All too often, millennials are accused of mismanaging their finances and having no long-term objectives. And yet, the housing market is home to many young entrepreneurs who decided to make their savings grow and build their wealth before their 30th birthday.
In order to hit the rental property market in your twenties, here are a few rules to follow to avoid costly mistakes.
Rejecting fear of risk
Every form of entrepreneurship has its share of risk. No risk, no reward. In business, it’s crucial to break through this psychological barrier and be optimistic. Those who are waiting for the perfect moment to invest may very well never take the plunge.
However, through enlightened decisions and efficient management, real estate can be one of the safest long-term investments.
Knowing your market and your industry
It’s not necessary to know all the ins and outs of the real estate market before making your first purchase. It is, however, important to stay informed and up to speed.
That’s why it’s recommended to focus your efforts on one particular neighbourhood or area. It’s hard to become an expert on everything, but it’s definitely feasible to do so for one defined area.
Saving up for a down payment
If what we’ve discussed so far is accessible to all, saving up a significant down payment to invest requires a considerable effort. Some are lucky enough to benefit from their family’s financial support, but with a great deal of discipline, it is possible to save up enough money to purchase your first plex.
In order to help you develop health saving habits, here are our top 7 financial tips for millennials.
You can also check out our article for tips on saving up for a down payment.
Crunching the numbers
Numbers don’t lie. Would you buy an unprofitable business? No way! Do your homework and make sure that the building’s revenue is enough to at least cover the expenses.
If you plan on living in the building, at least part of your decision won’t be strictly financial. However, you should still make an enlightened choice that makes sense on paper.
Pay special attention to the condition of the property. A poorly maintained property could cause you problems when you try to get financing, or could cause severe financial strain from the get go. You may want to consider a purchase plus improvements.
Managing the relationship with your tenants
This is often the scariest aspect. Before buying, ask lots of questions. Afterwards, most of your efforts will go towards maintaining a healthy relationship with them. To find out more, read our article « Landlords: your rights and obligations when it comes to tenants ».
Negotiating wisely at the moment of purchase
The art of negotiation can be learned. To brush up on your technique, check out our real estate negotiation tips.
Your youth doesn’t change the fundamental principles that apply to all those who wish to own a plex. Our practical guide to owning income property is full of technical details that will help you better understand the market.
Even if you’re young, you need to determine how big you want to go. Do you want to own a single building for the long haul, buy a building to lower your rent expenses, or build up a portfolio of buildings? These are very important questions when it comes to choosing your initial financing. Many strategies can be developed according to your long-term vision.
Key takeaways
- Those who are waiting for the perfect moment to invest may very well never take the plunge.
- With a great deal of discipline, it is possible to save up enough money to purchase your first plex
- Maintaining a healthy relationship with your tenants is key.