For so many of us, the dream of attaining financial freedom and owning investment properties goes hand in hand – but where do you start? Most young would-be investors simply don’t have the capital to purchase their own property outright, let alone expand their portfolios to include second and third properties. But as we’ll discover, this doesn’t mean you can’t start building your empire with just a small amount of capital, see that investment grow, and eventually get to ‘landlord’ status. Read on to find out how!
It all starts with making saving a habit
Unless you’re the heir of a wealthy businessperson, no-one starts off with a large chunk of money to invest. Amassing any amount of savings starts with making saving a habit, so that you never even have to think about setting money aside each month. Until you learn to curb your spending habits and make the most of what you earn – regardless of how much that might be – owning property will always remain a dream.
The best way to save is simply to force yourself to! This means having as large a chunk of our income as you can comfortably afford come from your paycheck each month and go into a savings vehicle where you can’t access it too easily. It might seem like a huge sacrifice at first, but you’ll be surprised at how quickly you get used to not having that money available. Better yet, it will be steadily growing and earning interest without you having to lift a finger. And as any investment guru will tell you, getting your money to work for you, rather than the other way around, is the most crucial step towards financial freedom. (And the down payment on your first property!)
Consider Real Estate Investment Trusts (REITs) or ETFs
Once you have a small amount of capital together, REITs are a great way to enter the property market without actually having to purchase property yourself. Real Estate Investment Trusts work similarly to a mutual fund, except that the fund invests in real estate rather than companies. You’ll need to do a bit of homework before you decide which one to invest in, but they’re a great way to learn more about the market and earn a market-leading return at the same time. There are plenty of free online courses and resources that you can make use of to get you started too.
Another option is real estate ETFs or exchange-traded funds, which work on a similar principle, or real estate mutual funds – which you choose will depend on how much capital you have available and what’s on offer on the stock market where you live. Just like choosing an actual property to invest in, doing your homework before you make your decision is important – so it’s good practice too! All these techniques are good ways to get your feet wet and learn the basics of property investing.
Another way to invest in property without buying it is renting it and then subletting out to tenants for a profit. It’s riskier, although there are insurance products available to cover you in the case of tenants who are unable to pay or who damage the property itself. If you’re the kind of entrepreneurial person who can spot a clever way to make money, and you’re already drawn to property as an investment, this can be a very rewarding undertaking for you. If you spot, for example, that a single bedroom for a student in area X is going for $100 a week, but you can rent a four-bedroom house for $250 a week, there’s an opportunity to make a steady income there. It’s a lot more hands-on, but it can also be a lot more rewarding if you actually want to be involved with the property you’re invested in.
All of the above methods can be used as investment vehicles, or as a way to get together enough capital for a down-payment on a property of your own.
Find the one you want to own
Of course, the ultimate goal is to have properties that you actually own outright, whether they’re residential or even commercial buildings. For most people, investing in their own home or apartment will be their first goal. Spending plenty of time talking with experienced and knowledgeable real estate agents in the areas you’re interested in is the best way to get a feel for the market and discover properties that have potential – either for you to stay in, to fix up and move on, or as a secondary property. And by choosing a property that has potential for bigger and better things, you can keep that forward momentum going, and keep climbing up that investment ladder!