Owning Real Estate in Your 20s
Now more than ever before, people in their 20s are looking into owning real estate. As mortgage payments have increasingly been the domain of younger and younger people, questions have arisen over the true benefit of owning a home at an early age and just what type of person should do so. Certainly, owning real estate at an early age is not for everyone and there are some things to keep in mind when considering the possibility.
With a Mortgage Comes Responsibility
Of course, one of the key benefits of being a young person is giving up when committing to a mortgage, an element of freedom. It is difficult to pick up and move when a mortgage payment is due every month and that can weigh heavily on a decision to plant roots at any age. Add to that an uncertainty in income because of being new to the workforce and it can be easy to see why up until recently, the idea of buying real estate, for example, was foreign to most 20-year-olds.
Increasingly, the benefits of building equity in a home are speaking to young people, making the prospect of real estate ownership more attractive. While building equity is certainly a big benefit to planting roots with a particular piece of real estate, young people need to understand that those benefits are not instant and that a long-term commitment is necessary to reap any rewards.
What You Could be Missing
Because of the propensity of young people to be in flux whether it be in job, location, or relationship status, planting those roots can be difficult. For benefits to truly be seen through a build-up in equity, payments have to be made for a lengthy period of time on a mortgage. As many initial mortgage payments go towards the interest on a loan rather than the actual loan amount, they do little to build equity in a piece of real estate.
That piece of information can sometimes be missed by young people that simply want to build equity and aren’t sure how to go about doing it or just what it takes. Giving up freedom is a steep price to be paid and the benefits are not immediate.
An additional wrinkle that some young people are adding is early investment desires and the attractiveness of pulling a rental payment on a leased piece of real estate. Becoming a landlord is no small decision and the burden of having to deal with individual renters and the upkeep that rental properties demand can be a daunting one.
Interestingly enough, that burden has been increasingly taken on by young people, perhaps suggesting better dissemination of information about real estate investment opportunities and the gradual death of the stigma that being a landlord is only for the old or rich.
The Bottom Line
In the end, if you are a young person and have considered the prospect of getting involved in real estate investment or ownership, a significant discussion has to take place with yourself over your goals in life and the value of flexibility to accomplish those goals. There are lucky people out there who land the perfect job early in life and for those people, perhaps they can be sure that they intend to stay in a certain area for a very long time. For those people, a mortgage makes sense, and building up early equity in real estate can certainly pay off later.
For those that have a more muddied version of the future and would love the ability to be able to take that new job opportunity at a moment’s notice, perhaps early home ownership is not the way to go. The struggle between freedom and future fortune can seem like a difficult one, but by evaluating your personal goals, you can decide whether home ownership is in your future.