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Are you a young adult looking to break into real estate? Starting now could give you a huge advantage over both your non-investing peers and those who start much later in life. In this article, we’ll show you how to get into real estate at a young age, with several strategies for building wealth, tips for getting started, and more!
Summary:
- Real estate is one of the best wealth-building tools for young investors, as it can provide cash flow, appreciation, loan paydown, tax benefits, and more.
- Turnkey rentals, house hacking, live-in flips, REITs, and the BRRRR method are some of the best investing strategies for young investors.
- Before you invest in real estate, make sure you have a strong financial foundation, credit profile, and cash reserves.
Ready to invest? Browse turnkey rental properties for sale!
Become a Millionaire Before Most Americans
Entrepreneur Andrew Carnegie is often credited with saying, “Ninety percent of all millionaires become so through owning real estate.” Over 100 years later, this is still largely true, as most wealthy people own at least some type of real estate investment. This isn’t a coincidence. Real estate is the asset that average Americans, no matter their age, can use to become wealthy. How?
Passive Income (Cash Flow)
Real estate can provide monthly cash flow and, depending on the investment, passive income. REITs (real estate investment trusts) are completely passive, professionally-managed turnkey rentals offer semi-passive income, and other investment properties may require you to be more hands-on. Pick the investment that best fits your availability!
Price Appreciation
Historically, the U.S. housing market has grown significantly over time. While this isn’t true for every single property in every market, most properties do appreciate over a long time horizon. If you bought an investment property 15-20 years ago in a high-appreciation market, it might have doubled in value by now!
Loan Paydown
As you make your mortgage payments, you build home equity. So, if you have tenants paying you rent each month, they’re effectively paying your mortgage for you!
Leverage (99% of People Don’t Understand This)
Unlike most investments, real estate allows you to use leverage (loans). This means you could bring a $50,000 down payment for a $250,000 investment property and have the bank finance the rest. You can’t do this with most assets!
Start Young, Retire Wealthier!
Disclaimer: The following example is for illustrative purposes only.
Let’s look at a simple example that demonstrates the power of investing while you’re young. If you buy one $250,000 rental property every two years between age 22 and 30, assuming a 3% yearly appreciation rate, here’s what your equity gains would look like:
Age 30: $161,808 equity gain
Age 40: $647,352 equity gain
Age 50: $1,299,882 equity gain
That’s a massive boost to your net worth—seven figures before age 50, just from real estate!
How to Get Into Real Estate at a Young Age (5 Options)
Even if you’re investing in real estate in your 20s, you have options! Here are some of the top strategies you could use to start building wealth today:
1. House Hacking
House hacking is a very beginner-friendly strategy where you buy a house as your primary residence and rent part of it to tenants. If the property has multiple units, you could live in one while renting out the others, OR you could rent out rooms in a single-family home and share common areas.
Pros
House hacking is one of the best real estate investments for young people because of the following:
- Can start with very little money (3%-5% down)
- Reduces your living expenses significantly
- Learn how to landlord with minimal risk
- Best interest rates and a lower mortgage payment (primary residence)
Cons
Living in your own investment property comes with a few trade-offs:
- Must live with or next to tenants
- No “dream home” (for now!)
- Must occupy the property for at least one year
2. Turnkey Rentals
Turnkey rentals are newly-built or renovated properties you rent out to tenants. These properties often come with property management (and sometimes tenants) in place, allowing you to invest in high-cash-flow markets with more affordable home prices from many miles away.
Pros
Buying turnkey gives you a more “hands-off” investment and the following benefits:
- Often can achieve day-one cash flow (get paid from the first day of ownership)
- Fewer self-management headaches (property managers are included)
- Excellent for those living in expensive markets
- Lower maintenance and repair costs (thanks to them being newly-built or renovated)
- No prior real estate investing experience needed
Cons
Despite turnkey properties being worth it to many investors, they do have a few (minor) drawbacks:
- Often requires at least 20% down (Rent to Retirement offers 5% down options!)
- May gain less landlording “experience” since a property manager takes care of most problems for you
- Value-add opportunities are limited compared to distressed properties (but that's also why maintenance costs stay low!)
Ready to invest? Get into your first rental property with 5% down!
3. Live-in Flips
A live-in flip is a property you buy as your primary residence and gradually improve over time, allowing you to “force” appreciation and increase the value of the home. If you occupy the property for at least two of the last five years, you could sell the property without paying any capital gains tax!
