10 Ways Young People Can Get Started Investing in Real Estate

With any investment, the younger you are when you start investing, the more time the investment has to grow -- and the more money you will likely earn because of it. I was fortunate enough to get started just after college in my early 20s, and now with a decade of investing under my belt, I have a lot of experience and time to keep my investments growing.

While real estate investing can be more costly up front than other avenues of investing, there are methods to make it more accessible. Here are 10 ways young people can get started investing in real estate even if they don't have much experience or money.

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Investing with no money or little money is possible in real estate, but it definitely pays to have money to invest. Start setting aside money specifically for investing in real estate -- at minimum, 10% of your salary. We'll discuss other ways in the coming slides to generate income using other people's money as you get started, but building your own investment nest egg is the best way to set yourself up for investing success.

One of the best and easiest ways to get your foot in the door of real estate investing is through house hacking. Instead of purchasing a single-family home that you alone use and pay for, purchase a home that has additional space that could be rented out. This could mean putting up for rent an additional room in the home, a garage apartment, or the extra units in a multifamily property. You can use the extra rent to pay for most if not all of your mortgage. And if you're supersmart about where you buy, the rent may even produce extra cash flow!

Real estate investment trusts (REITs) are a great way to start investing in real estate if you don't have a ton of money or experience managing rental property. You can select from hundreds of different publicly traded REITs that own, invest, and manage high-quality real estate assets across the globe in nearly every real estate sector possible. Plus, because of their unique tax structure, REITs can pay great dividend returns without you having to own or manage a single property.

ALSO READ: 3 Dividend REITs Yielding More Than 3%

Wholesaling is a common starting place for a number of young real estate investors because it requires little up-front capital, instead mostly requiring time and effort. When you wholesale a property, you get an off-market distressed property under contract at a discount, then assign the contract to a third-party buyer at a higher price. You earn a fee from the difference between the two. Aside from knowing how to estimate repairs, negotiate with the property owners, and putting up the cost for marketing to potential sellers, it requires little money up front from you and you never have to purchase the property to earn a payday.

Fix and flips are a great way for young people to start investing in real estate. Buying a property that's in need of repair and adding value to it through improvements can be a fun, profitable way to invest. If you have an eye for design, are handy around the home, or have great management skills, this can be a great way to get started. As an added bonus, if you live in the home for at least two of the five years before a sale, you don't have to pay capital gains tax on the property.

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Presented by Motley Fool Stock Advisor
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Most young people I know don't have a ton of money available to invest. It takes a few years to build up a notable salary and set money aside for savings. Thankfully, there are ways to invest in real estate without using your own money.

Other people's money, or OPM, is a common way to finance real estate transactions utilizing joint venture relationships or private lending such as hard money loans. The key is finding the people who lend for real estate transactions like these. Be aware, though: Costs for these loans are far higher than traditional mortgages. If you want to play, you'll have to pay.

Co-investments can be a great way for young people who may not have a ton of experience or money to invest in real estate to pool their money to purchase a property jointly. This investment strategy can pay off big if done with the right business partner, but there are a lot of risks to consider.

ALSO READ: How Risky Is Co-Buying a Home?

Rental real estate can be a great way to invest in real estate. Not only does it offer tax advantages and the potential to earn cash flow, but you can benefit from future appreciation. Since most young people have more time than they have money, learn what it takes to manage a rental property as you save the 20% required down payment if you plan to get a mortgage. Once you have enough money set aside, buy your first rental property, and hopefully reap the benefits from its rewards.

Vacation rentals can be a very lucrative investment option. When done properly, they can net far more than a rental property to a long-term tenant would. If the municipality allows it, you might be able to rent a room or part of your property on a vacation listing platform and earn a big rental income. I personally know of two friends who co-purchased several vacation properties in their 20s and now live fully off their investment income, traveling the world in their spare time.

There are so many creative ways to invest in real estate. Lease options, mortgage note investing, seller financing, joint ventures, and beyond. Learn about the unique methods for financing real estate or investing in real estate with little to no money down. If you get good at negotiating and understand these unique strategies, you'd be amazed at the possibilities for investing in real estate despite being young.

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Presented by Motley Fool Stock Advisor
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!" It's true, but we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Click here to learn how you can grab a copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Educating yourself on the ins and outs of your chosen investment strategy is hugely important. It pays to get started young, but if you're investing in risky asset classes or aren't well versed in what it takes to successfully invest in real estate, you'll likely lose far more than you will earn. Due diligence is key with any investment. Consider joining investment groups to learn more about how to invest in real estate and start saving. When you're ready you'll hopefully have the funds and knowledge to take action!

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