Do you sometimes feel that you have the heart of an entrepreneur but suffer from risk aversion and a limited bank account? Micro investing in real estate may just be the solution to your predicament. Millennials and others who have been reluctant to invest in real estate due to concerns about risk and lack of funds no longer need to be relegated to the sidelines. You can and should join the game. It is simple to get started and micro-investing platforms such as IMBY allow you to invest in assets of your own choosing – unlike traditional real estate mutual funds or REITs.
The World’s Best Investment
The statistics do not lie – no matter how you try and spin them. Real estate is a proven winner when it comes to investment success. Investopedia confirms that since 2000, real estate has outperformed the stock market 2:1 – earning a robust 10.71% annually vs. 5.43% for stocks. In an extraordinary feat of data collection and analysis released in 2018 by a joint team from UC-Davis and Deutsche Bundesbank (the central bank of Germany), researchers announced housing was the world’s best investment over the past 150 years. So why aren’t more millennials with an entrepreneurial disposition running to invest in real estate?
The millennial generation slid into adulthood pre-packaged to achieve success as entrepreneurs. A 2014 study by Bentley University reports that only 13% of millennial respondents expressed interest in climbing the corporate ladder or becoming CEO or President while 67% had the goal of starting their own business. Perhaps more than anything else, millennials need to feel that the goals they are pursuing in the workplace on behalf of their employer align with their own values, goals and aspirations. Despite being hard-wired to succeed as entrepreneurs, many millennials have been slow to take the initial steps.
Barriers to Entry
There are a number of factors both real and perceived that pose barriers to millennial entrepreneurship. Student debt, the high cost-of-living and risk aversion are a few reasons cited by this generation for failure to launch new businesses. It could be that while many millennials love the idea of being a self-employed entrepreneur, they are a little less in love with the hard work and long hours that go along with it.
This is where real estate investing (and particularly micro-investing in real estate) aligns perfectly with millennial attitudes and mindsets. In addition to outperforming stocks and bonds over time, a real estate investment provides a built-in hedge against the potential ravages of inflation since real estate assets tend to appreciate in value at or above the inflation rate. More importantly, particularly for millennial investors, putting money into bricks and mortar allows owners and investors the opportunity to exercise some control over the appreciation of an asset by investing additional money when the time is right in upgrades and enhancements to the property. Since it’s your baby, you get to take care of it in the manner you choose. A homeowner can immediately increase the value of a property by replacing the roof or updating the kitchen and bathrooms, while a shopping center owner will see an immediate uptick in value following a façade renovation in keeping with the times. Smart investors enjoy having some degree of control, or at least take comfort in knowing that someone is in control who shares their point of view and goals.
The Power of Leverage
Another great advantage to real estate investing lies in the power of leverage. Simply put, you can use your equity in real estate to borrow money to invest in additional properties and earn more money and so on and so on. Eventually, increased cash flow and appreciation will provide you with enough passive income to live the life you’ve dreamed about without too much sacrifice in the life you are living right now. Isn’t that every entrepreneur’s goal?