In a nutshell, I'm 21 and I'll be starting a job soon which will give me a fair amount of spare income, which I would like to look into investing.

What are my options here? I'm considering investing in duplexes and multi-family units, and I'm guessing I'll let part of the rent pay off the mortgage while I direct the other rent into buying more property. But while this seems smart initially, I'm not sure where it's going in the long-term. As my rental income increases and my salary increases, more and more money will be available, but if I keep up that pattern all I'll have in 15 years is more apartments than I have time or interest in managing.

What else can I do? What options are there for diversifying assets in a reliable way that won't turn me into nothing more than a semi-professional property manager?

  • 6
    less than six figures? obscene amounts? enough for real estate? hahaha ok, well now I know all the places where you don't live.
    – CQM
    Commented Nov 17, 2012 at 14:59
  • 7
    All it takes is a stay at home spouse raising two kids to make "just short of six figures" a struggle to live on. Does your employer offer a matching 401(k)? Use that for part of your long term savings. Take it slow, you've not yet graduated yet already jumped to having so many rentals you don't want to manage them yourself. Come back after the first purchase, and let us know how that went. Commented Nov 17, 2012 at 15:20
  • 2
    If you are determined to retire in 20 years at age 41, you will likely live for nearly twice as long in retirement than you will have spent working. So be sure to take into account the fact that the usual rules (such as "4% of your nest egg" is a "safe rate of withdrawal" that ensures that with high probability your nest egg will not disappear before you die) are not applicable to your case: you will need a lot more money put away than the usual retiree in the mid60s. Also be aware that your future spouse might marry you for better or worse but likely not for lunch (starting in 20 years)! Commented Nov 17, 2012 at 18:59
  • 4
    @Aerovistae - I did not mean to discourage you, only to point out that your question assumes a hypothetical future that may not happen. It's great to have a long term plan, but neither you nor I can wave a wand and find you with 6 positive cash flow rentals. I wish you well, but the first purchase may change your approach. "Lord of an index fund." I love that line below. I was up to 4 rental properties, and after years of evictions, called it quits. Rent the movie "Pacific Heights" before buying the first one. Commented Nov 17, 2012 at 21:19
  • 2
    @Aerovistae, it is not as bad as Joe puts it. He is basing his comments on his experience. I had 2 existing properties at the start of 2007, one living in and one investment, I bought 2 more in 2007 and 6 more in 2008. In 2012 all our investment properties are positively geared ( and that is in Australia where we haven't had a property bust and mortgage interest rates are around 6%). We manage all our properties ourselves and select our own tenants. We hardly have any problems with our tenants who stay on avaerage 3 to 4 years. The task is to select the right type of tenants.
    – Victor
    Commented Nov 17, 2012 at 23:45

4 Answers 4


Your post seems to read as if you want to invest only in real estate rental properties as a start because they will be a reliable investment guaranteed to generate profits that you will be plowing back into buying even more rental properties, but you are willing to consider (possibly in later years) other forms of investment (in real estate) that will not require active participation in the management of the rental properties.

While many participants here do own rental real estate and even manage it entirely, for most people, that is only a small part of their investment portfolio, and I suspect that hardly any will recommend real estate as the only investment the way you seem to want to do.

Also, you might want to look more closely at the realities of rental real estate operations before jumping in. Things are not necessarily as rosy as they appear to you now. Not all your units will be rented all the time, and the rental income might not always be enough to cover the mortgage payments and the property taxes and the insurance payments and the repairs and maintenance and ... Depreciation of the property is another matter that you might not have thought about.

That being said, you can invest in real estate through real estate investment trusts (REITs) or through limited partnerships where you have only a passive role. There are even mutual funds that invest in REITs or in REIT indexes.

  • 2
    +1 for looking into the realities of being a landlord. I tried it for a while and I found being the lord of an index fund and age based portfolio let me sleep better at night.
    – MrChrister
    Commented Nov 17, 2012 at 16:43
  • 1
    +1 for mentioning REIT funds, which can be a great way to get exposure to the real estate market without putting all your eggs in a few properties. Aside from the decreased volatility, shares in an REIT are much more liquid than a physical property.
    – Jeremy
    Commented Nov 18, 2012 at 16:59

I compared investing in real estate a few years ago to investing in stocks that paid double digit dividends (hard to find, however, managing and maintaining real estate is just as hard). After discussing with many in the real estate world, I counted the average and learned that most averaged about 6 - 8% on real estate after taxes. This does not include anything else like Dilip mentions (maintenance, insurance, etc). For those who want to avoid that route, you can buy some companies that invest in real estate or REIT funds like Dilip mentions. However, they are also susceptible to the problems mentioned above this.

In terms of other investment opportunities like stocks or funds, think about businesses that will always be around and will always be needed. We won't outgrow our need for real estate, but we won't outgrow our need for food or tangible goods either. You can diversify into these companies along with real estate or buy a general mutual fund.

Finally, one of your best investments is your career field - software. Do some extra work on the side and see if you can get an adviser position at a start-up (it's actually not that hard and it will help you build your skill set) or create a site which generates passive revenue (again, not that hard). One software engineer told me a few years ago that the stock market is a relic of the past and the new passive income would be generated by businesses that had tools which did all the work through automation (think of a smart phone application that you build once, yet continues to generate revenue). This was right before the crash, and after it, everyone talked about another "lost decade." While it does require extra work initially, like all things software related, you'll be discovering tools in programming that you can use again and again in other applications - meaning your first one may be the most difficult.

All it takes in this case is one really good idea ...


Real estate investment is a proven creator of wealth. Check into the history of the rich and you will find real estate investment.

Starting your investment in multi-family is a great idea. It is a good way to gain experience in real estate while exponentially increasing cash flow. If you turn the properties over to a reputable property management company, your cash flow will be a little less but so will your headaches. (Expect to pay 8 - 10% of gross income.) You could start investing now by looking into discounted real estate such as foreclosures, tax sales, short sales etc while the market is still depressed. This way your return on investment should be higher.

From there you could expand into land development (i.e. subdivision) or commercial investments. Commercial properties with triple net leases can be a great low-stress investment opportunity (but they take more cash upfront).

Attending some local real estate investment classes would be a great idea for starters.


If you're looking for a well-rounded view into what it's like to actually own/manage real-estate investments, plus how you can scale things up & keep the management workload relatively low, have a look at the Bigger Pockets community.

There are blogs, podcasts, & interviews there from both full-time & part-time real estate investors. It's been a great resource for me in my investments.

More generally, your goal of "retiring" within 20 years is very attainable even without getting extravagant investment returns. A very underrated determinant in how quickly you build wealth is how much of your income you are contributing to investments. Have a look at this article: The Shockingly Simple Math Behind Early Retirement

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .