Why Real Estate Investing Can Be Gen Z’s Ticket to Retirement — and How To Start
Written by
Jordan Rosenfeld
Edited by
Chris Cluff
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Investing in real estate can be a lucrative path for any investor. However, for Gen Zers who are starting to enter the workforce and earn income, this could be more than just a way to make money, but a way to lay a solid path to retirement.
While Gen Zers may not be ready yet to purchase their first properties, there are a variety of ways they can get started. Simply setting the goal to save for real estate purchases is a great start.
Experts explain why real estate investing could be Gen Z’s ticket to retirement and how to get started.
Traditional Investments May Not Work for Gen Z
For Gen Z, many traditional paths to financial security, like pensions or a lifelong career with one company, may seem outdated, according to Jim Sandford, the founder of Freedom Properties Direct.
Add in rising living costs, fluctuating markets and uncertainty surrounding Social Security, it’s no wonder many young people are exploring alternative ways to secure their financial future, he pointed out.
Real Estate Is a Tangible Asset
Unlike the stock market, real estate is a tangible asset that offers several avenues for income and long-term growth, Sandford said. He said these avenues include:
- Appreciation: Historically, real estate values increase over time, making it a solid investment. Even in market downturns, real estate often rebounds, providing long-term appreciation that can outpace inflation.
- Cash flow: Rental properties can provide a steady stream of income that can cover expenses, increase over time and potentially serve as a primary income source in retirement.
- Tax benefits: Real estate investors enjoy numerous tax advantages, including deductions on mortgage interest and property taxes, and depreciation can help reduce taxable income and keep more money in your pocket.
- Leverage: One of the unique advantages of real estate is the ability to leverage your investment. In other words, by using financing, investors can purchase property with a smaller upfront cost, allowing for potentially higher returns on investment (ROI).
- Control: Unlike stocks or bonds, where you’re at the mercy of market conditions, real estate allows you to actively manage and improve your investment. Renovating properties, adjusting rents or selecting the right tenants gives you a level of control not typically found in other investments.
How To Start Making Money
Getting started in real estate investing doesn’t require immense wealth, Sandford said. Here are tips for getting started.
Improve Your Credit
“A good credit score opens the door to better mortgage terms,” Sandford said.
Lenders prefer borrowers with higher credit scores, so make sure to do whatever you can to manage your debt responsibly and avoid missing or late payments.
Save for a Down Payment
While some investors can leverage financing with little down payment, having a solid down payment (around 20%) can reduce risks and make you a more attractive candidate for loans, Sandford explained. Consider saving in a vehicle that earns interest but keeps your cash liquid, such as a high-yield savings account or money market account.
Consider House Hacking
One way to both buy property and earn income to offset the mortgage, Sandford said, is to engage in “house hacking.” He explained, “This strategy involves purchasing a multi-unit property, living in one unit and renting out the others. It allows you to generate rental income while offsetting your own housing costs.”
Engage In Short-Term Rentals
Platforms such as Airbnb and Vrbo provide opportunities to turn a single-family home or condo into a lucrative investment with short-term rental income, Sandford said, though you do still need to have a solid down payment and you should be able to pay a mortgage without the additional income, to be safe. Also, some cities are cracking down on these kinds of rentals, so be sure you know the laws before you invest.
Real Estate Investment Trusts (REITs)
Another option for those who really aren’t ready to buy entire properties on their own, Sandford said, is to invest in real estate investment trusts, or REITs. This could be done as a group.
“REITs allow you to pool money with other investors to buy shares in income-generating real estate, much like buying stocks,” he said.
Educate Yourself
While real estate may offer lucrative opportunities, Sandford warned, “Real estate investing is as much about knowledge as it is about capital. Before making any major decisions, invest time in learning.”
You can do this through networking, such as joining local real estate investment clubs or online forums where seasoned investors share tips and experiences. You can do your own research, study markets and learn about local trends and demands. You also can work with a mentor, such as a seasoned real estate expert.
Long-Term Strategy for Retirement
Ultimately, remember that real estate isn’t a get-rich-quick scheme, Sandford said. It’s a long-term strategy, ideal for those willing to be patient and diligent.
“By building a diversified portfolio of properties over time, reinvesting rental income, and paying down mortgage debt, real estate investors can create substantial wealth,” he added. “This financial stability not only allows for early retirement but also offers financial security for life’s unexpected turns.”
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