The narrative that surrounds millennials and their money isn’t an optimistic one. You know all the major talking points: financial crash, useless liberal arts education, existential ennui, working a dead end job in the service industry. While not entirely inaccurate, this narrative has the same problems that all stereotypes do: it only provides a very general outlook, without any nuance. When you start looking closer at millennials, you start to notice that some of them aren’t doing so bad after all.
There has been a burgeoning culture of money-consciousness in millennial minds around the country. It makes sense. Put a bunch of young people in an economic situation where they have to scrap and save, and some of them are bound to learn a thing or two about money. The fact that the internet has exploded with personal finance blogs and the fact that many are focused on investment should not surprise. Millennials are finally getting into the careers they were hoping to start right out of college. Others have created a path for themselves through entrepreneurship. They don’t want to be poor. That’s where Real Estate investment comes in.
Passive Income For the Win
The morning of this writing, a post on Reddit went viral. It was a simple question, open to all of Reddit’s users for response. The question was a simple one: “What’s you main goal in life?” At the time of this writing, the #1 response (determined by popularity and “upvotes” from Reddit users) was from a user called “CluelessKnowltAll”, who explained that his/her main focus was on finding and creating passive income streams, in order to no longer have to work. Clueless also indicated that he/she already had a successful rental property, and was trying to acquire another, as this first one had worked out so well.
Hundreds of other users responded in kind, saying that this, too, was their strategy. The New York Times has covered this phenomenon, as have other major news sources. For a generation that many have said would never be able to afford a house, some Millennials seem to be buying up a whole lot of them.
Real estate investment makes a lot of sense for the Millennial mind, if such a thing can be accurately described. For a generation raised to be wary of traditional investment markets, physical pieces of real estate can be thought to have an attractiveness all their own. What’s more, real estate investment provides many ways to earn for the savvy investor.
- Appreciation - With most American homes increasing in value 4-5% per year (and some gaining a lot more value than that), people who have a knack for picking the right property can see better annual returns on their purchases than real estate investors.
- Leverage - By borrowing money to pay for a house that appreciates over time, property owners can see big net worth increases, even though the house was purchased with “other people’s money” (debt).
- Cash Flow - Having a property rented out is a great thing, especially since a rental price tends to far outweigh the money spend each month on a mortgage. This is one of the most powerful aspects of property ownership for investors like these.
- Tax Benefits - While not as powerful for people with multiple homes, it’s possible to save through methods like write-offs for mortgage interest and city taxes.
For a generation that values independence and want to attain financial security, real estate is an investment form that makes a lot of sense for millennials, and any other generation who wants to get into the game.
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