As a 24-year-old, owning a building of apartments is a little far-fetched for me. I have a moderate income, crushing student loan debt, and I still live with my darling mother. When I first started thinking about real estate I laughed. That’s not possible for me. And I’m not the only one who thinks that. Plenty of people go around in life imagining owning real estate and laughing.
But, here’s the thing, it is!
Real estate is accessible for everyone. You just have to get scrappy. REITs, real estate house hacking, and side hustles allow even young people to own and invest in real estate.
What is a REIT?
REITs are real estate investment trusts. They’re slices of real estate that you can purchase instead of a whole property. The more REITs you purchase, the more of a property that you own - but you don’t have to invest in an entire deal, be the landlord, and handle all the property management costs. Someone else does that. You just give the trust your money, and they give you a dividend in return based on the profits.
What Kinds of REITs Can I Invest In?
There are two main kinds of REITs: mortgage REITs and equity REITs.
When you invest in a mortgage REIT, you’re investing in the mortgage itself. You’re backing someone else purchasing the property. You’ll be paid off of the mortgage of the interest.
When you’re investing in an equity REIT, you’re investing in the equity of the property. You’ll be paid off of the money the property is making.
REIT.com is a great resource for learning more about these types of investments, and to start looking into different REITs to invest in.
What is Real Estate House Hacking?
Real estate house hacking is when you use real estate to your advantage. The most common way is to get a roommate. You don’t have to own a property to do this. Just rent out an extra room in your space.
The money that you save on rent can go towards an investment property. Then you can start house hacking. House hacking is renting out parts of your home for different purposes. You can do it traditionally, and rent out a room in your home for someone to live.
But if that makes you uncomfortable, you can get creative. Rent out your garage as a workspace. Create an office space in your home for someone to use.
Real estate hacking allows your real estate purchase to be cheaper. The goal is to have your house hacking to cover your mortgage. Then you’re not out any money.
Conventional loans let you put as little as 5 percent down on your home. That means that if you’re purchasing a $150,000 home, you can put as little as $7,500 down on the home.
Finding the Money for a Downpayment
You’re broke. Finding the money for a down payment is going to be a challenge - no way about it. I recommend side hustling to save money for a downpayment.
Side hustling is collecting money outside of your regular job. It can be as creative as you want it to be. You can sell bras, walk dogs, freelance write - whatever you’re good at can be turned into money. If you need ideas, check out iliketodabble.com. Daniella is the queen of side hustles, and you’ll be able to find something that works.
For a house that’s $150,000 (using an FHA loan) you’ll only need to put $5,250 down - plus closing costs. That might take a few years to save up - but that’s okay. Side hustling will allow you to get that money put away without sacrificing your bills.
The Bottom Line
Real estate doesn’t have to be expensive. You can use the skills you already have to save money for your first property. And it only gets easier from there.
And if money is a problem? Investing in REITs is a low-cost way to get started in real estate. You can even use the money you make from those purchases to save for your first home.
Got questions? Reach out to Tom for a free 10-minute consultation.