You Don’t Have To Be A Professional Real Estate Investor

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There are many ways to invest in real estate and not every investor has to be a professional, full-time investor.

One way someone young can invest and build wealth in real estate is by purchasing a duplex as their starter home and building from there. In Savannah GA there are many opportunities to start this way. I would like to give an example of how it can be done. Granted, this is not for everyone, but it’s a good long term investment plan for those who are willing to sacrifice a little and work for future gain.

Let’s say a young couple is starting out, each around 25 years old, and they decide they want to build wealth in real estate. They get guidance from professionals regarding the market and projections on how the local economy and housing market may fare in the next 4 to 5 years, then they purchase a duplex on the periphery of an up and coming area. Before purchasing they check around with family and friends to find the best tenant possible for the other unit.

Their buyer agent has helped them identify a good buy at $185,000 that needs some improvements but is in livable condition, and the rent they collect from the second unit offsets the mortgage by 50%. They have paid 10% down, $18,500 with their parents’ help. They can afford the whole mortgage which, let’s say, is about $1100.00 a month. Since the rental pays half the mortgage, they put $550.00 in a savings account They hold the property for five years and by this time they have a child and need to move up. They have added value during the five years by keeping it painted, adding a new roof, replacing windows and keeping it well maintained, plus the renovation in the area has spread to where they are living.

After five years, let’s say the duplex is worth $250,000. They are now able to get rent for both units that will cover the mortgage on a refinance of $225,000. After paying off the first mortgage and creating the second they are left with approximately $65,000. They have $33,000 plus interest from their rent savings. They are now thirty years old and buy an older home with more space that also has a garage apartment which rents out for $500.00 a month.

The numbers are not exact and the couple should get financial advice from pros, but you can see where I am going with this. The couple is building wealth in real estate and there are several options they can choose from as they build. When they get in their late thirties, they might decide to quit hassling with the rentals and just buy their dream home, but by this time they can buy quite a home. It’s a relatively low risk strategy with a little head ache, and some expenses that have to be factored in — but if they are in a growing area that maintains steady appreciation over the long run, they should do well with their investments.

It takes discipline and long term vision, but I have seen young people do this and profit. It’s not that difficult and if the young couple shows responsibility and foresight and maturity, they can get help and advice along the way. By the time they are forty, which is young by modern standards, they will be glad they invested early. Some might say this is dangerous and that many young people have gotten into financial messes by reaching too high. I say — poppycock! If the couple does it smartly and listens to advice from people who understand investments, it will be a much better strategy than blowing their money and waiting on social security.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.