Millennials aren’t fans of the stock market like their previous generations. Boomers and Gen X’ers all believe in the stock market, and most are heavily invested in it. Millennials, not so much.
It could be due to timing. Millennials entered adulthood at the wrong time. Ever heard the saying ‘wrong place at the wrong time’? That’s our poor millennial generation. They were leaving college and entering the workforce right around the Housing Crisis and recession. This left them with few job opportunities, and any they did find weren’t paying much.
With a crashed stock market and poor employment outlook, it’s no wonder millennials have a bad taste in their mouth when it comes to the stock market.
So what are they doing? They have to invest somewhere, or they’ll never hit their retirement goals, which must be well beyond the typical $1 million target Boomers had.
Here’s the secret - they’re investing in real estate, but not just any real estate - long-distance real estate.
How is it possible, and how do they afford it? Here are their secrets.
Roofstock Platform Opened up Many Possibilities
When you think of real estate investments, you probably think of rich people owning homes outright.
What if that’s not the case?
What if you could own investment real estate with very little capital? It’s called leveraging, but we’ll get into that later.
For now, let’s focus on the Roofstock platform and why it’s the answer to most millennial’s prayers for a fruitful retirement.
Roofstock Marketplace is a platform of homes for sale, but not just any homes - homes with tenants already in them. It’s a housing platform for home investors looking for reputable homes and cash flow on day one.
How Roofstock Works
Roofstock brings buyers and sellers together on its platform. Every home they list goes through a distinct procedure, including:
Extensive inspection by a Roofstock inspector who ensures the home is in good condition doesn’t need many repairs and meets all Roofstock requirements.
Professionals inspect the home’s title to make sure it’s clear of any liens, minus any home financing the seller will pay off with the proceeds.
Roofstock appraisers determine the home’s fair market value to ensure the sales price is in line with the value so millennials can secure financing and/or they won't’ invest in a home that’s worth less than they paid.
Roofstock evaluates the property’s lease, looking at factors such as the price of rent, expiration date, and lease terms that would affect the new landlord.
Roofstock looks at the current tenant’s rental payment history to ensure they pay rent on time, so it’s a good investment for the buyer.
Professionals evaluate the home’s area too. They look at factors that make the area desirable for renters or factors that would make it undesirable (these homes don't make it onto Roofstock).
In addition to the due diligence Roofstock professionals do, buyers also benefit from the simple-to-use platform. You can sort listings by several factors, narrowing down your options. At any given time, Roofstock has 300 - 500 properties listed for sale across the country.
If you have specifics in mind, you can sort by:
Contingencies you require
Buying A Property On Roofstock Marketplace
Roofstock makes it simple to buy property on it. Buyers pay just 0.5% of the sales price too, which is a great saving. Sellers pay 2.0% of the sales price, with a total commission of 3%, which is 50% less than the standard real estate agent commission.
Once you peruse the properties and find one you like, you place a bid. The seller can accept, counter, or deny the bid. If you settle on an offer, you’ll sign a sales contract, just like in any other loan purchase, and complete the sale.
Everything goes through the Roofstock Marketplace platform, so you don’t have to worry about lost documents or not understanding the next steps - they walk you through everything.
Once you own the property, you are a landlord with an investment property that earns cash flow right away.
Leveraging Your Investment
As we said earlier, you don’t need the home’s total price to invest in real estate. You can borrow the money if you have a 20% - 30% down payment.
Lenders often have programs for borrowers with decent credit and down payment. If you prove you can afford the loan and/or have a lease in place (which Roofstock properties do), you’ll have an easier time qualifying for a loan.
The loan helps you invest in the properties while leaving more money liquid so you can invest in other areas, too, making the most of your retirement funds.
Why Investment Properties Are Better Than the Stock Market
Most investors diversify their investments across several asset classes. Diversifying lowers the risk of a total loss. For example, if you invested all your money in Amazon.com, Inc. (NASDAQ: AMZN) stock and Amazon tanked, you’d lose everything.
If you instead invested some money in Amazon, some in Microsoft, and some in Albertsons, you’d offset your loss since not every stock usually tanks at the same time.
