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This article will paint a grim picture of the current generation of millennials finding affordable housing. Then, it will paint a worse picture of their kids being able to become homeowners. The truth is, as money prints, asset prices will continue to rise. Those with assets get richer, those without become poorer. It sucks.
I recently read an article on BiggerPockets about the current millennial housing crisis. It got me thinking about the topic again. I had always felt that something was out of whack regarding the difference in wages and housing costs. I wrote an article about it roughly three months ago called “Our Children Need Financial Education and Assets.”
Let’s address the broader issues first and then start working towards a solution. Look at this fun fact. We bought our third house in March 2020 for $340,000. I get an email in March 2021 from Zillow saying that the home is worth an estimated $382,000.
Let’s dissect this for a moment. In exactly one year, the price of our home goes up
12.35%. This number is insane. Now imagine if I was a younger millennial saving for a home. I am doing everything right, I have $60,000 saved and I am close to my 20% down payment. In one year, I need another $8,000 to close the gap.
Moreover, there are bidding wars over houses all across the country. Even if you get home, people are leveraging 30-40 years of work to get into these homes. The cost of housing is so ridiculous that you may never be able to afford to stop working.
The Advantages of Adult Children Living at Home part II
Now you have a house, but all your other bills are still growing as well. You have the wedding, student loans, wedding rings, credit cards, private school, vacations, car payments, and furniture. “Living a Middle-Class Life is Stressful.”
With all this madness going on, younger people are postponing getting married and having children. As a provider, I know the feeling. Providers want to ensure they have a clear shot at being financially viable before they match. It is the prudent thing to do, and I don’t blame anyone. However, there is almost no chance of becoming financially stable.
The best chance is to find a somewhat stable job and live so far below your means that you may as well be renting a cardboard box. The world has made it hard for ordinary people to live everyday lives.
All this stress and angst passes on to our children as well. With the parents (us) working until we are 80 to pay for our homes, our children will already be 50 years old- signing them up for the rat race alongside us. How can we spend Christmas together when everyone is working to pay off their homes?
Mortgage Zero. Now that I have presented the problem, it is time to find a solution. It is simple. Until you are financially independent, you should not attempt to live alone. What does this mean? I laid out the groundwork in my article “Mortage Zero.” It means live with your parents as long as you can. You will help them with their mortgage while you save for yours.
How Do You Define “Being Rich?”
When you do get home, have roommates until you can live without working a job. Being work-optional is called achieving financial freedom. The money collected from roommates is the purest, most incredible money created. It is free money, printed, and handed to you. The money from renting rooms is already in an infinite return.
Imagine receiving $1,600 a month just for waking up in the morning. This money goes straight from your pocket into the stock market, where it earns 5% dividends and 5% capital appreciation. Without having a few assets in an infinite return, you are destined to stay in the rat race. My wife and I saved and invested $100,000 in less than two years because of renting rooms and leveraging financial education. You can, too, if you can get past sharing your home.
Zero Down. Everyone needs to understand how to buy a home with zero or no money down, to the point that kids may need to join the military for four years to leverage the VA Loan. That is how vital homeownership is. Luckily, I wrote an article on this topic called “Maximum Leverage.”
Why Real Estate is the I.D.E.A.L. Investment
House Number 2. Now that you have bought a home and are renting rooms, Airbnb’ing, renting out RV lots, running a garden, etc., it’s time to think bigger. I started a series called “Creative Financing in Real Estate 101” that will teach you how to use creative techniques to obtain more housing. We will need these techniques because we are going to be buying more homes. Yes, I know you want to be comfortable and not worry about being a landlord. Too bad. Our kids need us. Nothing we do after age 40 should be for ourselves. We should be laser-focused on ensuring our kids stay on the path to wealth.
The funny part is that as my wife and I continue to push forward with our goals to better our kids’ lives, we have become even closer. It is a shared burden, and we love doing it all this together. We got out of debt together; now, we are building our investment portfolio, real estate portfolio, and royalty portfolio. It is incredible to see money coming in from all angles and not wanting to spend any of it. Our higher purpose is to ensure all our generations succeed. I digress.
Real Estate for College. The concept of using real estate to pay for college is something I have been kicking around for a while. I was talking to my oldest about it about a year ago. But I read an article, again on BiggerPockets, that freshened it in my mind.
I am starting a series doing a deep dive on leveraging real estate to pay for college. I already have eight parts planned. As I said, I already have a series called Creative Financing in Real Estate 101. Bear with me; I am only one man.
How to Leverage Real Estate at Any Age
As it stands, I write a daily article on one of each of my five topics in order: financial mindset, retirement, investing, real estate, and business. So to finish both my series will take roughly three or four months. Stay tuned.
Key Takeaways:
1) The housing situation is only getting worse.
2) Everyone is waiting longer and longer to get married and have kids.
3) We need to buy housing with zero or low money down.
4) Use leverage, but also use shared housing to lower costs to an absolute bare minimum.
5) Once we have a good amount of savings, use creative financing to obtain more housing.
6) Use real estate to pay for college for our children.
7) Children can leverage real estate at an earlier age to build even more wealth from the beginning.
I hope I conveyed the gravity of the situation. If you do not act fast, you will fall behind. It seems that the housing market is appreciating at about 10% a year. Foreigners are buying our homes and renting them back to us. We have to gain control by sharing and working together. It is the only way.
Trust me; I wouldn’t believe me either. It is hard to think that by renting rooms, you can begin your path to financial independence. But, my wife and I have never had more financial freedom in our lives. It feels good to receive a $30 dividend and buy lunch with it. Or get $800 from a room rental and purchase something for the house. Trust me; it is a life changer for our children and us.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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