Why First Homes Could Be Investment Properties
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Loading... - Marko Ivanov
- 28 Jul 2022
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If you’re young and looking to purchase a new home to live in, you may want to consider turning it 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 might be able to start much sooner than you think. However, taking on this kind of venture is no small task. Consider speaking with a financial advisor about what you’re envisioning beforehand.
Buying Your First Home as an Investment
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 little bit of 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 entail going from college to a first job to renting an apartment to marriage and buying a home, and so on and so forth.
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, waiting until you’re well into your 30s or 40s to start investing in real estate might not be wise.
Here are four reasons why you should entertain the idea of investing in real estate while you’re still young.
Reason #1: You can handle more risk while 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 aren’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.
Reason #2: You can find bargains in certain real estate markets.
According to recent reports from 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.
There are plenty of distressed homes for sale. Buying one would allow you to own an investment for significantly less than market value, especially as prices begin to rise. Before buying any property, however, it’s important to make sure you purchase a house that you can afford. Read More...
