Last week I discussed some of my ideologies around money, they were more or less my opinions on what young people should be thinking about currently to set themselves up for a stable economic future. As I stated last week, I am NOT a financial advisor but I think I do know a thing or two about current economic trends for young people and what track will set ourselves on one of financial stability. This week I am writing about real-estate.
Real-estate to me is like talking about what I had for dinner last on Saturday during my date night with my SO, it is fresh on my mind and I love discussing it (food and real-estate alike). This week I am going to discuss why I think every young person by the time they are 25 (at the latest 30) should at least have some of their ducks in a row and start thinking about buying a home.
25 years old. You are bold. You are ambitious. You have money coming in. You may or may not have a family yet. You are at the start of your life. Unfortunately for you money doesn't go as far as it did for your parents BUT thats okay! The ideologies around money for our generation are changing and I think for the better. Less and less young people are spending their money on non-durable goods and buy goods that are at the vert least somewhat-durable. A non-durable good is an item you buy that its value degrades instantly when you buy it, this does not include things that are necessary for life like food and water. This doe however include goods and serves like clothing and experiences (clubbing). Young people are buying less poorly made clothing and are willing to either buy second hand or buy quality goods from local or smaller retailers. What does this mean for personal finances?
This means that young people are understanding the value of their dollar and for one reason or another are either not spending as much on non-durables because they are cheaply made, want something to last, AND understand that non-durable experiences are cheaply made as well. This creates an environment that sustains economic stability, The understanding of ones dollar and its buy potential is important. There are those in older generations that have yet to figure this out. Understanding the power of ones money does a few things: makes money real, gives one the understanding of the value of money, and makes cash flows more tangible and easier to manage. These three things are fundamental when thinking about buying real-estate.
Real-estate is one of the oldest forms of retirement saving funds there is. Real-estate is one of the most stable, smart, and safe investments a person can buy. Obviously there are specific risks involved, like the housing bubble of 2007, but overall real-estate is your best bet for long term economic investment. I will discuss the housing crash and why, if you do your research, it should never affect you in next weeks article.
Real-estate in Canada is rather stable, in Nova Scotia it is even more so and here are some reasons why:
1. Our banks are better, Canadian banks are more stable then their American counterparts, 4 of the top 10 banks in the world are in Canada.
3. There is less income disparity, compared to the US who has a Grand Canyon between the rich and poor, in Canada it is more shallow (mostly due to our taxation laws).
4. We have better social mobility, if you are born to into a lower income family you are twice as likely to move to a higher income bracket in Canada then in the United States.
So let us talk about some reasons why buying young is a smart decision and why real-estate is one of the best investments you can make.
Buying your first home, may that be personal or rental, requires a morgtage (unless you have $250,000+ hanging around). Usually, 20% down on a 20-30 year term is the norm. This means that of what ever the sale price is you will put 20% of it upfront from your pocket and then take the next 20-30 years to pay of the rest. Lets say you buy your first home at age 25, you will be between 45-55 before that property is fully yours. Starting young gives you the financial freedom to not be pressured to pay off your mortgage when you are thinking about retirement. Now, this is where it gets interesting. If you are like most people you may buy one or two homes in your lifetime and when it comes to retire you sell your payed off home and add that to your retirement portfolio and live the rest of your days paying condo fees. Simple. One big cheque at the end of your working career to add the cherry to your retirement. What if there was a better way?
Most people stash money away and trust investment bankers to make good decisions with their money and steadily grow it until they want to retire. There is a better way to save!
Save in land. Save in property. Make passive income. Be uber economically stable! I am eluding to, instead of buying one or two personal homes for you and your family to live in, buy 2 or 5 or 8 homes and be set for life! If you are willing to put in 90 hour work weeks for the next 20 years and retire in your mid-40's then this is your dream investment. I am of this mindset. I am willing to put in the 90 hour or more work week so I can spend the majority of my life doing pretty well what ever I want. This isn't going to come easy though. That 90 hour work week is going to be filled with 3am my-toilet-overflowed-calls and pay-me-or-I-will-have-to-evict-you confrontations. But I am willing to do all that and more to live the ultimate life. Freedom. Many people I know are entering their professional jobs, working 9-5 Monday to Friday, saving for retirement, and then calling it quits when they are 65 (more like 70). This sounds awful. Literal prolonged boring awfulness that wont stop for the next 40-50 years. Becoming a real-estate entrepreneur and putting in the hours now sounds more like my cup of tea. Always something new will be happening. It will give me the ultimate freedom to do what ever I want. If I can grow it up quickly enough it will be self-sustaining and I can hire people to do the dirty work for me, leaving me time to get even more creative.
Someone once told me that I am too creative for business school. Today, 3 years in and thinking about the people I've met, about the things I've done, the things I've learned; I laugh at that person. Business can be the most creative outlet in society has to offer. It is how you approach is how creative it can be!
By understanding what your money can do you can create the future you want for yourself; I would strongly suggest taking a long hard look at real-estate and what it can do for you and what you can do for it. Start young. Pay it off young. Retire young. Create your future. Don't let it create you.
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