The post Why Should You Consider Buying a Home at a Young Age? appeared first on Oak Laurel.
You might have heard the saying: “The best time to plant a tree was 20 years ago, the second-best time is right now”. That lesson doesn’t just apply to horticulture. Investing in your future is a long-term strategy. The earlier you get started, the easier it will be to build a substantial nest-egg for your senior years.
Real estate is still one of the most valuable investments any person can make. For instance, consider the fact that house prices in Australia went up by 11.1% between 2016 and 2017. That means that a home you bought for $100,000 would be worth $111,100 just one year later. The question is, how early is too early to start investing?
The sooner you can make your mark on the real-estate map, the better off you could be. After all, owning a home is often far more lucrative than renting, and it also means that you set yourself up with an asset for the future. If you’re in the right place for it, buying a home can be one of the most financially responsible things anyone can do, regardless of whether you’re 21, or 45. The only difference is, the sooner you get started, the longer you have to reap the rewards.
Here we’ll look at some of the reasons why young investors should consider buying property as early as possible, and what you can do to improve your chances of a successful loan application.
- Real Estate is an Investment in Your Future
Perhaps the most obvious benefit of buying or building a property early is the fact that it allows you to start cultivating powerful investments for your future. A house is one of the most valuable things any person can own. In most cases, real estate will consistently increase in value over time. Even if your home loses some of its value during a down period, that problem won’t last long when you make a wise decision with the home you purchase.
Buying a home when you’re still young allows you to invest in your future by providing you with something you can sell for a lot more money when you’re ready to move on to a different property. You may find that your first home gives you a fantastic down payment on your next property, or your family home sets you up for retirement.
Additionally, because buying a home can be more lucrative than renting with time, you should find that you have enough cash left over in your budget to put towards things like retirement savings and future expenses.
- Property Appreciation Happens Over Time
The value of a home can move up and down over time. However, the longer you hold onto a property before you want to sell, the more time that structure has to appreciate in value. Although Australia’s property market has cooled down in recent years, most properties will still see an increase in worth of over 3% per year. This means that you’re earning money for your future just by living in your dream home.
Ultimately, to improve your chances of a wise and sustainable investment, it’s a good idea to have a plan early, run the numbers, and make sure that you’re investing in the right neighbourhood at the right time. Contacting a realtor or mortgage broker will make it easier to determine which property is right for you.
Importantly, some areas of the country are more volatile than others when it comes to real-estate investment. If you’re getting started in the property market early, you’ll have more time to weather the ups and downs of the marketplace. This means that it’s less likely you’ll have to sell when the market is in a downturn. Over the years, your home will continue to appreciate, as you continue to enjoy the freedom of owning your own property.
- Improve your Credit Score
Credit can be a common concern for youngsters hoping to enter the housing market for the first time. After all, your lender will want to be able to see that you can be trusted with the money they’re giving you. If your credit rating is poor, then you won’t be able to get the best interest rates. Unfortunately, when you’re still young, the chances are that you won’t have much of a credit history to speak of.
If you’re in a stable enough place that you can achieve a reasonable mortgage rate, then choosing to take out a home loan should ensure that you can begin to build your credit rating rapidly. The longer you spend as a homeowner, paying your mortgage, and setting up direct debits for other monthly expenses, the more impressive you’ll look to future lenders.
After a few years with your first mortgage, you might find that you can even switch to a better rate because your rating has changed significantly since the day you first applied for your loan.
- Additional Sources of Income
There are plenty of ways that owning real estate can put you in a better place financially. As mentioned above, as your home appreciates in value, your net worth will grow with it. Additionally, if you can purchase a home that’s large enough, you might even consider renting a room out to someone else for a source of passive income.
Renting out a room in your property is a great way to make some additional money. On the other hand, you could even think about offering your home up as a vacation destination during periods when you might be away yourself. This is a great way to ensure that you continue to earn on the value of your home, even when you’re out exploring the world.
Some young investors may even choose to purchase a secondary property that they can rent to tenants. This isn’t just getting another source of income, it’s also an opportunity to start your own side business – something that continues to contribute to your finances no matter what happens to your day job.
