Investing unlocks the golden gates to financial opportunity. The most successful investor out there, Warren Buffett, once said, “If you don’t find a way to make money while you sleep, you will work until you die.”
The latter doesn’t sound very attractive, does it? Working to make ends meet at age 70 isn’t ideal for anybody, especially when millennials aren’t even focused on saving money for retirement. So, investing seems like the best way to get the most bang for your buck.
While it sounds simple, finding what to invest in is the real question. There are so many options for millennials to dive into, from bonds and stocks to commodities and startups. However, the most promising exploration now is real estate.
Why Real Estate?
Well, there are tons of reasons, but mainly because it’s the safest and most trustworthy bet. Millennials have seen quite a bit of economic uncertainty in their lifetimes between the stock market crash of 1987 and the Great Recession of 2008.
While, yes, the Great Recession did include the worst housing crisis since the Great Depression, real estate still has outperformed the stock market 2-1 since 2000, according to a 2017 Real Estate Investors Survey by Realty Shares and Harris Interactive.
For some, investing in real estate may seem too difficult, costly or just doesn’t sound promising—perhaps that is true for older generations. However, it’s a completely different story for millennials who have more time, are technologically savvy and see the benefits of owning a rental property more so than other generations.
Time becomes quite the advantage for millennials who decide to invest in real estate. Generally, with any investment, the earlier the investment is made, the more time it has to compound. For example, if a $10,000 investment is made at age 20 with a 5 percent interest rate, it will grow to over $70,000 by the time the investor is 60 years old. Of course, if the investment was made at the age of 30, it would accumulate much less profit, meaning time is the most important aspect to generate wealth on investments.
Also, with youth comes more time to recover if an investment goes sour. Millennials really do have the advantage in real estate as they have plenty of years to learn investment trends and are more likely to withstand a potential risk.
As the generation of the digital age, millennials are more familiar with the Internet than any other generation before them. According to the National Association of Realtors Research Department, 44 percent of buyers look online for properties first. However, when we look strictly at millennial buyers, 99 percent look online first, showing that millennials are far more familiar with their online resources.
Since millennials are not shy about using the Internet, they have more of an advantage using marketplace lending sites and real estate crowdfunding. Both of these options allow investments of smaller amounts, which is perfect for millennials who are on a budget but want to start their investing career. Also, these outlets provide more security since the investments are guaranteed by the property and buyer, as opposed to other real estate properties that are traded through the stock market.
The benefits of owning a rental property are profound, as millennials have the opportunity to capitalize on their investments by renting out rooms to individual leasers or through Air BnB. Millennials are more likely to live in college towns or over-populated youthful cities, like San Francisco or Austin, where the demand for rentals is high and the willingness to share a room is even higher, bringing in more cash for your investment.
Air BnB also provides more benefits of owning a rental property, as homeowners can use the income earned from their rental property to pay the mortgage, invest money back into the home or put some cash in another venture.
Of course, there are some challenges to investing in real estate; however, the financial benefits are worth an uphill battle. The population of millennials today in the U.S. has grown to 75.4 million, surpassing the 74.9 million baby boomers. Eventually, millennials will be the largest generational group of real estate investors. Why not start maximizing your profits now?
Author: Howard Moore