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When making decisions about real estate investing, it’s essential to consider various factors, and one of the most important may be your age.
Age isn’t just a number— it can also be a deciding factor for real estate investing.
In this article, we’ll look at how different ages can impact investment choices and what you should keep in mind if you’re an investor looking to buy property.
So, what should you consider when making investment decisions based on your age? Keep reading to find out!
At What Age Can You Buy Real Estate in the US?
There is no ‘right’ or ‘wrong’ age to buy real estate in the United States. You can purchase property at eight years old or 80 years old. However, most states require that you be at least 18 years old to enter into a binding contract.
You can still get involved if you’re thinking about buying property but are not quite 18 yet. You’ll need to work with a parent or legal guardian of age or set up a trust fund to purchase property on your behalf.
The Benefits of Investing When Your Young
You’ve probably seen all those young actors and musicians buying homes from California to NYC. But, they are not the only ones in the younger generation working on building their portfolio. Here are some of the benefits of investing at a young age:
More Time to Invest
One of the most significant benefits of buying at a young age is having more time to invest. This means that you can afford to take more risks— and wait for a more extended period for your investment to appreciate.
Ability to Compound Your Returns
Another benefit of investing when you are younger is that you can compound your returns, meaning that your money will grow exponentially due to the power of compounding.
Additionally, you have more time to wait for the property’s value to increase.
For example, if you are buying a house in Sacramento that needs repairs, you may need to wait a few years for the value to increase before selling it at a profit.
If you’re older, you may not have the luxury of time and may need to sell the property sooner.
Asset Creation
The most important thing for any investor is to create assets. They can achieve this in many different ways, but real estate investing is one of the most popular and effective methods.
Regardless of age, all investors should focus on creating assets that will generate income and appreciate over time.
More Time to Repay Loans
Younger investors have more time to repay the loan than their older counterparts. For example, if you take out a 30-year mortgage, you’ll have 30 years to repay the loan. This can make it easier to afford your monthly payments.
If somebody is in their twenties when they take out a mortgage for 30 years— they will own that property clear and free in their fifties. That means they won’t have a house payment when they retire!
More Energy
Investing in real estate can be a physically demanding endeavor. From touring properties to dealing with contractors, a lot of work goes into being a successful real estate investor.
If you’re young and have the energy to put into your investments, you may be more successful than older investors who don’t have the same energy level.
Retire Early
For some people, working well into their golden years is unbearable. And if that’s how you feel, real estate investing may be a great way to achieve your goal of retiring early.
How does real estate investing help you retire early?
If you can purchase property without taking on a mortgage, that’s one less monthly bill you’ll have to worry about once you retire. And if you’re able to rent out your property, the rental income can provide an excellent supplement to your retirement savings.
Of course, there are some risks associated with retiring early, such as the possibility of having to sell your property in a down market. But if you’re careful and strategic about your investments, retiring early with real estate can be a great way to achieve your financial goals.
The Challenges of Investing at a Young Age
There’s always a downside to every advantage in life, including having wealth at a young age. It’s important to remember that being younger can have some drawbacks regarding real estate investing, including:
Not Being Taken Seriously
Unfortunately, age can be a factor in whether or not you’re taken seriously as an investor.
Some sellers may not take you seriously if you’re young and trying to buy a property. This is especially true if you’re dealing with older, more experienced investors.
However, the saying ‘money talks’ didn’t come out of thin air! If you’re determined to buy a house or business and have the financial means— don’t let anybody tell you that you’re too young.
Difficulty Securing Financing
It can also be challenging to secure financing when you’re a young investor. Most lenders require a minimum credit score to approve a loan.
For example, FHA loans require a credit score of 580, while conventional loans require a credit score of 620.
If you’re a young first-time buyer with limited credit history, it may be difficult to qualify for a loan, making it difficult to purchase a property.
Limited Work History
Another challenge that young investors face is their limited work history. This can make it hard to qualify for a mortgage since most lenders require borrowers to have proof of employment and steady work history to get approved for a loan.
Limited Savings
Young investors may also have a limited amount of savings. Consequently, it is challenging to come up with a down payment for a house if you don’t have the financial means.
For example, the average down payment on a home in the United States is 20%. So, if you’re looking at purchasing a $200,000 home, you’ll need to come up with $40,000 for the down payment.
Higher Risk Tolerance
Lastly, young investors often have a higher risk tolerance than older investors, which means that they’re more likely to take risks when buying property.
For example, a young investor may be more likely to invest in a fixer-upper property or a property that needs significant repairs. Conversely, older investors may be more conservative with their investment choices.
Should You Invest Now or Wait?
This is a common question for people of all ages, but it’s especially relevant for young investors.
The age-old wisdom says that it’s best to start investing early, and while there’s undoubtedly some truth to that, there are also some important factors to consider before making your decision.
For example, if you’re still in your 20s or 30s, you may be more likely to see higher returns over the long term if you don’t wait to invest.
However, you may have more time to ride out the ups and downs of the market. But if you’re closer to retirement age, it’s crucial to weigh the risks and rewards before making any decisions.
Of course, there’s no right or wrong answer to this question, and it ultimately depends on your circumstances and financial goals. But if you’re trying to decide whether to invest now or wait, age is certainly one factor to consider.
The Bottom Line
Age is just one of many factors that can impact your investment in real estate. Remember that real estate investing can be a great way to build wealth and achieve your financial goals, no matter your age. So if you’re thinking about investing, don’t let age hold you back.
Are you ready to become a homeowner? Contact us today to get started!
