I Just Had Someone Born in 2005 Invest In A Condo
Am I getting old, or are “kids” looking younger these days? All kidding aside, I mean absolutely no disrespect to younger buyers – in fact, I am jealous! It took 31 years to buy my first real estate investment property and I can’t image where I would be now if I had started investing when I was 19 – I’m sure my life and the path it took would likely look very different.
Investing in real estate when you are young has many benefits:
POTENTIAL FOR HUGE APPRECIATION: Real estate has historically appreciated in value over time, meaning that if you invest in a property at a young age, you have the potential to see significant returns on your investment as the property increases in value over the long-term. Like investing in stocks, a dollar invested today is MUCH better than a dollar invested 10 years from now because of the time value of money.
CASH FLOW: If you invest in rental properties, you can generate ongoing income from rent payments, which can help you build wealth over time. Cash flow improves every year you hold a property because rents increase, mortgages get paid down, and you can refinance mortgage rates whenever it is beneficial.
WEALTH BUILDING: Investing in real estate is not a get-rich quick scheme but you will build wealth over time. The equity built up in the property can be used to fund additional investments, business adventures, or anything you want that would not have been possible otherwise.
TAX BENEFITS: Real estate investors can take advantage of several tax benefits, including deductions for mortgage interest, property taxes, and depreciation. Young people typically have much less income earlier in their life and will pay less tax on rental income and capital gains when they sell.
FORCED SAVINGS: Investing in real estate can be a form of forced savings, as you are paying down your mortgage over time and building equity in the property. It can also be a way to build discipline and responsibility as you have a significant financial asset that needs to be properly managed.
FLEXIBILITY: Real estate investing can provide flexibility in terms of how you use the property, whether as a primary residence, a rental property, or a vacation home. Being young you don’t know where you life will take you but all options are open!
Things to be aware of for young investors:
ADVISOR: I don’t think that every 19 year old out there should start buying real estate. If you are considering it, you should have an advisor like a parent or someone experienced who has done this before to helping you so that you don’t make any big mistakes.
MORTGAGES: You have to get a mortgage when you close on a property and getting a mortgage requires income. If you aren’t able to qualify for a mortgage independently, then someone will need to co-sign the mortgage which means taking on responsibility for the entire amount if anything should ever happen.
FIRST-TIME BUYER PROGRAMS: If you have not bought property before and you buy an investment property (i.e., a property that you will not be personally living in), you will lose your first-time buyer privileges forever (the biggest are tax rebates and being able to use up to $30k of your RRSPs to fund the purchase). Typically, the gains you will see on your investment far outweigh the first-time buyer benefits and young people typically don’t have RRSPs sitting around anyways.
LIFE CHANGES: You are young and your whole life is ahead of you. It’s impossible to predict where you will be in 5 years, and you may no longer be interested in having a rental property in a city you might not even be living in. This can be dealt with by selling the property or getting a property management company to take care of the property for you – all very doable!
If you are a young person that is considering buying a rental property, or a parent looking to help your child, get in touch and I can help. FYI The legal minimum age you can buy real estate is 18 in Alberta and Ontario.