Real estate investments make money through appreciation and rental income. Real estate can diversify a portfolio and act as a hedge against inflation, since landlords can pass rising costs to tenants. But the down payment on multifamily investment properties? At least 20%, or 25% to get a better rate.
It’s true that eligible borrowers may use a 0% down U.S. Department of Veterans Affairs (VA) loan for a property with up to four units as long as they live there. However, those loans serve a relatively small number of people and are considered residential financing. Properties with more than four units are considered commercial.
So how can a cash-poor but curiosity-rich person tap the potential of multifamily properties? By not footing the entire bill themselves.
Key Points
• Real estate investments offer potential income through appreciation and rental income, providing a hedge against inflation.
• Eligible borrowers can use a 0% down VA loan for properties with up to four units.
• Various financing strategies enable purchasing multifamily properties with little to no personal money upfront.
• Options such as finding a co-borrower, securing hard money loans, or obtaining seller financing can facilitate the acquisition.
• Indirect investment methods include crowdfunding and real estate investment trusts (REITs), allowing participation without direct landlord responsibilities.
Can You Buy a Multifamily Property With No Money?
When you buy real estate, you typically have two options: Buy with cash or finance your purchase with a mortgage loan.
There are various types of mortgages. If you take out a home loan, you’ll likely need to pay a portion of the purchase price in cash in the form of a down payment. The minimum down payment you make will depend on the type of mortgage you choose — the average down payment on a house is well under 20% — and it will help determine what terms and interest rates lenders will offer you.
This money needs to come from somewhere, but it doesn’t necessarily need to come from your own savings account. When investors buy multifamily properties with “no money down,” they use little or no personal money to cover the upfront costs.
If you don’t have much cash of your own, there are several ways that you can fund the purchase of a multifamily investment property.
💡 Quick Tip: Jumbo mortgage loans are the answer for borrowers who need to borrow more than the conforming loan limit values set by the Federal Housing Finance Agency ($832,750 in most places, and up to $1,249,125 in high-cost areas). If you have your eye on a pricier property, a jumbo loan could be a good solution.
6 Ways to Pay for a Multifamily Property
Find a Co-Borrower
If you don’t have the money to front the costs of a property yourself, you can consider partnering with a family member, friend, or business partner. They may have the money to cover the down payment, while you pull your weight by researching properties or managing them.
When you co-borrow with someone, you’ll each be responsible for the monthly mortgage payments. You’ll also share profits in the form of rents or capital gains if you sell the property.
Give an Equity Share
You may give an equity investor a share in the property to cover the down payment. Say a multifamily property costs $750,000 and you need a 20% down payment. An equity investor could give you $150,000 in exchange for 20% of the monthly rental income and 20% of the profit when the property is sold.
Borrow From a Hard Money Lender
Hard money loans are offered by private lenders or investors, not banks. The mortgage underwriting process tends to be less strict than that of traditional mortgages. Depending on the property you want to buy, you may not need a down payment.
These loans (also called bridge loans) have high interest rates and short terms — typically one to three years — with interest-only payments the norm. For this reason, they may be used by investors looking to flip the property in short order, allowing them to make a profit and pay off the loan quickly.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
House Hack
House hacking refers to leveraging property you already own to generate income. For example, you might rent out an in-law suite or list your property on Airbnb.
Another option: You could rent out your primary residence and move into one of the units in a multifamily property you buy. This way, you’d probably generate more income than if you had rented out the unit to a tenant.
Finally, you could hop on the accessory dwelling unit (ADU) bandwagon if you own a single-family home. ADUs can take the form of a converted garage, an attached or detached unit, or an interior conversion. The rental income can be sizable. To fund a new ADU, homeowners may tap home equity, consider cash-out refinancing, or even take out a personal loan.
Seek Seller Financing
If you don’t have the cash for a down payment on a property, you may be able to forgo financing from a lending institution and get help from the seller instead.
With owner financing, there are no minimum down payment requirements. Several types of seller financing arrangements exist:
• All-inclusive mortgage: The seller extends credit for the entire purchase price of the home, less any down payment.
