Are you a young individual with a burning desire to how to start investing in real estate at 18? If so, you’re on the right track! Real estate can be a lucrative and exciting investment opportunity, especially if you start early.
In this article, we will guide you through the process of getting started investing in real estate at 18 the young age. So, let’s dive in!
The compound effect, however, means that the earlier you begin investing in real estate at 18, the longer you have a window of opportunity to realize returns, create wealth, and build a great financial future.
How old do I need to be to get started with real estate investing? It turns out that young adults can start investing in real estate at 18 when they are legally allowed to sign documents.
Why You Should Start Investing in Real Estate at 18 a Young Age
Real estate investing is a long-term investment for most people. It’s not a quick fix and most success doesn’t happen overnight.
So, the sooner you get started, the more time you have to reap the rewards. Suppose the market drops right after you begin investing in real estate at 18. When you’re following a long-term buy-and-hold strategy, it doesn’t matter if the market goes down or up.
You’ll be able to ride it out because real estate – like the stock market – will always go up in value. And unlike stocks, you’ll never have to worry about rent spikes during recessions because you’ll still have healthy rental income.
I’d also like to point out that getting started early isn’t the only way to win. The more time you spend improving your skills, the better off you’ll be.
How You Can Actually Start Investing in Real Estate at a Young Age
Nowadays, a lot of young people ask me, “I don’t have much money. How can I get into real estate?”
I would say to them, “You don’t have to have a ton of money to get into real estate. You just have to have the time, energy, and grit.”
And, contrary to popular belief, you don’t need a ton of money. In fact, you can get into real estate with as little as $20k.
So, how can you get into real estate without having a ton of money? Here are a few ways you can do it as a young adult.
Step 1: Define Your Goals
Before jumping into the world of real estate investing, it’s crucial to define your goals. What do you want to achieve?
Are you looking for long-term wealth accumulation, passive income, or financial independence?
Identifying your goals will help you stay focused and motivated throughout your real estate journey.
Step 2: Educate Yourself
Knowledge is power, especially investing in real estate at 18. Take the time to educate yourself about the fundamentals of real estate, including market trends, property types, financing options, and investment strategies.
Utilize online resources, attend seminars, read books, and connect with experienced investors to gain valuable insights.
- Read books
- Read blog posts
- Watch YouTube videos
- Listen to podcasts
- Take an online course
Start small. That way, you can get a feel for what it takes to investing in real estate at 18 and decide if it’s a good fit for you.
Once you decide that investing in real estate at 18 is something you want to do, you’ll be ready to put some real money into it.
Pick Your Strategy
When you’re a young person, you may not have a very clear idea of what it means to invest in real estate. However, it may come as a surprise to you that there are many different types of real estate investors.
There are a few main categories of real estate investors, including
- Active Investment -Owning a rental property or house hacking
- Passive Investing -Buy and hold investment funds that invest in real estate on their behalf
- Investing with No Money – Indirect real estate investors invest indirectly in real estate through alternative means such as property management, or wholesaling.
How to Actively Investing in Real Estate at 18
When most people think about investment property, they think of a physical house that they can walk into and feel. This approach works well for people who are hands-on and don’t shy away from tenant management.
When it comes to investing directly in real estate, there are two great ways that young people can do it.
- Owning a Rental Property
- House Hacking.
Owning a Rental Property
One of the most popular types of real estate investments is rental property ownership. Why? While everyone needs housing, not everyone can afford to buy their own home.
A rental property is any building that can be rented out to tenants like Single-family house, Condo, Apartment unit.
There are pros and cons to each option, so let’s hear them out!
Pros: Once you’ve secured high-quality tenants, you’ll be able to use the rental income to pay off the mortgage, meaning you’ll essentially be borrowing against your investment property to build equity.
Cons: There are some downsides to this strategy, such as having to pay a 20% down payment and getting a loan, which can be difficult for an 18 year old.
You may want to look for a business partner to help you out with this or look for moving-in-ready properties.
Since moving out of your parent’s house is a priority for most 18 year olds, one strategy that may appeal to them is house hacking. House hacking involves sharing your property with one or several tenants.
The tenants may be roommates who have full access to the entire house, or they may be assigned to specific areas (e.g., a completed basement, converted garage or the top of a duplex).
Pros: The main advantages are that you will not only have a place to live but you will also be using other people’s money to pay your mortgage.
For example, if your monthly mortgage payment is $800 and you have two roommates that each pay $500 a month, then you will essentially be living for free and earning an extra $200 a month.
