How much negative cash flow is too much
Member since 2023 · 13 posts · 10 votes
I have an opportunity to assume a loan at 2.5% in a HCOL SoCal community. Even at that rate I will still be losing about $800-$1000 per month with a renter due to HOA & Mello Roos. I'm ok with a negative cash flow for a couple of years because its in an area that should continue to appreciate. My question is how much is too much negative cash flow? Is there a general rule of thumb or is it based on personal tolerance. Thank you!
Lately I’ve been accused twice of insulting people when I ask questions, so right up front. This is not an insult, it’s a real question.
You say: "Investing" for appreciation is NOT investing, it's speculating (read: gambling).
Are you saying almost all stock investing, which is almost entirely based on appreciation is gambling? I certainly feel that way about bitcoin and probably silver/gold, and at least a little about stocks. It’s always bothered me when people won’t invest in real estate without cash flow but they’ll GLADLY invest in stocks with NEGATIVE cash flow, praying for appreciation.
This is the exact reason I stopped investing in stocks. There was no way I could buy enough stocks to generate enough cash flow to live on. When I retired I didn’t want to “hope I died before I spent all my savings”. That and having zero control over if they went up or down each day or even over time got me to real estate and changed my life.
Again, honest question and not aimed solely at you. I’d be happy to hear anyone’s opinion, you were just the latest to say it and I thought you might still be online.
Stocks and real estate can both cashflow.
You can buy and sell to profit from the appreciation on either (flipping properties or stock trading). You can also cashflow (renting a property or dividend investing) regardless of the asset price.
Dividend stocks are simple. You purchase once and they don’t come with expenses but like you mentioned, a lot harder to live on a dividend cashflow there.
They both have a purpose and come with their own strategies but let’s not forget the biggest reason. We’re not using our own money to cashflow with real estate.
Back to the original post.
If you’re losing $1,000 at an 10% rate. I could understand waiting a little and trying to refinance into a better rate.
If you’re losing $1,000 at 2.5% I don’t know how you could improve this anytime soon.
-Are you going to refinance later and lock in a higher rate after the principle goes down?
-How much would you have to pay off for you to even break even at a 7.5% every month?
That interest rate sounds GREAT but not when it comes with a negative cashflow.
I love seeing everyones feedback!
I don’t know ANYTHING about the socal market or your market if it’s different, but what you’re saying certainly was true in Vegas.
New builds were a constant 25-30% higher than existing homes. (Most of our housing is less than 20 years old, and much is less than 10-15.) so closer than you’re suggesting but we’re a small/newer built market.
BUT, I bought my first new build ever last month because they’re a lot closer to 10% over existing properties today. Before you factor in closing help, buying down the rate, and everything being new, there just isn’t much used inventory, and almost zero motivated inventory. I’ll never carry the loan to term, but if I did, the financed cost of the new build would be lower than an existing home. Saving 2%/yr in interest would eat that 10% price difference up quick. For the cash flow investors, even 1% makes the payments lower. $550k at 5.5% has a lower payment than $500k at 6.5%.
TLDR; in almost 30 years of buying real estate I had never even considered purchasing a new home, I never saw the value in it. In 5-10 years it would be just another used home, why pay 20-30% more. But now that my homes are approaching 20+ years old and I can exchange them for new for just 10% more. I’m making the switch. I’ll make less money in the short run, but I think I’ll be happier in 10-20 years.
Sounds like you’re walking from this deal?
I didn’t see it mentioned or even asked. Another big factor is does this deal cost you anything? I forgot to consider it, but this deal is mostly acceptable if you’re walking in with a downpayment between zero and very small. If you’re taking over the deal for free I’m still kinda interested. If you’re putting down $500k, I’m waaaaay out.
You have to consider the return your downpayment could make. In this high interest environment. Many “cash flow investors” could make more Chas flow putting their cash in the bank. They’re really banking on loan pay down and appreciation. $100k downpayment could bring in more than $400/mo in guaranteed bank interest so you can’t get in to real estate to make $200/mo.
Let us know the cash required in your deal, that could be a killer all by itself.
Lately I’ve been accused twice of insulting people when I ask questions, so right up front. This is not an insult, it’s a real question.
You say: "Investing" for appreciation is NOT investing, it's speculating (read: gambling).
