Can I invest in real estate as a student?

Investing as a student can be one of the smartest financial decisions you can make. The sooner you start investing your money in assets that will work for you and help you earn money, the more time you will have for compound growth to make you richer.

There are many asset classes you may want to invest in while in school, including real estate. Adding real estate to your portfolio can lead to greater diversification than just investing in the stock market, and it can also provide inflation protection.

But is it possible to buy real estate while you are still in school?

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Students may face real estate investment challenges

For most students interested in real estate investing, the biggest challenge might come from the high cost of buying properties.

Even repairers tend to cost tens of thousands of dollars or more. While you’re still in school and not working full time, chances are you won’t have the money for a down payment needed to qualify for a loan to buy a property. And paying cash for a property would probably be an impossibility.

While it’s sometimes possible to buy real estate with no down payment, lenders may not be willing to work with you while you’re in school when you have limited income and little work experience. Financing 100% of the purchase price of an investment property could also be a high-risk approach if you don’t have a lot of income to cover the carry costs until your investment starts paying off for you.

There are other alternatives to buying properties

The good news is that it is absolutely possible to invest in real estate without never own a property – and often, this is the best way for students to be exposed to this asset class.

There are a number of different options for investing in real estate without directly buying a property. Here are two examples:

  • Real Estate Investment Trusts (REITs), which were created by Congress to democratize real estate investing by allowing people to invest in entities that hold either a portfolio of mortgages or a portfolio of commercial real estate.
  • Exchange traded funds or mutual funds, which invest in many REITs and/or many real estate stocks. These funds could be actively managed, with fund managers specifically choosing a mix of real estate investments. Or they could be passively managed and designed to track financial indices measuring real estate market performance.

Each of these different types of investments has its own advantages and disadvantages. Additionally, some unlisted funds and REITs have minimum investment requirements. But, in general, it is possible to find options that require very little money to start. In fact, with some brokers allowing you to buy fractional ETF shares, it may be possible to start investing in real estate with just a few dollars.

This can be great for students who don’t have a fortune to spend but feel the real estate industry is where they want to put some of their money. If you’re a student, consider researching these options to decide if they’re right for you. However, as with any other investment, be sure to carefully consider the risks as well as the potential rewards and take the time to think about how real estate fits into your overall quest to build a diversified portfolio.

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