a blend of stocks and these other assets.
Heres the benefit: Lets say a company represented by one of the stocks in the mutual funds portfolio goes bankrupt, and the stock goes to zero. If you had all of your money invested in that stock, you would lose all of your investment.
Most mutual funds are actively managed, which means there is a single fund manager or a team of fund managers making investment decisions.