Cons: The main drawbacks are that depending on where you choose to live, you may end up seeing a lot of your tenants in common areas like the kitchen and living room.
Unlike a rental property, where you may only see your tenants once a month, you will have to be willing to give up some privacy.
How To Passively Investing In Real Estate at 18
If the idea of managing tenants or physical properties feels overwhelming, then you’re not alone.
Many people understand that real estate can be a great investment opportunity, but they’d rather not be involved in the day-to-day operations.
Fortunately, there are opportunities to make money with this type of investment, too REITs and real estate crowdfunding.
A REIT (real estate investment trust) is a corporation that invests in commercial real estate. It may buy and manage properties, manage loans, or do a combination of both.
Unlike a single-family rental house, a REIT invests in high-quality commercial real estate. A typical REIT portfolio may include:
- Office buildings
- Shopping centers
- Apartment buildings
Once these structures are occupied by businesses, they pay rent to a REIT. Under REIT laws, the REIT must return at least 90% of its net income to shareholders through dividend payments. REITs’ share prices can also increase and decrease over time.
Pros: One of the biggest advantages of a real estate investment trust (REIT) is that it’s easy to trade. Like stocks, a REIT’s shares can be purchased and sold on a trading app such as M1 Finance (M1 Finance) or Robinhood (Robinhood).
Anyone aged 18 or over can start trading a REIT today.
Cons: The downside of REITs is that their growth potential is somewhat restricted. Unlike stocks, which can double in value in a short period of time, a REIT’s growth rate is typically slower.
Like stocks, there is no guarantee that a REIT will not experience a decline in value.
Crowdfunded Real Estate
Crowdfunding platforms such as GoFundMe and Kickstarter are familiar to most young people. However, a new generation of real estate investors are using crowdfunding platforms to fund their ventures using the same business model.
What is Crowdfunded Real Estate? What is a Crowdfunded Real Estate Platform? A Crowdfunded Real Estate (CRE) is a platform that links people sponsoring different real estate projects to casual investors.
People with a lot of money who want to investing in real estate at 18 will have the freedom to select which projects they want to fund. On the other hand, people under 18 will likely only be able to invest in the platform’s private REITs of various projects.
Pros: Like public real estate investment trusts, private real estate investment trusts (REITs) will pay dividends. The difference between a public REIT and a private real estate investment trust (REIT) is that the distributions and share value of a private REIT will be more stable.
Cons: On the other hand, liquidity will be very low. Investors will usually have to put money into a REIT for a minimum of five years, or pay a penalty if they withdraw money early.
Step 3: Prepare Your Mindset
Real estate, unlike stocks or cryptocurrencies, is a long-term investment.
You’ll make a lot of money if you’re smart, you’re risk-averse, and you wait for things to develop.
However, it could take several years for this to happen. If you’re only 18, ask yourself if you’ll have the patience.
Do you think you’ll need your money within five years? Or do you prefer faster returns?
Step 3: Build a Strong Financial Foundation
As an 18-year-old, having a strong financial foundation is crucial before venturing into real estate investing. Start by establishing an emergency fund to cover unexpected expenses.
Additionally, focus on building a good credit score, as this will facilitate future financing opportunities.
Step 4: Save and Invest
While it may seem challenging to save money at a young age, every dollar counts when it comes to real estate investing. Create a budget and stick to it, ensuring you allocate a portion of your income to savings. Consider opening an investment account to grow your savings through various investment vehicles.
If you want to start investing in real estate at 18 but don’t have enough capital to do so, there are two great ways I’ve used to build up capital quickly:
- Starting a side hustle
- Increasing your savings rate
If you’re serious about starting a side hustle, you should do both. In fact, doing both is a great way to springboard into investing much sooner than doing just one.
The internet and gig economy have made it easier than ever to start a side hustle. In fact, many side hustles don’t even require you to leave your home.
There are tons of articles and websites out there about increasing your savings rate, and I won’t go into them all right now, but you can find some great ideas just by doing a quick Google search:
If you don’t have the money to start your side hustle, there are still plenty of options for you to choose from. Bringing in a partner
Step 5: Network and Seek Mentors
Networking is a valuable tool in any industry, and real estate investing at 18 is no exception. Attend local real estate meetups, join online communities, and connect with experienced investors to expand your network.
Seek mentors who can provide guidance, answer your questions, and share their experiences to accelerate your learning curve.
If you can’t invest in the real estate market on your own, whether it’s for financial reasons or because you don’t have the necessary experience, there’s always someone who can do it for you.
