As a realtor, I often come across individuals who express their concerns, saying, “I understand that buying a house can be a profitable investment, but you need to have money to get started. I’m not sure how others manage to save enough to purchase a home.” For those facing these questions, I’d like to introduce three strategies below.
Firstly, consider exploring the world of REITs (Real Estate Investment Trusts). REITs function similarly to mutual funds but focus on investments in real estate or real estate-related loans instead of stocks and securities. The returns generated from these investments are then distributed among investors in the form of dividends.
REITs offer several advantages, including (1) the ability to start with a relatively small investment, (2) a legal requirement to allocate over 90% of taxable income to shareholders, ensuring attractive returns for investors, and (3) the convenience of not having to manage real estate directly, as asset management companies handle all associated responsibilities. If you find it challenging to venture into real estate investment due to low interest rates, a lack of immediate funds, or the complexities of property management, exploring REITs is a worthwhile option.
Secondly, you can explore the avenue of co-investing in real estate ventures with others. If you lack the financial resources to jointly purchase property with friends, consider what alternative contributions you can make—whether it be your time, knowledge, or labor.
For instance, I know an individual who purchased his first house 28 years ago with a mere $500 in hand. Faced with the prospect of having to wait for at least five years to save up enough for a solo real estate investment, he embarked on a different approach. He persuaded his father, who possessed both financial means and a strong credit score, to enter into a 50-50 partnership for the purchase. In exchange for the father’s financial contribution, he offered his $500 and undertook the management of the property, including dealing with mortgage loans, handling banking-related paperwork, overseeing house repairs, tenant management, and all other property-related aspects. Through hard work and dedication, he managed to repay the borrowed money and interest, while gaining invaluable experience and knowledge that paved the way for the continuous expansion of his real estate portfolio.
Another individual I am acquainted with borrowed money from a friend a decade ago to acquire a dilapidated property. After refurbishing it and renting it out at a higher rate than monthly expenses, he successfully repaid the borrowed sum. A few years later, he leveraged that property as collateral to secure additional loans for further real estate investments.
Lastly, save diligently for a down payment and secure a mortgage to purchase property in proximity to downtown areas or places where language schools thrive. Even with a few roommates to share costs, you may encounter challenges related to privacy due to limited space. However, the experience gained from property management and the financial discipline acquired through dealing with mortgage loans and upkeep expenses will impart invaluable life lessons.
I frequently advise young individuals to seize the opportunity to purchase a home as early as possible because starting early can expedite progress. More importantly, home ownership and the financial responsibilities it entails can naturally foster sound financial habits. As I have entered my 50s, I wholeheartedly concur with the adage that enduring hardships in youth yields rewards in the future. To all the diligent young individuals out there, keep up the good work!!