The advantages of investing in real estate when you’re young
(Ginbee is the president of BPI Family Savings Bank. She has an MBA from Harvard Business School and over 17 years of banking experience.)
For many young adults, investing in real estate is a conundrum and, possibly for some, a burden. They may be at a loss when it comes to when, where, and how to start. They may also view this as a big commitment that they’re not be ready for.
This is perhaps why young adults aged 25 to 34 are torn between investing in a property of their own and accumulating a variety of experiences. According to a recent study by ZipMatch, an online real estate marketplace in the Philippines, 49 percent of young adults want to buy a home of their own, while 51 percent prefer to invest in personal leisure.
For this working-age population, many can afford to either cover the monthly mortgage to purchase a property of their own, or pay for monthly rent that will allow them to live on their own.
The lifestyle and spending habits start to differ as these young adults grow older. Although curious about buying properties, they now have a wide breadth of choices on where to spend or invest their funds.
It really boils down to priorities. Though it may be more fun investing in experiences, young adults should consider the advantages of investing in real estate when they are still young and productive. 1. Being single provides greater flexibility. For a number of single adults, the money they earn is their own. They have fewer responsibilities compared to married individuals. Having a family means a major portion of the salary is committed to paying for monthly bills, education and other household expenses. Consequently, capacity to invest in a property may be compromised.
2. Starting early has its rewards. If one decides to apply for a home loan when still young, monthly installments can be lower as they will be eligible for a loan with longer terms, which can be as long as 20 years. As one’s career progresses through time, income also improves. It will then be possible to accelerate loan payments through either higher monthly installment payments or settlement of a large chunk of the loan to save on interest expenses. That, or going into new property investments to build one’s portfolio of real estate assets, which can be a future source of rental income. 3. Investing early matters for capital
appreciation. Acquiring a property in a developing area for investment purposes is also another advantage. There’s a well-known principle in investing – “buy low, sell high.” Many who have invested in properties in the early stages of development have benefited from significant price appreciation. It was a matter of time. These early investors have enjoyed high returns either through sale or rental of property. 4. Investing instills financial
discipline. Aside from earning a return on the investment, young adults learn to manage their finances better. They develop the practical skills such as budgeting, monitoring of returns, and evaluation of investment options. They are also able to learn the virtues of patience, determination, and prudence. They will realize the value of delayed gratification and broaden their perspective to plan for their future. 5. Having a trusted partner is key. Getting sound financial advice from a respected and experienced financial institution is imperative. Finding the right bank to provide expert and appropriate financial advise can help young adults make the right decisions early on in their lives. Seeking financial advice early on helps young adults manage their finances towards their life goals. Investing in a property through a housing loan is just the beginning. They will also learn about other financial solutions and products that fit their needs over the long run. They get to know about special programs and exclusive deals that make the most of their hard earned money, allowing them to even set aside some funds to invest in experiences they long for. And as they progress in life, they have a trusted partner that can guide them, one that knows them well and understands their needs.
As the saying goes, “time is gold.” Make time work for you. Start early. Make the right investments, today rather than tomorrow, sooner rather than later. When done right and with a trusted partner, investing in real estate while you are young can be one of the best decisions you will make.
Forty-nine percent of young adults want to buy a home of their own, while 51 percent prefer to invest in personal leisure.