• Junior mortgage: The buyer finances a portion of the sales price through a lending institution, while the seller finances the difference.
• Land contracts: The buyer and seller share ownership until the buyer makes the final payment on the property and receives the deed.
• Lease purchase: The buyer leases the property from the seller for a set period of time, after which the owner agrees to sell the property at previously agreed-upon terms. Lease payments may count toward the purchase price.
• Assumable mortgage: A buyer may be able to take over a seller’s mortgage if the lender approves and the buyer qualifies. Federal Housing Administration (FHA), VA, and USDA loans are assumable mortgages.
Invest Indirectly
Not everyone wants to become a landlord in order to add real estate to their portfolio. Luckily, they can invest indirectly in REITs and through crowdfunding sites, for example.
The Jumpstart Our Business Startups Act of 2013 allows real estate investors to pool their money through online real estate crowdfunding platforms to buy multifamily and other types of properties. The platforms give average investors access to real estate options previously available only to the very wealthy.
REITs are companies that own various types of real estate, including apartment buildings. Investors can buy shares on the open market, and the company passes along the profits generated by rent. To qualify as a REIT, the company must pass along at least 90% of its taxable income to shareholders each year.
As far as investment opportunities go, REITs can be a good choice for passive-income investors.
💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.
The Takeaway
Buying a multifamily property with no money down is possible if you take roads less traveled, such as leveraging other people’s money. And if you have the means to make a down payment on a property, your first step is to research possible home mortgage loans.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
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FAQ
Can I buy a multifamily home with an FHA loan?
It is possible to buy a property with up to four units with a standard FHA-backed mortgage if the buyer plans to live in one of the units for at least a year. The FHA considers homes with up to four units to be single-family housing. The down payment could be as low as 3.5%. There are loan limits.
A rarer product, an FHA multifamily loan, can be used to purchase a property with five or more units. The down payment is higher, and you’ll pay mortgage insurance premiums upfront and annually for any FHA loan.
Is a multifamily property considered a commercial property?
Properties with five or more units are generally considered commercial real estate. Commercial real estate loans usually have shorter terms, higher interest rates, and different down payment requirements than residential loans. They almost always include a prepayment penalty.
How can I buy a property without a down payment?
You can borrow the full purchase price of a property without having to put down a deposit of your own, or you could find a partner to put up the money. This could be a family member, a friend, a business partner, or even an equity investor.
Photo credit: iStock/jsmith
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¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.
Each year brings new challenges for investors in terms of their investment strategies. Given the level of uncertainty in the U.S. and globally in 2026 so far, investors may want to ensure their portfolio can ride the waves for the coming months and beyond.
While it’s smart to keep an eye on the current economic and market climate — e.g., inflation, interest rates, the impact of certain technologies, tariffs — it’s just as important to anchor your investing strategy in time-tested principles of good investing: by knowing your current financial situation, your goals, time horizon, and risk tolerance.
With those as a base, here are eight investments to consider now, as well as some different types of investment accounts to know about.
Key Points
• While every year brings a new set of considerations for investors, it’s worth keeping a few fundamentals in mind.
• Deciding where to invest your money will depend on your goals, risk tolerance, and time frame.
• Newer investors can consider several investments to get started, including stocks, bonds, and mutual funds or ETFs that invest in those asset classes.
• Whether you tilt toward higher risk/high reward investments or lower risk/lower reward is something to consider in light of your overall goals and situation.
• Your goals will also help determine the best type of account to use for your investments.
Before You Invest Your Money
If you’re wondering where to invest right now, there are several answers and investment opportunities out there. But before you do anything, though, you’ll need to make some key decisions.
Your Current Financial Situation
No one invests in a vacuum, and your current financial situation will not only inform your goals, but potentially your timeline, risk tolerance, and how much money you have to invest.
Your age, your income, how much money you hope to invest each week or each month, whether you’re in debt — these personal factors are important to consider as you begin the self-directed investing process.
Goals
When deciding where to invest your money, the next step is to understand your goals: Whether you hope to earn additional income, or you’re saving for college, or planning for your retirement, it’s essential to know the main purpose of your investment plan.