But millennials are taking it a step further. Many worry about the stock market ‘popping,’ leaving them with little to no profits on their investments. They also worry that the stock market won’t grow at a pace fast enough for them to beat inflation and have enough money for retirement.
It’s a lot to worry about, and with millennials entering the market at such an inopportune time, they are already behind, so time is of the essence.
This is why many millennials turned to real estate investing, more specifically, investing on Roofstock Marketplace.
First, real estate investments diversify a portfolio more than spreading money across several stocks or even mixing it up with stocks and bonds. Real estate usually isn’t tied to the stock market. In other words, if the stock market crashes, it doesn’t automatically mean real estate values will fall too.
Next, real estate tends to appreciate no matter what’s going on in the world. Sure, there are times values fall and times they even crash, like the Housing Crisis, but it doesn’t happen often. If you diversify your money into one or more investment properties, you’ll have a greater chance of reaching your retirement goals.
When you invest in a home, you earn equity. Home equity is the difference between a home’s value and the outstanding loan on it. You earn equity on an investment home in two ways:
When you make monthly payments, you pay down the principal balance of your loan. As you pay down the balance, your home’s equity increases.
As the home appreciates, the value increases, which naturally gives you more equity in the home.
How Can You Invest Around the Country?
Millennials are making the most of the opportunity to invest in real estate versus the stock market by using Roofstock Marketplace to invest in homes around the country.
It seems crazy to think that someone in Boston, Massachusetts, could invest in a home in Memphis, Tennessee, but they can use Roofstock.
You can use Roofstock’s platform to buy the property and get matched with a property management service. This is how investment real estate becomes a passive investment. You hire a property management company to handle the property. They handle dealing with the tenants, managing repairs, and handling collections.
All you have to do is earn the cash flow from the rent payments, put the money away for retirement, or invest it even further.
A great way to grow your investment portfolio is to reinvest the money you earn and buy more investment properties.
You can do this in a few ways:
Save the rent earned (net cash flow) in an investment that will compound your earnings, giving you a decent return on your investment. You can use the funds to invest in more properties, increasing your cash flow.
Leverage the property by taking out a mortgage. If you have equity in one home, you can refinance it, taking the equity out to invest in more properties. You’ll lower the equity in the first home but grow your portfolio and potential for larger returns.
The Benefits of Investing in Real Estate vs Stocks
Millennials have many opportunities to invest, but there are many reasons to choose real estate vs stocks:
Investing in real estate is straightforward. When you work with Roofstock Marketplace, it’s easy to understand how to invest in real estate. They walk you through the process, helping you every step of the way. You don’t have to know fancy jargon or when to buy and sell as you do with stocks.
You can leverage your investment. Let’s say you want to buy a $200,000 home. If you invested in stocks, you’d need $200,000 in cash. With real estate, you can invest 20% - 30% of that amount and finance the rest. You have a lower risk because you aren’t putting $200,000 in cash upfront, and you can make larger investments.
Real estate hedges against inflation. Each year, we deal with inflation. When you’re looking at 20 to 30 years from now, inflation rates will be much higher. This means you’ll need to save a lot more money to have the same spending power you have today. Real estate hedges against that risk since property values and rent values usually increase with inflation.
Real estate ownership has tax benefits. When you invest in real estate, you can write off many of the expenses because it’s like a business you own. When you invest in stocks, you can’t write anything off except your losses, which no one wants because then you can’t reach your financial goals.
This isn’t to say investing in stocks is bad. It’s always a good idea to diversify your portfolio, investing in many areas, not just one. Millionaires have seven streams of income - that’s how they achieve financial peace, and you can too.
Even if you haven’t started yet, invest in stocks, but leave money for real estate so you can diversify your portfolio and get the best of both worlds.
Should You Invest in Real Estate?
If you’re looking for ways to diversify your portfolio or you haven’t started your retirement fund yet, consider real estate. Using a platform like Roofstock Marketplace makes it easier than ever to invest long distances.
You don’t have to worry if you live in a high-cost area and can’t afford the homes to invest in. You can invest from coast-to-coast with Roofstock. As long as you pay for property management, you’ll have a passive investment in your portfolio that creates monthly cash flow and helps you reach your retirement goals.
Read more about Roofstock: Roofstock Review
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