Real Estate: The Smartest and Hardest to Afford Investment There Is

November 17, 2014

There is no doubt that real estate is one of the smartest investments a person can make. It is also true that the sooner you start buying property, the better off you will be. Of course, knowing that you need to start buying property is completely different than actually being able to afford buying that property and–inheritances and trust funds notwithstanding–the younger you are the more true this is.

True, yes, but not impossible. It is absolutely possible to buy real estate without resorting to condemned and falling apart properties.

There’s More to Life Than Houses

When you think of property purchases, what do you think of? Most of us think of houses. Houses are just one type of real estate you can buy. If you are interested in the live-in type of property, condos offer and much cheaper form of home ownership. If you’ve already got your housing squared away (or don’t want to get into the highly volatile residential real estate market), commercial properties are a great investment. Small shop spaces, storefronts, warehouses, etc–they’re all worthy choices.

What is Your Goal

We’ve already talked about condos being a great alternative for people who want to live inside of their investments. If you’re hoping to turn a profit off of your investment, however, commercial property is your best bet. A lot of people buy up commercial spaces–like those shop fronts, warehouses, office spaces, etc and then rent them out at a markup so that they get to bank a little cash in addition to covering the mortgage payments on the space.

The reason more young people don’t jump into commercial real estate is because there are more hoops through which you have to jump before a lender will approve your application for a commercial mortgage loan. Most of the time you’ll have to actually have a plan for what you want to do with the space. As someone under 30, your best bet is getting a home loan.

Stop hyperventilating! It’s not impossible.

How Much Can You Get

The home you buy is going to depend primarily upon the amount of money you’re able to get from the bank. Before you even start looking at the real estate listings, you need to figure out how much money a bank will be willing to give you. The easiest way to do that right now, while you are still in the initial stages of planning, is to use a mortgage calculator.

As you will see when you play around with the calculators, the amount of money you put down up front will greatly affect the amount of money you have to pay over the long haul–and could even affect the size of the mortgage you are able to get. Most banks want at least 20% of the cost of a home/mortgage loan to be put up at the beginning. Websites such as Bankrate, Banking Sense, and LendingTree offer some great mortgage tips and advice that could be helpful depending on your situation.

Special Programs

Before you panic over the size of your expected down payment, know that there are a lot of programs out there that can help you either raise that capital or reduce the amount required. Most states have first time home buyer programs that are designed to reduce down payments and closing costs. The FHA also has grants and loans that can make the cost of buying a house easier to afford.

The point is: banks are not going to deny you a loan simply because you are young. There are lots of factors that go into determining your mortgage eligibility. If you are gainfully employed and have good credit, you shouldn’t have any trouble getting approved. What matters is that you make an informed decision about what you’re going to buy and the amount you should spend. Don’t just buy the first house you see. Spend some time looking, consider all of your options and then work with whichever reputable lender will give you the best deal.