Make sure you bring enough value to the partnership. Use your energy, drive, and hard work to find deals and let your partner finance them. I’ve done this on several deals.
I had a great deal lined up but the financing didn’t work out. I brought a money partner in to finance the deal and then we split everything 50/50 after that.
I needed them because the financing didn’t work out, and I needed them because I already had the deal in the bag.
I’ll also manage and run the property so my partner can just sit back and relax while I collect the monthly checks.
It’s a win-win for both of us. Bringing in a partner requires you to gain some real-world experience.
Step 6: Start Small
Starting small is often the best approach for young investors. Invest in Single Family Homes, Condominiums, or Small Multi-Unit Properties. These types of properties are generally more affordable and manageable for beginners.
Remember, it’s better to start with a small investment and gradually expand your portfolio as you gain experience and confidence.
Step 7: Leverage Technology
Take advantage of technology to streamline your investing in real estate at 18 journey. There are numerous apps and online platforms available that can help you find deals, analyze properties, manage your finances, and stay organized.
Embrace these digital tools to maximize your efficiency and stay ahead of the game.
Step 8: Learn from Mistakes and Adapt
Investing in real estate at 18 is not without its challenges and setbacks. Expect to make mistakes along the way. Embrace these setbacks as learning opportunities and adapt your approach accordingly.
Remember, every successful investor has encountered obstacles, but it’s how you respond and learn from them that will determine your ultimate success.
Investing In Real Estate Without Money
It’s understandable that young adults may find it difficult to find the capital or the time to devote to being an active (or passive) real estate investor.
But that doesn’t mean they can’t learn the ins and outs of investment property investing or make money from it. Here are two ways to do it.
When a rental house owner has more than one property to manage, they often hire a property manager, also known as a property controller.
A property controller can be a person or a service that takes care of all aspects of running a rental property, including but not limited to:
- Interviewing tenants
- Basic property maintenance
- Collecting rent
- Making or contracting repairs
- Evicting tenants
Pros: In addition to getting paid, you’ll get to experience first-hand what owning and managing a rental property is like.
Not only will you learn how to manage tenants, but you’ll also get to understand how property owners make their money and how they run their businesses.
Cons: The downside is that you won’t own the property and won’t make any money off the rent. Instead, you’re investing in the experience and expertise you’ll need to one day build your own empire.
What is Wholesale? Wholesale is when you make contact with the property owner and contractually agree to sell the home to them for a predetermined price. What are the Pros and Cons of Wholesale Property Sales?
The Pros: You will never actually purchase the property. Instead, you will sell the right to sell the property to the owner.
The Cons of Wholesaling Property Sales: This type of deal is not for the passive type of buyer. It requires a lot of time and effort to negotiate, network, and motivate the property owner to close the deal.
Starting to investing in real estate at 18 can be an incredible opportunity to build long-term wealth and financial independence.
By defining your goals, educating yourself, building a strong financial foundation, networking, and starting small, you can set yourself up for a successful investing in real estate at 18 journey.
Remember, patience, perseverance, and continuous learning are key to achieving your real estate investment goals. So, take the leap and begin your real estate journey today!
Can I Invest in Real Estate at 18?
Yes, you can start investing in real estate at 18. There is no legal age restriction for real estate investing.
However, you may need to work with a parent or guardian to sign contracts or purchase property until you reach the legal age for such transactions in your jurisdiction.
How can I Finance my First Real Estate Investment at 18?
Financing options include saving money, seeking investment partners or co-signers, or exploring creative financing methods such as seller financing or private lending.
Research local mortgage lenders and programs that may be available to young investors.
What Type of Real Estate Investment Should I Consider?
It’s essential to start with a clear investment strategy. Consider options like residential rental properties, fix-and-flip projects, or real estate investment trusts (REITs).
Choose an approach that aligns with your financial goals, risk tolerance, and local market conditions.
How Do I Research and Select a Suitable Property?
Begin by researching your local real estate market, understanding property values, and analyzing potential rental income.
Look for properties in areas with growth potential, low crime rates, and good schools. It’s also crucial to perform thorough due diligence, including inspections and financial analysis.
What Are the Risks and Challenges of Real Estate Investment at 18?
Real estate investing comes with risks, including property market fluctuations, unexpected repairs, and tenant issues.
As a young investor, you may face challenges related to limited experience, financing difficulties, and the need for proper education.
Be prepared to learn, adapt, and seek guidance from experienced investors or mentors.
Note: The information provided in this article is for educational purposes only and should not be considered as financial or investment advice. Always do your due diligence and consult with experts before making any investment.