- I became a landlord at 28 when I used my savings to buy a three-unit building in Chicago.
- Being a landlord freed me from working 9-5 and helped me launch my startup.
- There are also tax benefits, and paying my mortgage on time is great for my credit.
- Read more stories on Personal Finance Insider.
At 28, I made a life-changing decision. After years of squirrelling away bonuses, commissions, and any cold hard cash I could get my mitts on, I was finally in possession of a savings account that I could put to good use. Exactly what use, though, was the real question.
While it was certainly tempting to follow in my friends’ footsteps and invest in handbags and honeymoons, I knew I had bigger financial fish to fry. Having lived the daily grind as an advertising executive in New York City, I wanted a passive income stream that would give me freedom from the 9-5 world.
The benefits of real estate crystalized, and in 2014, I put my hard-earned cash towards a three-unit building in Chicago. There’s a plethora of reasons why this was hands-down the best decision of my 20s.
1. I owned an asset and had cash to leverage
An asset like property doesn’t just offer a roof over your head. It can be leveraged in a multitude of ways — whether it’s starting a business, purchasing another home, or using the building as collateral to get a business loan.
Leasing the units allowed me to live “rent free” and stack up cash reserves. I parlayed the cash into startup capital and launched a media and entertainment company, something not so scary when I had a steady income stream and free cost of living from my rental.
2. I get tax deductions on tax deductions
You’ll become friends with the IRS once you learn how many benefits you can take advantage of as a landlord. Did you know that any and all repairs that are made to your property are deductible? In fact, even the insurance you take out on your property is a deduction.
A whole tax universe of benefits opened up to me when I entered the world of landlordship — a bit of research (along with a good accountant!) literally saved me thousands.
3. It’s a pretty safe bet
There are a couple of reasons real estate is considered about as safe a bet as you can make. A reason not often considered — land is one of Earth’s finite resources. We can’t make more of it! That’s a primary reason why land does not depreciate and increases in value.
Landlordship can be a hands-off bet, too. Because trust me, no tenant wants me in charge of the plumbing. With so many mobile labor marketplaces like Yelp and TaskRabbit available, maintenance requests were outsourced, and completed with a few taps of a finger. The ability to manage my building remotely allowed me to easily tackle revenue generation for my startup.
4. Owning property is a massive boost to your credit score
One of the lesser-known pros to being a property owner is how keeping in good standing with a mortgage reflects positively on your credit score. Most young professionals’ credit only reflects lines of credit from credit cards. When I mixed it up, adding installment debt (a mortgage) to revolving debt (credit cards), my score greatly improved.
A mortgage can account for about 10% of your credit score. As long as you pay your mortgage on time every time, the debt you take on for a home is considered responsible debt — the good kind. The result? A credit score to be proud of.
The benefits of a good credit score are obvious, but the fact that it’s tied to your mortgage was a perk I only discovered once I was in the real estate game.
I could keep going, but I’m sure you get the idea. Are there moments when I feel a pang of regret for not going in on that Hamptons share house with all my friends? Absolutely. But do I regret my leap into landlordship? No way, not for a second.
Purchasing real estate as soon as I was able changed my future physically and financially. It has generated opportunities that would not have been possible if I went the traditional savings route, or splashed out on too much David Yurman. So if you’re considering jumping into the world of landlordship I have only one question — why not?
Business News Governmental News Finance News
Need Your Help Today. Your $1 can change life.