Will Real Estate continue to be a strong investment for the coming generations?

Question

I am 17 years old, and currently invest a pretty good amount in stocks. My plan is to allow my portfolio to compound, and then after college pill up some money and start investing in real-estate. I understand real-estate is cyclical, and some times may be better than others, but regardless, it trends upwards over time. However it seems that things are changing, even if housing prices settle out in the coming months and years, they still are and still will be at record breaking highs, which has left my generations purchasing power significantly lower than any others. Properties are so much more expensive it seems like a whole different world than a lot of real-estate investors likely started in and it leaves me wondering if real-estate will still be a strong investment for my generation or really just me when I am in my 20's.

Thomas M. · Answer

I think it will be important to buy in areas that are just starting to sprawl. Then you can be in it for the long haul when the area becomes more developed and the market starts to mature. The idea is to take advantage of the growth of cities and suburbs.The price of getting started is higher for you than it was for previous generations.  I think that's what you're referring to here and I agree with your sentiment. That is a problem for sure. The ceiling of property values is not infinite. We are in a historically unusual time where the increase in credit and lending has pumped up prices. Will it continue? Nobody knows.The growth of RE values is also predicated on growing population and increased population density. If those things go down the values will go down (or rise more slowly), like in the rust belt.And keep in mind you're on a forum full of RE agents. Agents will ALWAYS tell you it's a good time to buy. That's how they make their money. It's also ALWAYS a good time to sell, upgrade for that growing family, downsize for that retirement. Agents encourage MORE TRANSACTIONS and that will be their general message.

Henry Clark · Answer

It will always be a great time to be in real estate.  As a new investor you have many more options to invest than a larger investor.  And a greater chance for a positive return.

Russell Brazil · Answer

Yes.

Paul Azad · Answer

Real Estate Is just a term? that describes the medium or the mechanism of the true underlying investing action. Real estate is just the wrapper around the actual thing you're doing which is Banking. IE capital allocation and leverage.

Without the leverage, real estate investing is actually not a particularly good investment. Take a look at the study from Amsterdam. by Piet Eichholtz Eichholtz_A-long-run-house-price-index.pdf (maastrichtrealestate.com)

basically a nearly 400 year study of the prices of the same homes along the best canals in Amsterdam since 1628, and the prices rose at about 2-3% or the historic rate of inflation there, same study has been retroactively and proactively studied in almost all countries on Earth and they all get same answers over long term, (Re rises with inflation rate) Now you can have short term bubbles like now in USA, but they usually deflate like the 22% drop from 1929-1935 or the 34% drop from 2006 to 2012, which many of us benefitted from. I guarantee it will deflate again, as it always has in past, or at least go flat for 10-20 years until incomes catch up. Why, because you need people to buy those houses, and people's incomes only rise at the rate of inflation.

But imagine you don't pay cash but rather borrow so your 5k cash/closing-down payment to buy a 100k STR, then in year 1 it rises 2k - only a paltry 2%, but you make a 40% profit as you are levered 20:1, and that beats the best year for stocks ever.

So real estate is not actually about "real estate". It's about banking just like almost all businesses. You could be drop shipping from an Amazon warehouse business using leveraged inventory and doing the exact same thing or borrowing billions to buy NVIDIA GPU's to retrofit and add on to your own servers like my favorite business does, SMCI. Most businesses are about banking, but they have different wrappers around them. Good luck.

James Carlson · Answer

@Grey Fraser

Like @Russell Brazil so succinctly put it, yes, real estate will continue to be a good investment.

Just like in other investment avenues, there are no secrets in real estate. Your timeline should be long, and luckily for you, it will be really long. You're 17.

Are you going to get 15% appreciation over the next year, like we saw in Denver and Colorado Springs in 2021/2022 (and elsewhere in the country)? Probably not.

But the basic dynamics don't lie. The Millennial generation is bigger than the boomer generation and they've just now entered peak buying age, meaning demand will only continue to be strong.. Meanwhile, a legacy of restrictive local regulations around building has kept supply low.

Strong demand, limited supply ... prices go up.

Jacopo Iasiello · Answer

Good to know that you are starting to learn and gather info's at a young age. Real Estate is always a good investment, although some experts have says on that, we don't handle the future the first step to do is continuous learning especially always keeping an eye on the risk

John Morgan · Answer

We will have a major shortage of SFR for at least a couple decades. I would focus on single family vs MF. Maybe house hack a duplex to start off.

V.G Jason · Answer

Is owning land with utility a strong investment?

For sure.

Joe S. · Answer

I’m not referencing that at all. I didn’t even name any political movement directly. You would probably need to start a different thread for that.

Will Real Estate continue to be a strong investment for the coming generations?

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