Yes, I started investing in real estate in 2012. Yes, things are different now. Does that mean you shouldn’t start AT ALL? No. Let me tell you what I would do if I were in your shoes and looking to start in 2022.
1. Stay (or Become) Frugal for a Few Years
When we were in college (or were college-age), we were more frugal than we are now. I’d be willing to bet you spent less going out to nice dinners then than you do now. If you are young, stay frugal a little longer than you have to. Don’t give into to lifestyle creep yet. Don’t pay big rent and a high car payment. Drive a sensible used car. Live with your parents or roommates. Cook at your own place. Start saving and investing. If you’re older, remember what it was like when you were frugal and go back to that. Now.
2. House Hack
Once you’ve saved up enough money for a down payment, buy a property, live in part of it, and rent the rest out. This is called house hacking. You can buy a duplex and live in one unit while renting the other out. You can buy a house with an above-garage apartment and rent that out. You can buy a house with a mother-in-law suite and rent that out. You could buy a house with a basement apartment and rent that out. Or – get this – you could live in the above-garage apartment, mother-in-law suite, or basement apartment and rent the house out. If you can only find a condo or a single-family home, rent out a bedroom. Is house hacking less comfortable than not doing it? Sure, but so is working for 40 years.
3. House Hack Again
If you live in a property, even if it has 2, 3, or 4 units, you can put less down and will have a lower interest rate than if you buy a property as an investment. So, I highly suggest that after you do your first house hack, you move into another one. Rent the entire first property out, and house hack again. Your interest rate doesn’t change on your first property, and you will need to save up less for a down payment on your second house hack than you would if you were just buying as an investment. Or you could take equity out of your first property before you move and use it for the down payment on your second house hack (but this would change the interest situation).
Getting started in real estate is simple, but it isn’t easy. You will have doubts. You will be scared. But you must trust yourself and know deep down that this is the right thing to do. If you buckle down for a few years, you can change the trajectory of your life and give yourself breathing room and freedom.