“Know what you own, and know why you own it.” – Peter Lynch
As a young and successful professional, you may have already been able to save a substantial amount of money in your savings and investment accounts. The thought may have crossed your mind that you could use some of that money as a down payment on a new home or on an investment property. However, you may be asking is buying a house a good investment at such a young age. After all, you have decades of working years ahead of you, and it may seem like you have plenty of time to purchase real estate in the future. The reality is that buying a home as an investment is a great idea for young entrepreneurs like you, and there are several reasons why this is true.
Ample Time to Build Equity
Whether you are thinking about buying a primary home to live in or an investment property, buying real estate in your younger adult years gives you ample time to build equity in your real estate investments. Each mortgage payment you make will reduce your debt balance. In addition, your property value may increase at the same time. The combination of these two factors can make your equity skyrocket over time. You can use a home loan repayments calculator with an amortization schedule to see how quickly your payments can reduce debt and help you to build equity. You will notice the use of the first home loan repayments calculator that the rate of equity growth increases over time as the principal balance on the loan decreases. Time is definitely working in your favor when it comes to equity accumulation in real estate.
Leverage Your Investment
Regardless of whether you decide to live in the home or not, real estate is an investment that can dramatically increase in value over the years. This is one of the few types of investments that you can leverage through home loans. Consider that you may only make a 10 percent down payment on the property, but the full value of the property may increase in value rather than just 10 percent of it. This is a significant financial benefit for you to take advantage of over the years. When you start investing in real estate at a young age, you can leverage multiple properties to enjoy more significant financial results from this effect.
Avoid Throwing Money Away on Rent
When you rent a home, your rental payment is going toward the investment loan repayments for the landlord. Essentially, your payment is building equity for your landlord, and you are throwing your money away each month. On the other hand, when you own your own home, you are building your own equity in real estate through each monthly mortgage payment you make. Furthermore, if you own rental properties, your tenants are building that equity for you through their monthly payments. If you want to build your net worth to substantial proportions over time, you need to use these rental payments in your favor rather than in someone else’s favor.
Develop a Great Passive Income Stream
Another great reason to purchase real estate earlier in your adult years is that you have more time to develop an incredible passive income stream that you can live on later in life. Many people are able to retire off of rental property income alone. They may pay off the home loans on their rental properties and generate a substantial profit from them over the years. Even if they keep the loans in place, they may own several properties that still produce a reasonable net income for them to live off of. This passive income experience could be yours when you start purchasing real estate earlier in life.
While it is understandable that you may be asking is buying real estate a good investment, you can now clearly see that it is. Not all properties in the local area are equivalent in terms of what whey offer you from an investment standpoint. Your real estate agent can assist you in selecting a property that meets your current and long-term needs. Take time to reach out to a real estate agent today for more information about available listings in your area.