Owning a piece of real estate in your 20s seems to be an unrealistic prospect. Between living on your own and paying all your bills, some people at this age feel that they don’t have the financial and emotional capacity to buy their first house and lot or condo unit. Being in your 20s typically involves working in entry-level jobs to vie for a higher position, shifting to a new career, or racking up school units to finish a Master’s degree. Can it also mean being a condo owner?
Chartered financial analyst Gavin Lee said, when compared to baby boomers (born between 1946 and 1964) and generation X (born between 1964 and 1981), millennials, or people who were born between 1981 and 2001, are the easiest to convince to put money in potential investments simply because they have money tucked away as savings. Millennials are taught early to save, thanks to their parents.
However, saving money can only go as far as the millennials’ skills in financial matters. Lee shares the same conclusion as COl Financial Philippines Business Development consultant Marvin Fausto, who said millennials lack the financial literacy when it comes to spending money.
Why real estate?
Investing in real estate has been an attractive option to many Filipinos. For homeowners, owning real estate property will help you save money in rental costs (if you intend to use it as your primary residence like a condominium unit or even a house and lot), or use it as a financial leverage should you need to fund a huge expense via a business line of credit or a loan. Moreover, owning real estate guarantees that you have a physical asset of financial value under your name, which appreciates over time in an aggressive market.
In the Philippines, condominium units are a popular option because of its potential to earn passive rental income. The demand for residential condominiums are foreseen to keep on rising, especially in high-density locations, like central business districts.
Invest in yourself early
Whether you are a millennial or part of the older generation, you can invest in real estate and be a condo owner as long as you have a steady source of income and a good-looking financial profile. However, it’s better to start investing early on so you can enjoy the benefits of property ownership and potentially earn thousands of pesos in increasing rent money that you might need at the next stage in your life, whether it’s marriage or growing a family.
Here are some steps that you can take toward owning a condo in your 20s:
1. Determine your long-term goals with your potential investment.
Before you dive into buying a condo, determine first your long-term plans and consider scenarios that would affect your condo ownership.
If you’re buying real estate as an investment to sell in a few years, is it worth paying more for the location in the hopes that the condo’s value will appreciate in the future? Or, are wedding bells in the cards for you? Do you see yourself putting your future condo for lease off the market? Will you have kids by that time, and can your condo accommodate the lifestyle change?
Answering these types of questions will help you put things in perspective and give you a clear idea of what you want to happen with your condo investment.
2. Start small.
Naturally, majority of millennials invest in starter condos, which are usually smaller, affordable, and are located near a busy business center. These condos, which range from studios to one-bedroom units, will come with basic amenities.
If you’ll be on the hunt for one, choose a condo that will fit your lifestyle requirements. It should be located in a nice neighborhood, accessible to certain establishments like banks, supermarkets, convenience stores, restaurants, and recreational space (ex. park), and is commuter and transport friendly. If you’re looking to put the condo for rent after your purchase, you need to make sure the condo you’ll own will also appeal to prospective renters in the future.
3. Have an attractive financial profile.
Getting a home loan approved is a huge part of the waiting game in property buying. Having a financial profile that will set your credibility as a financially-capable, responsible borrower opens you to several home financing options. Moreover, having access to many home financing options allows you to choose the best one that works for you.
Almost all condo developers offer in-house financing, with some coming with more relaxed requirements. However, they might come with higher interest rates. Banks, though they typically have stricter requirements, offer more affordable rates. Some financial institutions come with fixed-interest terms of up to five years, which will be good for your home buying fund.
4. Get a second job.
If your income will not allow you to meet future amortizations of a potential condo or even set up a significant amount for down payment, you may want to consider earning extra cash on the side.
Job sites and freelance job platforms offer part-time to contract jobs that you can do outside work hours or on weekends. You can also consider selling stuff on the side, like food, makeup, clothes, and other retail items. If you happen to be proficient at something, you can do consultancy work or train someone for a fee.
However, make sure that your second job or work does not affect your primary job or violate the law. You don’t want to risk your primary source of income because you’ve put more hours on your second job or got called by HR for doing something that violates company policy.
5. Get a co-signer.
How is a co-signer a good sign of financial independence? It’s certainly not a symbol, but it will definitely help you to achieve it. The local financial industry does not discriminate against young lenders. But the reality is that it’s more comfortable lending money to people with excellent credit and employment, and an income that’s no less than three times more than your yearly amortization rates—things that your parents or other family members may have.
But if you prefer to apply for home financing on your own, craft a home buying budget based on what you can realistically afford. If you think your savings isn’t enough to take the home-buying plunge, put them in a financial product that allows you to add increments and can earn more in compounding interest.
Buying a home in your 20s is certainly feasible and there are plenty of affordable options that will allow you to do so. Yes, youth comes with a lot of financial and lifestyle considerations. However, the key to a first successful real estate investment is to be consistent and disciplined in establishing good financial habits. In no time, you’ll be on your way to making a milestone that will make mom and dad proud.