Are you saying almost all stock investing, which is almost entirely based on appreciation is gambling? I certainly feel that way about bitcoin and probably silver/gold, and at least a little about stocks. It’s always bothered me when people won’t invest in real estate without cash flow but they’ll GLADLY invest in stocks with NEGATIVE cash flow, praying for appreciation.
This is the exact reason I stopped investing in stocks. There was no way I could buy enough stocks to generate enough cash flow to live on. When I retired I didn’t want to “hope I died before I spent all my savings”. That and having zero control over if they went up or down each day or even over time got me to real estate and changed my life.
Again, honest question and not aimed solely at you. I’d be happy to hear anyone’s opinion, you were just the latest to say it and I thought you might still be online.
Stocks and real estate can both cashflow.
You can buy and sell to profit from the appreciation on either (flipping properties or stock trading). You can also cashflow (renting a property or dividend investing) regardless of the asset price.
Dividend stocks are simple. You purchase once and they don’t come with expenses but like you mentioned, a lot harder to live on a dividend cashflow there.
They both have a purpose and come with their own strategies but let’s not forget the biggest reason. We’re not using our own money to cashflow with real estate.
Back to the original post.
If you’re losing $1,000 at an 10% rate. I could understand waiting a little and trying to refinance into a better rate.
If you’re losing $1,000 at 2.5% I don’t know how you could improve this anytime soon.
-Are you going to refinance later and lock in a higher rate after the principle goes down?
-How much would you have to pay off for you to even break even at a 7.5% every month?
That interest rate sounds GREAT but not when it comes with a negative cashflow.
I love seeing everyones feedback!
This is a very good point. I guess I was banking on rent increases and appreciation but you're correct, the 2.5% rate doesn't leave any room for improvement there.
"If it does not cash flow, do not buy it"
I would have lost out on a lot of money over the years if I absolutely followed that rule strictly with no deviation.
Granted, we do 15 year amortization loans, so it is a lot harder to cash flow significant money for us.
In general, sure, you want positive cash flow.
But there are zero absolutes in investing - everything must be looked at case by case.
Sounds like you’re walking from this deal?
I didn’t see it mentioned or even asked. Another big factor is does this deal cost you anything? I forgot to consider it, but this deal is mostly acceptable if you’re walking in with a downpayment between zero and very small. If you’re taking over the deal for free I’m still kinda interested. If you’re putting down $500k, I’m waaaaay out.
You have to consider the return your downpayment could make. In this high interest environment. Many “cash flow investors” could make more Chas flow putting their cash in the bank. They’re really banking on loan pay down and appreciation. $100k downpayment could bring in more than $400/mo in guaranteed bank interest so you can’t get in to real estate to make $200/mo.
Let us know the cash required in your deal, that could be a killer all by itself.
Good point! The difference between asking and the loan balance is about $45k. The property is only about 18 months old and in a brand new master planned community.
I would maybe say you're okay with losing some cash flow each month depending on many factors such as debt pay down and cost of property vs value of property. Each deal being unique..
However....if you're at a 2.5% rate and you're still at 800-1000/mo then I would definitely not do the deal. You're not going to refinance to a lower rate...you're already at the best rate possible.
If the same situation was at an 8% rate, but you would cash flow at say 5%, then we can hope rates will come down in a few years and you could refi, but that's not the case here.
It sounds like you're getting a great interest rate, but might be paying too much for the property. Perhaps the seller is offering mortgage assumption but asking a much higher price in return. Owner financing is just one part of the equation and just because you're getting a great rate doesn't make it a great deal.
Also....I had to look up what Mello Roos was as I had never heard of it before. HAHAHHAHAHAH California doing California things!!!
@Zachary Ware@Bill B.@Tommy Nguyen@Carlos Ptriawan@Jessie Dillon@Peter Mckernan @Leo R. @David Dachtera@Timothy Chi@Joe Villeneuve@Brady Mullen@Eric Gerakos@Jonathan R McLaughlinThank you everyone for your responses and advice. I'm admittedly new and REI is something I've always wanted to get into but didn't have the means. I'm finally in a position to bein this journey but it's a difficult to find cash flowing properties. This one seemed like a good deal and I was a little enamored with the 2.5% rate in a high appreciating market. But once all the numbers came in, that negative $800-$1000 monthly was eye opening. I am surprised by the comments saying any negative cash flow is a deal breaker though, especially in high appreciating markets.
Again, I appreciate all the feedback and advice. If I have to ask stupid questions to learn, so be it.
No, this is actually a very smart decision to ask the group.
The more we digging in the more we understand the problem.
I used to do very heavy DD in this kind of new-ground-up investment. It's very high risk project , but if the location is "right" then there may be slim chance. Thing is we also can't assume the rate of appreciation from 12 years ago would work for the next ten years.
I guess to do this project you may want to consult independent professional DD investor. For newbie I advice to do more "conservative" investment.
No doubt this is high risk project.
When reaching out to those pm’s ask them how much they think they could collect in rent, what they charge and what you would net. Then you’re going to want them to guess at annual rent increases, is it 2%, 5% or 10%, that’s going to be a big factor. In 5 years will you be collecting 5% more rent or 50% more. Is it high end of the market where you’re going to reach an affordability problem.
Your numbers don’t excite me. I think your personal finances will probably have to be the tie breaker. Would an extra $1,600/mo in your pocket change your lifestyle at all? (Being positive $800 vs negative $800.) Many/most people would say yes, those people probably shouldn’t take this deal. To somewhere between 5 and 20% of BP members, based on a percentage I just made up, that’s not life changing money. They can/might buy this property based on future returns or plans.
As I’ve said elsewhere on my negative $800/mo cash flow property. It was much less than I had been putting in to my retirement accounts, which certainly didn’t cash flow. And I was treating it as a tax advantaged retirement account, not a cash flow account. I was able to do that because that $800 wasn’t life changing, because I had other properties that were cash flow accounts.
Good luck. And let us know what you decide.
It seems there's more story to this. If I'm not wrong this is the typical way of home builder playing with price.
So what OP should do is the following:
1. Measure the PSF of this new construction
2. Measure the PSF of 10 year old stock 1-2 mile apat>
3. Measure the PSF of 30 year old stock house
Compare to PSF, I would not surprise if the new construction PSF is higher 30-40% than FMV of older house in neighborhood.
In one of our area, with the same PSF, lets say 30 yo house is selling for $300K, the new construction is like $500k and lakefront is $700 !
It's the way they make money, even the lake is man made to hijack the price. And this is the very reason why price is negative 800 bucks even with two percent rate which seems illogical to me.
Thank you for this, I will definitely look into it. You're spot on, it is a brand new master plan community with all the big developers building there (Lennar, KB, etc) and it's only about 18 months old. It's close to tourist attractions like Disney and six flags on the outskirts of LA. The last few years have definitely skewed appreciaiton data so I can't exactly estimate how much it'll appreciate.
I would maybe say you're okay with losing some cash flow each month depending on many factors such as debt pay down and cost of property vs value of property. Each deal being unique..
However....if you're at a 2.5% rate and you're still at 800-1000/mo then I would definitely not do the deal. You're not going to refinance to a lower rate...you're already at the best rate possible.
If the same situation was at an 8% rate, but you would cash flow at say 5%, then we can hope rates will come down in a few years and you could refi, but that's not the case here.
It sounds like you're getting a great interest rate, but might be paying too much for the property. Perhaps the seller is offering mortgage assumption but asking a much higher price in return. Owner financing is just one part of the equation and just because you're getting a great rate doesn't make it a great deal.
Also....I had to look up what Mello Roos was as I had never heard of it before. HAHAHHAHAHAH California doing California things!!!
Thank you, all valid points and thats what I'm learning here. I initially assumed great rate - great deal but it could actually be the opposite since it doesn't leave much room for improvement. It's actually a very unique deal in that the owner is about $45k behind and that $45k is the difference between asking and the loan amount. The owner is in no position to pay that $45k so I can't really negotiate the asking price down. It's just a wild deal but I've learned a lot.
How much of the payment is lowering your principle?
The only negative cash flow deal I ever bought was almost $800/mo negative. But it was paying off $1,500/mo in principle day 1 and only got better. So over 6 years it went from me paying $9,600/yr to pay off $1,800 to the debt being paid off and cash flowing $28k/yr. And yes, that was the icing on the cake as it appreciated about $280k.
Is this a property you could see yourself living in and doing a house hack? That’s how I got started as I had never paid rent before and didn’t like the idea of it. Or when the current lease expires raising the rent $3-400/mo and if they move out renting it by the room while staying in your current place? (A little harde, might need one roommate to play on-site property manager for discounted rent.)
This is very helpful way of looking at it. If I could buy $1,500 worth of any viable asset/investment for $1,000 month after month, I'd consider it (I didn't say I'd definitely do it, all you cash flow junkies - I just said I'd consider it).
