Investing in real estate at a young age can set you up for financial success down the road. While most traditional investment channels are off limits to minors, there are several creative ways for under 18s to get started in real estate. With proper guidance and strategic planning, ambitious teens can begin building an impressive real estate portfolio before adulthood. This article will explore various real estate investment strategies suitable for young people and provide tips to maximize your chances of a favorable outcome.
Save up money and research the real estate market
The most fundamental step is to start saving up capital. Investing in real estate requires substantial upfront costs. Babysitting, a part-time job, or monetizing a hobby are great ways to generate income as a minor. Be sure to educate yourself on the real estate market, investment properties, and financing options while growing your savings. Connect with a knowledgable real estate agent or investor in your area who can serve as an invaluable mentor.
Partner with family members on a real estate purchase
One of the most accessible real estate investing routes for minors is to partner with parents, grandparents, or other family members on a property. Offer to contribute a portion of the down payment in exchange for partial ownership. This allows you to get hands-on real estate experience and a share of cash flows or appreciation, without needing to individually qualify for financing. Make sure the agreement clearly delineates ownership percentages, responsibilities, exit strategies, etc. Treat the partnership professionally like any investment syndicate.
Invest through a custodial account
Parents can open a custodial investment account, such as a UTMA or UGMA, on behalf of their minor children. With adult authorization, these accounts can hold real estate such as rental properties, REITs, crowdfunded deals, or real estate funds. The assets belong to the child but are managed by the adult custodian until age of majority. This allows minors to invest in real estate while avoiding complex ownership issues until adulthood.
Use IRA funds for real estate investing
Teens with earned income can contribute to a Roth IRA account which can provide tax-free growth on up to $6,000 per year. IRAs can be self-directed to include alternative assets like real estate. Research self-directed IRA custodians that allow you to hold physical property or invest in private real estate syndications within your IRA. This can give young investors access to cash-flowing rentals, fix-and-flips, or tax-advantaged financing options.
Pursue real estate education and training
Spend your teenage years absorbing as much knowledge as possible about real estate evaluation, property management, home renovation, accounting principles and other relevant topics. Attend real estate conferences and network with professionals in your area. Shadow experienced investors to gain hands-on experience. Complete DIY home improvement projects with family members. Starting the educational process early equips you to make smart moves once legally able to invest on your own.
With determination and strategic planning, under 18s can gain invaluable real estate investing experience and set the stage for continued growth into adulthood. Focus on saving capital, learning the ropes, and partnering creatively with family members. Lay the proper groundwork now to ensure your real estate success for decades to come.