Knowing your investing goals will help determine your timeline, and from there your risk tolerance — which can help you narrow down the investments you finally choose for your portfolio.
Your Timeline and Risk Tolerance
The time frame in which you hope to accomplish your goal is also important. For example, a longer time horizon might allow you to take on more risk with your investments. A shorter time horizon, where there’s a smaller margin to recover from any volatility, could inspire you to select lower-risk investments.
However, these choices ultimately depend on your personal tolerance for risk. If you can stomach a greater possibility of losing money when you invest, you likely have a higher risk tolerance. If you dread the idea of losses, you may have a lower risk tolerance.
There’s no right or wrong way to make these decisions. It’s important to take each factor into account in order to decide where to invest your money right now.
Learning About Investment Options
Once you’ve identified the main ingredients in your investment plan, you can begin to consider the type of investment account that makes the most sense for you, as well as exploring the various asset classes you can invest in.
A Few Types of Accounts
Your goal will likely help you decide what type of investment account is best for you.
• If your goal is to earn additional income … you may want to consider an online investing account or taxable brokerage account.
• If your goal is to save and invest for retirement … you may want to open an IRA, or fund your workplace retirement account, if you have one. Sometimes it’s possible to do both.
• If you’re thinking about college for your kids … a 529 college savings plan might be the way to go.
Those are just a few of the choices to think about. Again, knowing your personal goals will guide you.
In order to determine the asset classes that might work for your investment plan, it helps to understand the risk profile of a given investment. For example, stocks are generally considered higher-risk assets because they’re more volatile, compared with bonds, CDs, or money market accounts, which are lower risk.
The advantage of higher-risk investments is the potential for seeing bigger returns (a.k.a., profits). The downside, though, is the risk of losing money. Conversely, investing in less risky assets can help minimize potential volatility and losses, but the gains here are typically smaller. As the saying goes: High risk, high reward; low risk, low reward.
8 Ways to Invest Your Money Now
As noted, there are many different assets that investors can add to their portfolio. Some make more sense in certain situations than others — again, depending on your goal, timeline, and risk preference. That said, the following eight investments are worth considering now.
1. Stocks
What it is:Investing in stocks means having shares of ownership in a company or companies. When an investor buys a share in a company, they own a small portion of that company. Shareholders may even receive voting rights. This is why stocks are sometimes referred to as equities; investors now own equity in that company.
How it works: A stock can earn money in two ways. The first way is through the value of shares appreciating over time; this is called capital appreciation. The second is through periodic cash payments made to shareholders, called dividends.
Stock prices can be influenced by both internal and external factors, such as a new product launch or broader national or global events like a political event or natural disaster. Because the nature of business is highly unpredictable, stock prices can be volatile.
2. Bonds
What it is: When buying a bond, investors essentially loan money to a government, company, or other entity for a set timeframe. The bond guarantees that the investor will get regular interest payments and a return of their principal when the bond matures.
How it works: Investors buy bonds for a specific amount (i.e., the face value) and for a certain time period, called the bond’s maturity. The bond pays a fixed amount of interest, the coupon rate, typically every six months or year, and the principal is repaid at the maturity date.
Bonds are generally categorized as fixed-income investments. And while there are bonds with different levels of risk, bonds are considered conservative because they are less volatile than stocks.
• Government bonds, also known as Treasury bonds, bills, and notes, are considered lower risk because they’re backed by the full faith and credit of the U.S. government.
• Municipal bonds, or muni bonds, are a type of local government bond: States, cities, and counties issue munis to finance capital projects like hospitals, schools, and roads.
• Corporate bonds, which are issued to do research, develop products, and other aims. These can pay higher interest, but corporate bonds can also be higher risk.
Generally, though, bonds are often considered a safer, more stable investment that may be more appropriate for investors who aren’t as comfortable with the volatility of the stock market. That said, bonds are not completely without risk, and it is possible for bonds to lose value.
What it is: Investing directly in stocks or bonds isn’t the only option available to investors. Mutual funds, which are pooled investments, present another way to invest in certain markets.
How it works: Think of these funds as baskets that hold an assortment of investments, such as stocks, bonds, real estate holdings, and much more. Funds provide investors with a basic level of diversification, and can be more affordable than buying individual securities. That said, mutual funds charge investment fees that can impact returns over time.