- Learn Better Spending Habits
While you don’t necessarily need to buy a home to learn how to be responsible for your money, you can rest assured that you’ll uncover some important habits when you become a homeowner. Although budgeting can seem tough at first, it’s something that all responsible homeowners need to do. While other people your age might fall into the trap of constantly spending their money on frivolous things, you’ll be forced to think more carefully about your expenses, so you can continue to pay your mortgage.
Learning how to afford a home and the added extras that come with it is an important lesson. The good news is that the money you put into your home in the form of mortgage payments isn’t just outgoing expenses, it’s cash that’s going back into your pocket in the future.
When you own a home at a young age, your decision-making process begins to change. You become less likely to make irresponsible choices because you know you have bills to pay. Ultimately, it sets you up for a life of success.
- It’s an Automatic Savings Account
If you’re aware that you have a problem with spending or saving, a home can even act as a kind of savings account. It gives you an additional way to prepare yourself for retirement. For instance, if you purchase a home for $100,000 when you’re 20 on a 30-year term, and it appreciates in value by 3.5% each year, by the time your term is up, your home could be worth an additional $105,000. In other words, you’ve made more than you spent in the first place.
Real estate, when chosen properly, can be a powerful way to develop your wealth. Over time, your home will become your largest asset, and the thing you can rely on to keep delivering value no matter what else happens in the marketplace. After all, while stocks might go up and down, people are always going to need a roof over the head.
- Freedom to Live in the Home of your Dreams
Finally, one of the biggest benefits of buying property when you’re young is that it gives you absolute freedom over how you live. When you live in a rental property, you’re at the mercy of a landlord, and the demands that he or she makes about how you decorate the home you live in. You might not be able to build onto your home, create the garden you’ve always wanted, or even paint rooms specific colours.
On the other hand, when you live in your own home, you’re completely free to make decisions according to your own style and preferences. There’s no-one that you need to run your ideas by because the property you’re decorating belongs to you.
If you’ve always wanted a stunning backyard with a fence, you can go ahead and build it. So long as you have the right planning permission, you can essentially do whatever you like with your property.
Are You Ready to Invest in Real Estate?
Deciding to invest in the real estate market when you’re still young can be a nerve-wracking decision. To make sure that you’re getting the most out of your investment and reduce the risks of one of the biggest purchases you’re likely to make, it’s important to make sure you’re prepared. Remember, before you get started:
- Educate yourself: Research property prices in your local area, consider local tax charges and government costs. Subscribe to online forums and learn as much as you can about the appreciation of different neighbourhoods that you might want to buy in. The more you educate yourself about the investment opportunities that are available to you, the more likely you are to make the right decision on your purchase.
- Seek advice: Make sure that you have the right support from a pool of qualified professionals in your local area. Some younger investors might want to seek out the help of a mortgage broker, whereas others will simply want to work with a real estate to help them find the best property for their budget.
- Start saving early: If you want to invest in a property, then you’re going to need a down payment. When you’re still young, you might not be able to save as much back as you’d like for this initial deposit, but the faster you get started, the better off you’ll be. It’s also worth looking into government schemes that might help you to place a lower deposit down for your new home if you’re a first-time buyer.
- Consider different borrowing options: As a young investor, you might want to consider a range of different borrowing solutions, including investing with someone else. However, if you do decide to take out a joint loan with someone, it’s important to make sure that you’re both on the same page and have the same financial goals. A joint loan is not something to be entered lightly.
It’s Never to Early to Prepare for your Future
Ultimately, it makes sense to buy real estate as early as you can. As well as giving yourself a new way to make money and appreciate in wealth over the long term, you also ensure that you’re on track to learn fiscal responsibility as soon as possible.
Investing in real estate when you’re still young gives you the freedom that you’re looking for when you’re just starting off in life, combined with the comfort and stability you need for the future. Whether you invest in real estate to rent out while you’re still exploring the world, or you purchase your very first home, a property is one of the best things you can buy – regardless of how young you are.
Just remember to do your research and learn as much as you can about the buying market before you jump in. Buying early doesn’t mean rushing into real estate. It’s all about walking into a good investment with plenty of background knowledge, and your eyes wide open.
The post Why Should You Consider Buying a Home at a Young Age? appeared first on Oak Laurel.
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