Hi Zachary!
It’s awesome that you're thinking about real estate at 21, you're already ahead of the game by saving and planning for your financial future. With low overhead and time on your side, you have a great opportunity to set yourself up for long-term wealth. Let's break down some smart first steps in real estate investing:
1. House Hacking: One of the best ways to get started in real estate without a huge upfront investment is house hacking. Since you’re living with your parents and don’t have immediate housing expenses, you have the flexibility to explore this strategy. House hacking involves buying a multi-family property (duplex, triplex, or fourplex), living in one unit, and renting out the other(s). The rental income can cover your mortgage and other expenses, allowing you to live for little or no cost while building equity.
Since you're saving $2,000 a month, you can likely start building a down payment for a property within a couple of years. With FHA loans, you can put down as little as 3.5%, which is great for first-time homebuyers.
2. Seek Cash Flowing Rental Properties
Another great option is to purchase a single-family rental (SFR) in an area with good cash flow potential. Look for properties where the rent you collect can cover the mortgage, property taxes, insurance, and maintenance costs, with some leftover for profit. Many real estate investors recommend investing in markets that are landlord-friendly with solid population growth, stable job markets, and a demand for rentals.
You could look into cities outside of New Jersey where property prices might be lower but still offer strong rental demand. For example, areas in the Midwest or Southern U.S. tend to have more affordable properties with strong rental yields, but NY and NJ have great investment options as well.
3. Build a Netwrok As you prepare for your first investment, make sure you’re learning as much as possible about the real estate market. Consider reading books, listening to podcasts, and attending webinars or local meetups (virtual or in-person). The more you learn about market cycles, property management, deal analysis, and financing options, the better equipped you'll be to make informed decisions when you're ready.
Networking is also key, connect with local real estate investors, realtors, and mortgage brokers. Surrounding yourself with a knowledgeable network can help you make smarter decisions and avoid common mistakes.
4. ***Creative finance options: Since you have time on your side and a decent savings rate, you could also look into creative financing strategies to get started. Owner financing and seller financing are great alternatives to traditional bank financing. These arrangements allow you to bypass the typical mortgage process and negotiate terms directly with the seller, which can lead to lower upfront costs and more flexible repayment schedules.
Additionally, if you’re open to house hacking, you might find sellers who are motivated to sell quickly and are open to negotiations that could provide you with a better deal.
Since you’re not in a rush to move out and you have the time to save, you’ll be able to strategically invest in your future. The key to building long term wealth in real estate is patience and discipline. With the right approach, you’ll not only accumulate equity but also create a long-term income stream through rental properties or property appreciation.
You’re in a great position to make a smart first move in real estate with low overhead and consistent savings. My advice is to focus on cash flow and long-term growth. Consider house hacking or investing in a rental property that generates positive cash flow from day one. Keep building your knowledge, expand your network, and stay disciplined in saving for your next opportunity.
Best of luck as you continue your real estate journey, you’re on the right track!
Best Regards, Laura Navaquin
lauranavaquin.com | Real Estate Investor & Mentor