If you could purchase a business for 33% off, wouldn't you at least think twice about it?
Cash flow is important, of course, because liquidity is a vital metric, but it's not the only thing that matters.
If a negative cash flow of $1,000/mo is buying you $1,500 of equity through debt paydown based on where that loan is in its amortization schedule means you're purchasing $1,500 of equity every month for $1,000. This is also where the 33% off comment comes from (1000 is a 33% discount from 1500).
I'm not saying this deal is a good deal. It is probably not in that position. I'm just saying that if my negative cash flow (a monthly cost to me) is buying me something worth 1.5x that amount every month, I'd entertain that.
It's easy to create a slogan about positive cash flow at all costs, but it's just not that straightforward. Of course cash flow is important. That's not my argument. But if I could buy $1,500 of Apple stock for $1,000 every month (this transaction is negative cash flow for me, by the way), then I'd consider that.
Hi @Bradley Shuhart,
Don't worry! We all ask questions to facilitate learning. As the old saying goes, 'Learn from other people's mistakes, not your own!' I recommend exploring the extensive BiggerPockets catalog for further knowledge. There's a wealth of information available, but remember to take action and avoid getting stuck in 'analysis paralysis'.
All the best,
Tommy Nguyen
How much of the payment is lowering your principle?
The only negative cash flow deal I ever bought was almost $800/mo negative. But it was paying off $1,500/mo in principle day 1 and only got better. So over 6 years it went from me paying $9,600/yr to pay off $1,800 to the debt being paid off and cash flowing $28k/yr. And yes, that was the icing on the cake as it appreciated about $280k.
Is this a property you could see yourself living in and doing a house hack? That’s how I got started as I had never paid rent before and didn’t like the idea of it. Or when the current lease expires raising the rent $3-400/mo and if they move out renting it by the room while staying in your current place? (A little harde, might need one roommate to play on-site property manager for discounted rent.)
This is very helpful way of looking at it. If I could buy $1,500 worth of any viable asset/investment for $1,000 month after month, I'd consider it (I didn't say I'd definitely do it, all you cash flow junkies - I just said I'd consider it).
If you could purchase a business for 33% off, wouldn't you at least think twice about it?
Cash flow is important, of course, because liquidity is a vital metric, but it's not the only thing that matters.
If a negative cash flow of $1,000/mo is buying you $1,500 of equity through debt paydown based on where that loan is in its amortization schedule means you're purchasing $1,500 of equity every month for $1,000. This is also where the 33% off comment comes from (1000 is a 33% discount from 1500).
I'm not saying this deal is a good deal. It is probably not in that position. I'm just saying that if my negative cash flow (a monthly cost to me) is buying me something worth 1.5x that amount every month, I'd entertain that.
It's easy to create a slogan about positive cash flow at all costs, but it's just not that straightforward. Of course cash flow is important. That's not my argument. But if I could buy $1,500 of Apple stock for $1,000 every month (this transaction is negative cash flow for me, by the way), then I'd consider that.
Thank you for framing it that way, it's an interesting way to view it. With it only being about 18 months into its amortization schedule, only about $1100-$1200 is going towards principle but it is more than the negative $800-$1000.
Lately I’ve been accused twice of insulting people when I ask questions, so right up front. This is not an insult, it’s a real question.
You say: "Investing" for appreciation is NOT investing, it's speculating (read: gambling).
Are you saying almost all stock investing, which is almost entirely based on appreciation is gambling? I certainly feel that way about bitcoin and probably silver/gold, and at least a little about stocks. It’s always bothered me when people won’t invest in real estate without cash flow but they’ll GLADLY invest in stocks with NEGATIVE cash flow, praying for appreciation.
This is the exact reason I stopped investing in stocks. There was no way I could buy enough stocks to generate enough cash flow to live on. When I retired I didn’t want to “hope I died before I spent all my savings”. That and having zero control over if they went up or down each day or even over time got me to real estate and changed my life.
Again, honest question and not aimed solely at you. I’d be happy to hear anyone’s opinion, you were just the latest to say it and I thought you might still be online.
How much of the payment is lowering your principle?
The only negative cash flow deal I ever bought was almost $800/mo negative. But it was paying off $1,500/mo in principle day 1 and only got better. So over 6 years it went from me paying $9,600/yr to pay off $1,800 to the debt being paid off and cash flowing $28k/yr. And yes, that was the icing on the cake as it appreciated about $280k.
