We’ve long been of the opinion that the path to wealth in America today does not run down Wall Street. This insider-trading mecca is rigged so solidly that, between transaction costs and administrative fees, the average investor can expect a regular fleecing. Today’s young investor should set his sights on real estate. An income property tied to a fixed-rate, long-term mortgage is highly likely to perform much better for your portfolio than stocks. Here are four ways to get into real estate.
Self-Directed IRA – In case no one ever told you, it’s perfectly legal (and smart) to invest in real estate through a self-directed IRA. The tax benefits are truly amazing, but make sure you familiarize yourself with the complex rules first. Do it wrong and you could get hit with a huge tax bill. The main thing to keep in mind is that the property cannot be for residence or vacation use. It has to be an investment property.
Partner with other Buyers – There are experienced real estate investors out there who solicit funding from the public for large apartment building buys. This is a great way to let an expert do your property screening for you, though take care to understand exactly what sort of deal you’re getting into and what returns are expected. It wouldn’t hurt to have your own expert look over the deal. We suggest you avoid the “great deals” associated with a “war zone” neighborhood.
Make friends with the local REIA – Most areas have a local chapter of the Real Estate Investor’s Association. Attend the meetings. It’s a great way to meet like-minded investors and maybe even get a heads up on new property deals or meet potential partners.
Wholesale – This refers to the strategy of locating motivated sellers who have not listed their property on the MLS yet. A great way to learn the business from the ground floor up, wholesalers commonly make $5k to $10k per deal by acting as a bird dog for cash buyers.
These are just a few ideas for the young investor looking to break into real estate. The overall point to keep in mind is that you will be much better served in the long run to focus on developing your property portfolio than messing around with Wall Street squirreliness.
The Young Wealth Team
Flickr / Jon Garfunkel