Society (especially people in my age group) has a tendency to not give millennials and younger adults the respect that is due. There is this preconceived notion that they’re all jobless, unmotivated and living in their parents’ basement. Maybe this is true for some, but most (the ones I know at least) are working hard and creating a future for themselves. I love to see young adults making wise investment decisions to set themselves up for financial freedom. My nephew is one such “millennial” with a W-2 job, who is starting plans and investing for additional streams of income.
Millennials Can Find Investing Opportunities, Too
Last week we had a conversation about an opportunity he’s looking into. He’s a young 30-something engineer who travels a lot for his company to various rubber and plastic product factories to help them improve operations and systems. He makes a decent income and just bought a home about two years ago in the Kansas City area.
I have to give him serious credit for the work he put into his home. He has no mortgage and estimates he can probably sell it now for $300-$400k. He’s going to be able to harvest substantial equity from this house. Since he bought his home, he’s been thinking of ways to create streams of income. This was before he even knew the increase in value.
Here’s where the opportunity comes in…
His company is interested in leasing a storage space and agreed that if he can find it, they’ll lease from him.
We kicked around a lot of ideas about:
- interest rates
- amortization schedules
- how much is reasonable to pay per square foot
- how to make the best use of the space
- what else can be done on the 8 acres of land available around the facility. (For example, he could rent out lots for boat or RV parking.)
Needless to say, we came up with a lot of exciting ideas.
One thing we spent time discussing is the lease term, should he purchase the facility. He is used to the concept of a 3-year lease, whereas I am used to an 8-10 year lease. I recommended to him, the longer the lease, the better. Otherwise, he runs the risk of buying the warehouse, them moving out after a couple years and being stuck with no tenants, no cash flow.
With one stream of cash flow and a W-2 job, he’d be in a great position to set up a second stream. He also had an idea to use some of the equity to buy a duplex, where he could live on one side and rent the other side out to pay for his mortgage. It might not cover all costs, but it’s a great strategy for someone young and just starting out.
Millennials Have Challenges, But Investing When You’re Young Is Totally Possible
So many in his age group, late 20’s-30’s are not even buying a house because they’re thinking about paying off student debt! They can barely think about what’s happening next week.
That’s why I’m so inspired by his long-term thinking and setting up streams of income now. If for whatever reason his job went away, he would still be protected. I wish at that age, I’d had the same foresight and interest.
For those more seasoned investors out there, think about mentoring a young person about what you’ve learned. It’s always nice to help someone along the way and teach them what you know. I believe we have a duty to pass along the insights we’ve gained to our younger generations.
Frankly, in talking to both my nephews, I am learning a lot. They’re both engineers and think a lot differently than I do. For me, the biggest takeaway hasn’t been what I can instill in them, but what I am learning from them.
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