Some mutual funds only invest in stocks, or equities. Some only invest in bonds. Some invest in a mix of asset classes. There are thousands of mutual funds, and many brokerages or online investing platforms offer special screening tools to help you find the types of funds that suit your needs.
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4. Index Funds
What it is: A common type of mutual fund is something called an index fund. These are investment funds that track an index, which is usually a specific part of the broader market. For example, there are index funds that track the S&P 500 index or the Russell 2000 index of small U.S. companies — and thousands of other indices, as well.
How it works: Because index funds mirror market indices, and aren’t managed by live portfolio managers, they’re usually among the less expensive types of funds. This style is called passive management, and some investors like to include passive investments in their portfolio because, over time, these securities can add to portfolio returns.
That said, there is always a risk of loss, as market indices can also decline, bringing down the corresponding funds.
5. Exchange-Traded Funds (ETFs)
What it is:Exchange-traded funds, or ETFs, are similar to mutual funds in that they’re effectively a basket of different investments, combined into one security. Investors can buy shares of the fund, but unlike mutual funds, it’s possible to trade ETF shares throughout the day.
How it works: ETFs are a type of pooled investment fund, but owing to the way the underlying assets in the fund are created and redeemed, these funds can be more liquid than mutual funds. ETFs tend to be passively managed, and there are thousands of ETFs investors can choose from, encompassing all sorts of different market indexes, sectors, and asset classes.
6. Options
What it is: An option is a derivative contract that’s tied to an underlying asset, such as a stock. An option contract represents the right, but not always the obligation, to buy or sell a security at a fixed price by a specified date.
How it works: Instead of buying actual shares of a stock, trading options allows the investor to potentially profit from price changes in the underlying asset without actually owning it.
Options are used with leverage, and are a more sophisticated type of investment than, say, stocks or bonds. Options are fairly easy to trade, but they are complex and high risk.
You’d likely want to discuss options trading or investing with a financial professional before you get into it.
7. Real Estate
What it is:Real estate investing can include buying and managing physical property — houses, commercial buildings, etc. — or certain real estate-oriented investment vehicles.
How it works: While many investors may not have the capital laying around to buy a house for investing purposes, they can buy real estate stocks, mutual funds, ETFs, or consider REITs, or real estate investment trusts to get real estate exposure into their portfolios.
Real estate is sometimes considered an alternative investment, and as such it can be higher risk, but because real estate values don’t move in the same direction as the stock market, investing in real estate can provide diversification and a hedge against inflation.
8. Certificates of Deposit (CDs)
What it is:Certificates of deposit, or CDs, should also be on investors’ radar as part of the cash or cash-equivalent part of their asset allocation. CDs are bank products, and are somewhat like savings accounts, in which investors “lock up” their funds for a predetermined period of time in exchange for interest rate payments.
How it works: Functionally, CDs are similar to bonds in that you get a fixed rate of interest until the CD matures, at which time you get both principal and interest. But you may owe fees if you need to pull your money out of a CD before the maturity date.
On the upside, because these are bank products, when you open a CD at an FDIC-insured bank or NCUA-insured credit union, your deposits are covered up to $250,000, per depositor, for each ownership category (e.g., single, joint, etc.), at each insured institution.
Understanding Cash in Your Portfolio
In some instances, it may make the most sense to keep the money for a particular goal in cash, for easy access, and to minimize risk. Here are some traditional options that are generally available through banks and credit unions.
As such, these accounts are typically FDIC-insured at a bank, or NCUA-insured at a credit union. This means deposits are covered up to $250,000, per depositor, for each ownership category (e.g., single, joint, etc.), at each insured institution.
Savings accounts at a traditional bank or credit union: This is likely the most familiar option. Traditional and commercial banks remain popular for their large geographical footprint. Note that many traditional banks tend to pay a relatively low rate of interest on any cash holdings.
Online-only checking and savings accounts: Online-only banks and banking platforms may offer a slightly higher yield than a savings account at a commercial bank. Additionally, many do not require minimums or charge monthly maintenance or account fees.
