Being in your 20's you're probably just getting out of college or trade school. Have little to no money and are just trying to pay the loans, rent, insurance and other bills you have just taken on. And you can't buy a house until you are older right? WRONG you have amazing assets in your twenties that no one else has!
the power of time
Now at any age you are busy right? We're all busy. There was a great article I read on the decreasing hours in a work week but somehow we still find a way to be busy. Originally we spent 16 hrs/day as farmers/laborers until we industrialized more and headed into the tech revolution. Now we spend 8 hrs/day at work and most of us have dropped our commutes since we work from home and still we're just as busy as when we had 16 hr days. However being in our twenties most of us do not families of our own yet. A lot of us have more time than we think on our hands.
If you buy a house that needs some work in your twenties you can spend that free time fixing it up! Sometimes it's a pain doing the work but a lot of the time it's fun and gratifying. Instead of watching Netflix you can be listening to music and painting or landscaping your house. I hear a lot of people who rent and are really great at doing projects all say "I want to fix it the place I live in but I don't own it so why would I?" That's right! If you had a house of your own to fix up you would be spending a lot of your energy tackling these projects! When you fix up a house you force appreciation and can really skyrocket quickly how much that house is worth.
Appreciation is the gradual rise in value of a property over time. The earlier you buy the more appreciation you see. If you buy a property in your early twenties you can see significant appreciation over the time. If you buy in a urban area with a lot of development you can see 5% or greater appreciation per year. Check out the power of appreciation below. How much will these home owners homes be worth in their 40's?
Time is your best friend!
In your 20's you have the power of freedom. Maybe you are single and can house hack which means you can basically live for free with roommates. Then you save that money and pay down your student loans or buy another deal! You can keep buying more deals and growing your portfolio with the loan down payments since you're living in them. Even if you're not single you can buy a house live in it and keep moving every year into a new one just renting the one out behind you. You are not tied to a school district, or a specific place.
If you are housing hacking and building a rental portfolio you can use these rentals for certain things. 1 rental could be to subsidize your own mortgage cost. Rental 2 could be to save for your kids college fund every month. Rental 3 could be vacation money. It's up to you but it gives you options!
Trade up to your dream home
Everyone wants to move to a nice area someday with a nice house and a big yard right? We live in the city so maybe not everyone needs a yard. But everyone still wants a nice house in a great area! If you look at those high desire areas you'll see the decent homes starting at 350 and go to 700 for middle class homes. That can be a large mortgage payment every month for people in there thirties with kids, cars, a house to maintain. So how do you get a large down payment to reduce your monthly payment?
I'll use an example Jack and Diane bought a house in their 20's for 200k and this is what happened:
Year 1: Cleaned up the outside of the house and made it beautiful. They redid the backyard. Tour up the carpets, painted, and some other little projects. As a bonus their lender called them and told them rates had dropped and to refinance their house. They went from a 30 year loan to a 20 year loan. Now they are gaining around double the equity in their house every month!
Year 2: They took on a bigger project and redid the kitchen to something trendy people would like.
Year 3: They took on the bathroom project!
They basically spent over the years 15k fixing up the place. Which is 2500/person per year. They liked the area and stayed for around 8 years. They now have accrued 44,000 in equity in there house.... just for paying the mortgage every month.
After the renovations the homes worth was estimated to be 260k. Then there was still 5 more years of appreciation on top of that! This brings the value to 331k!!!
So let's do the math....
331k - final value
-156k - remaining loan balance
We can subtract the renovation costs too which leaves them with 160k for a down payment on that dream home! The sales is also tax free because they lived in it for more than two years!
So maybe you're saying to yourself: I don't have the time and I don't have the money to do this. But when you're in your 30's or 40's and want to buy that dream home that's 450k or more that mortgage is going to take all of your time and money. Leverage time to your advantage and your money now will be worth 10x in the future if you use it right!
If you want to learn how to save for your first down payment check out: