Investment Opportunities That Millennials Will Love

It is a sad fact of life that many millennials are finding themselves in a difficult financial position, facing a future with a high student debt, low savings, and less-than-ideal employment. It isn’t the American dream that most of us had hoped for. So if you find yourself in this situation, feeling disillusioned and living from paycheck to paycheck, then perhaps this article could offer some hope.

It is widely accepted that investing in rental properties can be a powerful way to build wealth and generate income. With the continuing demand for rental apartments, and reluctance to purchase property, it seems to be the perfect time to make this choice. However, many people are of the opinion that owning a portfolio of great quality rental property is something reserved for the wealthier among us.

But as the title of this article may suggest to you, investing in rental property is not impossible for millennials; in fact, it could be the solution that many individuals are looking for. The barriers to entry are often not as high as we perceive. Plus, it can be done with lower risk and a lower outlay of money than you might expect. Below, you will find three of the main ways that millennials can achieve this goal. They vary from dipping a toe into the water of rental property investment, to diving right in to becoming a landlord.

1. Real Estate Investment Trusts (REITs)

Let’s start with the lowest risk option available. Let’s ask our friends at to define these for us:

“A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges like a stock. REITs provide investors with an extremely liquid stake in real estate. They receive special tax considerations and typically offer high dividend yields.”

Image courtesy of IndianMoney.comThese often publicly traded companies invest in income-producing properties. That means real estate, but also hospitals and shopping malls, for example. Shares are traded on the stock exchange, affording individuals the opportunity to invest in a ready-made, diverse portfolio of properties, all managed by experienced real estate executives.

This affords you control over how much to invest, without requiring any input around sourcing and purchasing the properties, or needing to become a landlord and face the worries surrounding tenants. The properties are managed and run by the REIT, which has to distribute 90% of their income to shareholders.

REITs typically offer a good rate of return on investment over time. They are stable and gradually appreciate as the capital gains value. They are also a good source of additional, passive income.

In addition, private REITs (or private placements) may be an even better investment, as they typically show stronger returns. Unfortunately these are only offered to select investors, who are accredited. To achieve this status, individuals have to show proof of more than two years of income of exceeding $200,000 and have a net worth of $1m (not including primary home). This clearly puts this option out of the reach of many millennials, but for those that can afford it, this is a great option.

2. Pooling Resources

The second option available to some millennials looking to invest in rental property, is joining forces with friends and family. This helps to overcome the initial hurdle to becoming a landlord - not having enough money for a down payment.Image courtesy of

According to Tonia Papke, president and founder of MDI Consulting, "Family and friends are great sources of financing. These people know you have integrity and will grant you a loan based on the strength of your character."

Pooling resources in this way affords more control over the investment when compared with REITs, but of course there are many factors to consider. The best way to make an arrangement like this work is by creating a limited partnership.

An individual is appointed as the general partner, who is responsible for purchasing and managing the properties. They are paid a salary for their role and the investors receive a pre-determined share of the rental income as well as a percentage of the capital gains when the property is sold. The terms of the partnership are agreed by all investors and can be tailored to each individual scenario.

However, you should be aware that asking for support from your loved ones in this way can cause difficulties in the relationships. The best way to approach the situation is to be fully prepared, explain how the individuals will be investing and always accept rejection gracefully.

3. Purchase An Investment Property

Of course, there is always the option to go it alone and purchase an investment property for rental. The process of buying and becoming a landlord is lower risk than you may think, because you are largely in control of your investment every step of the way. The potential to make higher-than-average returns is very real, plus there are great tax advantages to consider.

The trick here is to do as much research as possible into the long-term strategy of buying property to rent, with a considered exit strategy that will hopefully result in capital gains. In addition to that, it is imperative to find out about the location you wish to buy in, the average house price, rental value, and demographics of the potential tenants there.

Once you know these details, you must consider how much you could realistically afford to invest in a rental property, taking into account that the down payment will be on average 20%. The cost of repayments must work out in your favor when balanced against the rental income and tax advantages. While investing in rental property is really about the long game of capital investment, it must be worth your while in the interim.

Image courtesy of gjrassets-gordonjamesrealt.netdna-ssl.comIt can be a great idea to simply hold on to rentals as long as possible, maintaining a steady passive income. But in some instances, the plan to sell relatively soon can work out well, too. In some cases you may find that you are forced to sell due to unforeseen reasons, but whatever the case, you should think through the options before you commit to buying.

The best way to reduce risks and stress when buying an investment property is to discuss all of the options and potential outcomes with an expert. They will be able to navigate the confusion with you, so that you can make informed decisions about how much to borrow and which type of loan to take.

Once you have purchased an investment property and had it fixed up to a suitable standard, if required, the obvious next step is to find a tenant. This is something that you can learn to do yourself, although there are many agencies that can assist you in this process, too.

What Is Right For You?

These are the three main ways that millennials can take the first step towards investing in rental properties. Each requires a different level of commitment and offers a different reward in return. It is up to you to decide which is the right option for you - and there is nothing to stop you from trying all of them! The truth is, there are many opportunities for young people to become a part of this trend, and it sometimes requires lateral thinking if money really isn’t an option.

A method that some particularly entrepreneurial individuals have tried with success is investing their time to support landlords that are either too old or busy to continue in their role. By assisting landlords with maintenance and management of rental properties, as well as collection of money due from the tenants, these individuals are learning powerful lessons, and in most cases receiving a portion of the rental income as payment.

An example such as the last is a real sign of the ‘hustler’ spirit that many millennials appear to embody. It is evidence that the ‘unfair’ economic conditions are a catalyst for creativity and income generation in the many new and unprecedented ways that we are seeing around us. Investing in rental property, for example, is no longer reserved for a select minority.

With pools of ambition and aspirations, young Americans are no longer following the unwritten rules that society has imposed upon them. It takes hard work and commitment to make it, but that is within your grasp. Investing in rental property is achievable, and these three suggestions are a great way to start.

Posted on May 27, 2016


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