How To Get Into Real Estate Investing In Your 30s
[Editor’s Note: Today’s article is a guest post from Travis Hornsby who blogs at StudentLoanPlanner.com. Travis started the site in 2016 after helping his wife (doctor) and her friends tackle six-figure student loans.]
Take it away Travis……….
Your 30s might be a decade of settling into serious life decisions, like starting a family, focusing on your career, and saving and investing for retirement.
And many doctors and high-income professionals are turning to real estate investing as a way to grow multiple streams of income.
Real estate investing can boost your retirement figures and give you a source of revolving income. It can also be a roller coaster of emotions, draining you of time and financial reserves, depending on how successful your strategy is.
Here’s how you can begin investing in real estate.
3 Reasons To Consider Real Estate Investing
With real estate investing, you leverage the value of time. This is done by putting your money to work today and allowing it to grow into the future. Real estate investments can strengthen your financial portfolio in a few ways.
#1 Creating a new income stream
There are several avenues for making money in real estate. For example, if your property value increases over time (i.e. appreciation), you can sell for a profit.
The other option is creating a positive cash flow by purchasing and operating a rental property.
This additional income can be used to pay down other debts, like student loans, or be used to reinvest and grow your real estate portfolio.
#2 Growing your net worth
Since real estate properties are considered an asset, it’s an excellent way to grow net worth for anyone willing to do their homework and not get carried away with debt leverage.Join the Passive Investors Circle
#3 Acting as a tax shelter
You can save on your tax bill through various tax deductions, like mortgage interest and depreciation for your investment properties.
There are also legal ways to avoid capital gains tax. Such as moving into a house you’re flipping and claiming it as your primary residence for two years. Always consult a tax professional for guidance and tax planning for real estate ventures.
With well-chosen properties, you can enjoy profitable returns and build wealth over time. But you may also run into drawbacks like failing to keep a consistent influx of tenants and being at the mercy of the housing market when it’s time to sell.
Be Realistic With Your Expectations
Investing in real estate is time-consuming and, at times, labor-intensive (if you choose to go the active route).
You need to ask yourself some basic questions:
- How much time and energy can I commit to?
- What level of risk am I willing to take?
- Am I prepared to be a business owner?
- What’s my long-term financial plan?
Picture what you want your life to look like in the future, and then reverse engineer your investment plan.
If you only see yourself owning one or two rental properties, it’s probably not worth the time investment compared to just using mutual funds.
But if you’re excited about owning multiple properties one day, then real estate investing might be a fun and challenging adventure that can pay off over time for you.
5 Ways To Invest In Real Estate
There are many ways to go about investing in real estate. Some require more commitment in terms of time and physical labor, while others require more financial reserves.
Here are some beginner-friendly ways to get started in real estate.
#1 House-hacking can reduce your housing expenses
House-hacking is one of the easiest ways to dip your toes into real estate investing.
With this strategy, you purchase a home for personal use and then rent out a portion of the property. It may just be a room, or it could be an entire addition set on your property. By renting out part of your home, you can offset your housing expenses (e.g. mortgage, utilities, etc.) by collecting rental income from your tenant(s).
House-hacking can help ease you into a future in managing rental properties. You’ll learn how to be a landlord while living on-site and be able to pay off your mortgage faster — giving you a steppingstone to reinvest and expand your portfolio.
#2 Flipping properties
If you’re looking for a creative outlet on top of boosting your finances, house-flipping might be a rewarding investment opportunity for you. But it’s way harder than it looks on TV.
When flipping a property, your goal is to invest in an underpriced home that can be inexpensively renovated in order to turn a profit.
Because house-flipping can be complicated, it may be worth reaching out to other property flippers for mentorship throughout the process. After all, home renovations are never as straightforward as they seem.
You’ll need to do the work yourself or hire contractors to complete the project. The longer you take to flip and sell the property, the less money you’ll make. This is because you’ll still have mortgage payments to make until it’s sold, whether you live in it or not.
Don’t Miss Any Updates. Each week I’ll send you advice on how to reach financial independence with passive income from real estate.Sign up for my newsletter
#3 Short-term rentals can be lucrative
Areas that have a lot of tourists or seasonal visitors are a great environment for short-term rentals. They can churn out a sizable profit, but they require a hands-on approach.
You’ll need to plan how you’ll manage a high turnover of visitors — everything from marketing your property to scheduling visitors to cleaning the property.
If you don’t live near your rental properties, it may be worth partnering with a property management company to handle tedious tasks like housekeeping and responding to complaints.
#4 Invest in REITs
You can choose to invest in different types of real estate without having to know much about the business.
This includes properties like:
- multifamily housing
- commercial buildings
- medical facilities
Your money is pooled with other investors to support the property investment, so you won’t need a lot of funds to get started. You’ll also share the benefits of the property by gaining access to dividend-based income.
#5 Passive Syndications
A real estate syndication is simply the pooling of funds from a group of investors in order to purchase a property that’s more expensive than any of them could have afforded on their own.
So instead of buying a bunch of small properties individually, the group of people can come together and buy a larger asset together.
Most doctors and other high-income professionals that don’t want to go the active investing route, tend to focus on these types of investments.
The Bottom Line
Real estate investing isn’t for everyone. If you don’t want the burden of maintaining properties and juggling tenants, then you may be better off sticking to mutual funds and other hands-off investment strategies.
But if you’re ready to dive into real estate, then you’ll need to treat it as a business from the beginning. Do your research and decide which form of investing matches your lifestyle and long-term goals.