Pros
Many investors prefer the live-in flip strategy for these reasons:
- Ability to create substantial equity
- Full control over renovation and scope of work
- Could transform an average property into your “dream” home
- Tax-free profits (up to $250K for single, $500K for married) when living in property for at least two of the past five years
- Can turn the house into a rental property if it makes sense
Cons
There are a few notable downsides to the live-in flip strategy:
- Living in a construction zone/renovation project
- Inexperienced investors may go over budget when renovating
- Will have to hunt for a good “deal” with profit potential
- Often not best for brand new beginners
- Not as easily repeatable as other strategies (frequent moves and renovations)
4. BRRRR (Buy, Rehab, Rent, Refinance, Repeat)
The BRRRR strategy is when you purchase a distressed rental property, renovate it, rent it out to tenants, and then refinance into long-term debt—usually pulling your cash out so you can fund the next property and repeat the entire process!
Pros
The BRRRR strategy can be a powerful wealth-building tool for the right investor because of the following:
- Ability to create substantial equity
- Can get most (sometimes all) of your down payment back quickly
- Can “force” higher rents thanks to a remodeled home
Cons
Despite its advantages, the BRRRR method presents several investing risks and challenges:
- Fluctuating mortgage rates can make the refinance timing difficult
- May go over budget if you don’t have renovation experience
- Pressure to refinance quickly when using other people’s money (hard/private money)
Want passive income? Browse cash-flowing turnkey rental properties!
5. REITs (Real Estate Investment Trusts)
Don’t want to deal with tenants or toilets? REITs give you a more passive way to invest. These companies buy and operate real estate, while you buy shares of them (like stocks). Since REITs are legally required to distribute at least 90% of their taxable earnings to investors, you get steady, passive income!
Pros
REITs provide a simple, low-effort way to invest in real estate and offer several benefits:
- Extremely low minimum investment (often only a few dollars)
- 100% passive income (dividends)
- No real estate investing experience required
- Can easily diversify across asset classes and industries
- More liquid than investment properties
Cons
REITs aren’t the right option for everyone. Consider these drawbacks:
- Often lower returns than “hands-on” rentals
- No direct tax benefits (interest write-offs, depreciation, etc.)
- No control over investment, returns, or strategy
Tips for Young Real Estate Investors (Before You Start)
Not quite ready to invest in real estate? Here are a few ways to prepare for that first investment:
Begin Budgeting ASAP
Before you invest in real estate, you’ll want to make sure you’ve built a strong financial foundation. Increase your income as much as possible and keep your expenses in check by creating (and sticking to) a watertight budget!
Build Credit and Don’t Fall Into Bad Debt
Unless you plan to buy a rental property with cash, you’ll need to get a loan for your investment property, and lenders will want to confirm that you use debt responsibly, pay your bills on time, and don’t bite off more than you can chew. Apply for a few credit-building cards, get a credit-monitoring app, and work on getting that score up!
Save a Little Every Month
The more you save, the faster you’ll have the funds for your next investment, down payment, and closing costs. Just make sure you’re also setting money aside for cash reserves to cover emergencies or unexpected repairs.
Go to Free Real Estate Meetups
If you want access to all kinds of resources and connections, find and attend your local real estate meetup. Start networking, building relationships, and gleaning what you can from other investors!
Educate Yourself as Much as Possible
Today, there are so many ways to learn about real estate investing, like reading a few real estate books or tuning in to the Rent to Retirement podcast. Once you’ve exhausted these free resources, joining the Rent to Retirement Academy is a great next step—it’s designed to take you from no properties to a full portfolio!
Start Analyzing Rentals
Before you buy any rental property, you need to ensure it’s a worthwhile investment. Practice analyzing properties and determine whether they align with your investing goals. Use our free rental property calculator to analyze deals in minutes!
Start Now: Your Future Self Will Thank You
Investing in real estate in your 20s gives you an enormous advantage over those who are just starting in their 30s, 40s, or 50s. The sooner you start, the faster you’ll be able to scale your portfolio and grow your investments. Begin today while time is on your side, and you could retire early with real estate!
How to Get Into Real Estate at a Young Age FAQs
How to Start in Real Estate at a Young Age?
There are several ways to start investing in real estate at a young age. You could buy a primary residence and rent part of it out (house hacking), buy a professionally-managed turnkey rental in another area of the country, put 20% down on a traditional investment property, or simply invest a few dollars in REITs (real estate investment trusts) for 100% passive income.
How to Get Into Real Estate as a High Schooler?
If you’re still in high school, you may not be able to buy your first rental property just yet, but if you start preparing today, you could be ready once you turn 18! Save as much money as possible, learn about real estate investing through books and podcasts, and attend a few real estate events that have presentations and speakers (with a parent, of course!).
How Much Money Do You Need to Invest in Real Estate?
How much you need to invest in real estate depends on your investment strategy, market, and the deal itself. You could invest in a REIT (real estate investment trust) with only a few dollars, or you could put 20% down on your own investment property!