Some anecdotal notes about millennial investing…
Recently my nephew, a millennial who is soon to be married, asked me for some basic advice when it came to property investing. He and his fiancée were not sure if they should get into the real estate market, and if so, where to start. He was overly concerned with finding a property first, and wanted to know how best to run a search, especially for investment renovation property. I tried to tell him that he was getting way ahead of himself…and here’s why…
Starting with your local lender
As I explained to him, the starting point always begins with an honest assessment of what you can comfortably afford. If you’re looking to rehab a house, it’s best to speak with a lender about a home renovation loan. So your first stop should be with a local mortgage lender – be it a local bank or mortgage broker. Online national outfits are OK (for example, Quicken Loans), however, as I’ve noted in many prior articles here, it’s best to develop a relationship with one local lender. They can get to know you in person, you can actually sit down and talk with them, and they will eventually become part of your team of professionals aiding you in your property investing journey. Try speaking with several lenders first, then see who you feel you can work with the best. In addition, make sure they are good listeners, and can recommend mortgage products that really address your particular situation.
Expect initial mistakes to occur…
If you intend to get your hands dirty, and are looking for home renovation projects, you’ll be numbers crunching all your estimated home renovation costs. Renovating an investment property will become easier over time, the more projects you get under your belt. But initial forays into the world of renovating an investment property can be fraught with many mistakes…especially underestimating your renovating costs. For this reason, it’s best to know how much house you can afford by speaking with your local lender before starting your search. Then, you should get several quotes for the repair work to be done from different local contractors as well. If the numbers seem viable, then, and only then, should you consider actually placing an offer in on the property.
A growing trend
According to a recent article in The New York Times, millennials are becoming one of the fastest groups now investing in rental properties (“Millennials Investing in Rental Properties,” by Lisa Prevost, The New York Times, November 20, 2015). In fact, many millennial property investors don’t even own their own home, preferring to purchase an investment property instead! In the article, the author notes that “for all the talk about the so-called millennial generation — often defined as those between ages 18 and 34 — being slow to move toward homeownership, some young adults are, surprisingly, drawn to real estate as an investment opportunity.”
A millennial’s rationale
Ms. Prevost interviewed several millennial property investors for her article. One summed up his rationale for this form of investing this way: “I’m interested in real estate investment because of all the ways you can make money — from appreciation, leverage, cash flow, tax benefits. I’m not looking to get rich quick. I’m just looking to have long-term income I can rely on.” The author also noted how he liked the concept of control over his investment dollars, relative to other forms of investment, like the stock market, for example.
Another interviewee added his summation, warning “inexperienced investors to proceed cautiously when considering a rental property. “There’s a lot of information out there that makes it sound easier than it is,” especially if you’re managing the property yourself, he said.” This particular investor also noted that “buying a multifamily home that you can live in can be a great way to go. Rent from the other units might cover your mortgage payments. It’s easier to manage the property because you’re right there, and if you want to move sometime down the road, you can then rent out your own apartment.” Many millennials are doing just that indeed. It’s a growing trend that’s seen the market for multifamily houses become quite hot over the past couple of years, with no end in sight.
Photos courtesy of immersiveyouthmarketing.com, worldpropertychannel.com, profitindetroithomes.wordpress.com, propertymanagerpsg.com, screenmediadaily.com