Is this a property you could see yourself living in and doing a house hack? That’s how I got started as I had never paid rent before and didn’t like the idea of it. Or when the current lease expires raising the rent $3-400/mo and if they move out renting it by the room while staying in your current place? (A little harde, might need one roommate to play on-site property manager for discounted rent.)
This is very helpful way of looking at it. If I could buy $1,500 worth of any viable asset/investment for $1,000 month after month, I'd consider it (I didn't say I'd definitely do it, all you cash flow junkies - I just said I'd consider it).
If you could purchase a business for 33% off, wouldn't you at least think twice about it?
Cash flow is important, of course, because liquidity is a vital metric, but it's not the only thing that matters.
If a negative cash flow of $1,000/mo is buying you $1,500 of equity through debt paydown based on where that loan is in its amortization schedule means you're purchasing $1,500 of equity every month for $1,000. This is also where the 33% off comment comes from (1000 is a 33% discount from 1500).
I'm not saying this deal is a good deal. It is probably not in that position. I'm just saying that if my negative cash flow (a monthly cost to me) is buying me something worth 1.5x that amount every month, I'd entertain that.
It's easy to create a slogan about positive cash flow at all costs, but it's just not that straightforward. Of course cash flow is important. That's not my argument. But if I could buy $1,500 of Apple stock for $1,000 every month (this transaction is negative cash flow for me, by the way), then I'd consider that.
Thank you for framing it that way, it's an interesting way to view it. With it only being about 18 months into its amortization schedule, only about $1100-$1200 is going towards principle but it is more than the negative $800-$1000.
I completely agree.
It's in an area that "should" continue to appreciate. Speculating has never been my thing...ESPECIALLY when negative cashflow is in the equation.
Lately I’ve been accused twice of insulting people when I ask questions, so right up front. This is not an insult, it’s a real question.
You say: "Investing" for appreciation is NOT investing, it's speculating (read: gambling).
Are you saying almost all stock investing, which is almost entirely based on appreciation is gambling? I certainly feel that way about bitcoin and probably silver/gold, and at least a little about stocks. It’s always bothered me when people won’t invest in real estate without cash flow but they’ll GLADLY invest in stocks with NEGATIVE cash flow, praying for appreciation.
This is the exact reason I stopped investing in stocks. There was no way I could buy enough stocks to generate enough cash flow to live on. When I retired I didn’t want to “hope I died before I spent all my savings”. That and having zero control over if they went up or down each day or even over time got me to real estate and changed my life.
Again, honest question and not aimed solely at you. I’d be happy to hear anyone’s opinion, you were just the latest to say it and I thought you might still be online.
It is certainly legal for minors to own stocks and options. Not sure where you're getting that from. And stocks are legitimate ways to invest wealth.
While there is nothing wrong with buying good company stocks, day trading and options trading are different animals - very risky and akin to gambling.
We have to accept that finance is a very nuanced topic. It doesn't have to be an argument about whether real estate is better or worse than stocks. They have different pros and cons.
It's in an area that "should" continue to appreciate. Speculating has never been my thing...ESPECIALLY when negative cashflow is in the equation.
I agree, but LA/SoCal is pretty darn safe. Nothing is 100% certain though
I'd accept a negative cash flow deal. There's too many personal and market variables to mention but just be sure to account for the total value, have a long time horizon, and an exit plan and/or way to stop the bleeding.
Keep in mind that a positive cash flow deal with deferred maintenance can end up negative for years at a time even though it's cash flowing day one. And I'm originally a stock guy and many experts invest in unprofitable companies and assign crazy high valuations to unprofitable startups all the time.
I would demand positive cash flow from every property you purchase, and that includes the opportunity cost on any funds that you invest in the property that you could have invested elsewhere, such as in Treasury bills.
If you're still negative even at that low interest rate, how is that property ever going to cash flow?
If they are negative cash flow, how many houses could you own?
How many houses could you own if they all had positive cash flow?
Lately I’ve been accused twice of insulting people when I ask questions, so right up front. This is not an insult, it’s a real question.
You say: "Investing" for appreciation is NOT investing, it's speculating (read: gambling).
