Investing in Property
I feel that “Millennials” or the Generation Y (those born from early 1980s to early 2000s) are far more communication savvy and tuned in to global economics today that many of us ever were in our 20s or 30s. They have grown up seeing swinging inflation, vacillating stock market conditions and career fluctuations that affected many of their lives personally. This has given them greater awareness and better knowledge about starting on the career path young. However, there are lesser books on sound investment decisions for young millennials than there are books on History, Geography or French!
As an experienced Mississauga broker, I would like to tell them that nothing offers more financial security than investing in your own property as early as possible.
Patrick O’Shaughnessy, Author of “Millennial Money: How Young Investors Can Build a Fortune” reinstates my view with some great tips to help young investors get rich and stay rich. He believes that most people wait till they are in their 40s or 50s to invest in their own property. What they don’t realize is that if they wait that long, they lose out on valuable time.
“If you can invest when you are young, you can get significantly ahead”, he says. I have to agree with him.
So how young is young before you can invest? When do you have enough money? Do you ever have enough money in your 20s and 30s to invest in your own property?
In my view, Millennials should start out by taking baby steps towards investing. You should invest small amounts in your tax free savings account. It is important to appoint a financial consultant at your local bank while doing so.
As Patrick correctly states, the average growth of each dollar you save in your 20s grows in value by leaps and bounds over the years. If you wait till you are in your 40s, that growth percentage lessens considerably.
When it comes to property, once you invest at least 5% down payment, you are well on your way to buying your own home and stop renting. Doesn’t that sound great?
If you are one of those privileged young people who have the luxury of living with your folks, the going can be even more fantastic! This gives you the opportunity to continue saving and build enough equity to buy an investment property for renting.
As Patrick O’Shaughnessy states, your home feeds your psychological needs. Stocks might have outperformed the real estate market in the long run but real estate investors get richer faster when their properties are not bought with 100% cash. Most investors put down 20% or more and banks loan the balance of the home’s price.
For example, in our GTA market you can invest in property by putting down 20% or more down payment. This is called leveraging. It makes good sense when your properties are rented to good tenants and your rent is greater than or equal to your investment property’s expenses (mortgage, property taxes, insurance, maintenance expenses etc.).
It is prudent to consult a financial advisor before investing and even more important to find a good real estate broker specializing in investment properties if you are considering owning property. Parents can also assist their young investors get a head start by helping with the down payment.
If you are a young millennial thinking of venturing into real estate investing, give me a call. We have a lot to talk about.