Are you saying almost all stock investing, which is almost entirely based on appreciation is gambling? I certainly feel that way about bitcoin and probably silver/gold, and at least a little about stocks. It’s always bothered me when people won’t invest in real estate without cash flow but they’ll GLADLY invest in stocks with NEGATIVE cash flow, praying for appreciation.
This is the exact reason I stopped investing in stocks. There was no way I could buy enough stocks to generate enough cash flow to live on. When I retired I didn’t want to “hope I died before I spent all my savings”. That and having zero control over if they went up or down each day or even over time got me to real estate and changed my life.
Again, honest question and not aimed solely at you. I’d be happy to hear anyone’s opinion, you were just the latest to say it and I thought you might still be online.
It is certainly legal for minors to own stocks and options. Not sure where you're getting that from. And stocks are legitimate ways to invest wealth.
While there is nothing wrong with buying good company stocks, day trading and options trading are different animals - very risky and akin to gambling.
We have to accept that finance is a very nuanced topic. It doesn't have to be an argument about whether real estate is better or worse than stocks. They have different pros and cons.
To start investing in stocks on their own, your kid will need a brokerage account, and they must be at least 18 years old to open one. They can start earlier than this, but they’ll need a parent or guardian to open a custodial account for them."
From Stilt:
"The legal age to start investing in stocks is generally 18, but some states have higher age restrictions."
From investmentU:
"Specifically, you have to be at least 18 years old to invest in stocks in the United States. This includes other investments such as bonds, cryptocurrencies, exchange-traded funds (ETFs) and mutual funds."
@Bradley Shuhart I don’t love negative cashflow but for me how much I have to put into it and how much loan pay down you have are big factors. If I had 2K a month in pay down and only put 5K into buying and getting property ready and it had negative 800 a month cashflow with no deferred maintenance in a good area I’m probably taking that as long as I can afford it. If your putting a couple hundred thousand down and loan pay down if 300 a month that’s a no for me.
@Zachary Ware@Bill B.@Tommy Nguyen@Carlos Ptriawan@Jessie Dillon@Peter Mckernan @Leo R. @David Dachtera@Timothy Chi@Joe Villeneuve@Brady Mullen@Eric Gerakos@Jonathan R McLaughlinThank you everyone for your responses and advice. I'm admittedly new and REI is something I've always wanted to get into but didn't have the means. I'm finally in a position to bein this journey but it's a difficult to find cash flowing properties. This one seemed like a good deal and I was a little enamored with the 2.5% rate in a high appreciating market. But once all the numbers came in, that negative $800-$1000 monthly was eye opening. I am surprised by the comments saying any negative cash flow is a deal breaker though, especially in high appreciating markets.
Again, I appreciate all the feedback and advice. If I have to ask stupid questions to learn, so be it.
Lately I’ve been accused twice of insulting people when I ask questions, so right up front. This is not an insult, it’s a real question.
You say: "Investing" for appreciation is NOT investing, it's speculating (read: gambling).
Are you saying almost all stock investing, which is almost entirely based on appreciation is gambling? I certainly feel that way about bitcoin and probably silver/gold, and at least a little about stocks. It’s always bothered me when people won’t invest in real estate without cash flow but they’ll GLADLY invest in stocks with NEGATIVE cash flow, praying for appreciation.
This is the exact reason I stopped investing in stocks. There was no way I could buy enough stocks to generate enough cash flow to live on. When I retired I didn’t want to “hope I died before I spent all my savings”. That and having zero control over if they went up or down each day or even over time got me to real estate and changed my life.
Again, honest question and not aimed solely at you. I’d be happy to hear anyone’s opinion, you were just the latest to say it and I thought you might still be online.
It is certainly legal for minors to own stocks and options. Not sure where you're getting that from. And stocks are legitimate ways to invest wealth.
While there is nothing wrong with buying good company stocks, day trading and options trading are different animals - very risky and akin to gambling.
We have to accept that finance is a very nuanced topic. It doesn't have to be an argument about whether real estate is better or worse than stocks. They have different pros and cons.
To start investing in stocks on their own, your kid will need a brokerage account, and they must be at least 18 years old to open one. They can start earlier than this, but they’ll need a parent or guardian to open a custodial account for them."
From Stilt:
"The legal age to start investing in stocks is generally 18, but some states have higher age restrictions."
From investmentU:
"Specifically, you have to be at least 18 years old to invest in stocks in the United States. This includes other investments such as bonds, cryptocurrencies, exchange-traded funds (ETFs) and mutual funds."