Money market accounts (MMAs): A money market account (MMA) is a type of deposit account, like a savings account, typically offered by banks and credit unions. MMAs may offer higher interest rates than standard savings accounts, and they usually include some checking account features, i.e., a debit card or check-writing.
When considering cash as an asset class, consider the risk and reward tradeoff, just as you would for any other investment type. Although cash might not be risky when considered in terms of volatility, it does carry the risk of losing value over the long-term due to the effects of inflation, or prices rising over time.
Beginner-Friendly Places to Invest
If you’re a beginner investor looking for places to put your money, it may be beneficial to revisit some basic investing rules or guidelines. For instance, you’ll likely want to build an emergency savings fund before focusing on your stock portfolio.
But assuming you’re ready to put your money in the market, or otherwise start building your investment portfolio, many beginners start with some basic investment funds. ETFs are a popular choice, as are mutual funds — but your choices will depend on your goals and financial situation.
If you’re not sure where to turn or what to do, consider speaking with a financial professional for advice.
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Creating a Goals-Based Strategy
Contrary to the way some new investors are encouraged to think about investing, it rarely makes sense to try to pick “hot” stocks right out of the gates.
Instead, take a step back and consider the bigger picture of your life and finances in order to identify one or more investing goals. Now that you have a better understanding of the investing process and some solid investment choices, you can start to connect the dots to make your own investment plan.
For example, if your goal is to save for retirement, you might want to think about using lower-cost investments like mutual funds or ETFs, and using a mix of equity funds and bond funds in your portfolio. If you have many years until you retire, and you can stomach a little extra risk, you may want to tilt your portfolio toward equities to maximize potential returns.
But if the volatility of such a mix makes you uncomfortable, consider a different balance that includes more fixed-income and/or cash, which could help mitigate the risk of equities.
Risk vs Reward
The asset allocation decision really boils down to an examination of an investment’s risk and reward characteristics in order to determine whether it’s a good fit for you and your goals.
Risk and reward are two sides of the same coin. Investors cannot have one without the other. For more reward potential, an investor will have to take more risk. There is no such thing as an investment that produces returns with no risk.
Let’s consider two hypothetical investment goals: $1,000 for a down payment and $1,000 for retirement. How do goals lead one down the path of where to invest?
• First, the $1,000 for a down payment. If the money is designated for use in the next few years, the risk of losing any money in a volatile investment may outweigh the potential to earn investment returns. Therefore, it might be best to keep this money in a lower-risk investment or cash equivalent.
• Next, the $1,000 for retirement. Many retirement investors have the goal of seeing growth over the long-term. Because of this longer time horizon, there should be enough time to recover after spates of volatility. Therefore, it may be suitable to create a portfolio that is primarily invested in the stock market or a combination of stocks and bonds.
Retirement investors close to retiring may opt to consider some exposure to bonds for both diversification purposes and to lower the overall volatility of the portfolio.
Ultimately, a person’s comfort level with risk vs. reward will determine their specific allocations. And it’s worth noting that an investing strategy isn’t stagnant. As a person ages, their goals and investing strategy will likely need to evolve, too.
Opening the Right Account
Knowing how to invest your money is one step, knowing where to invest your money is the next.
Retirement Accounts
It is not uncommon to hear someone refer to a 401(k) or an IRA as if one of those is itself an investment. But retirement accounts are not investments — they are tax-advantaged accounts that can hold investments.
You contribute money to a retirement account, and then those funds are used to purchase investments: e.g., stocks, bonds, mutual funds, and so on.
While retirement account holders can select the investments for their account, in a plan sponsored by your employer like a 401(k), the investing might be automated — and your money could be invested by default into a money market fund or a target date fund. Hence the confusion about the 401(k) being an investment itself.
Retirement accounts offer a tax benefit, like tax-free growth on your investments, which make them suitable vehicles for long-term goals. But because they offer a tax benefit, they come with more restrictions. For example, some retirement accounts, like 401(k) and traditional IRAs, levy a 10% penalty on money withdrawn before age 59 ½, with some exceptions.
Also, there are limits to how much money can be contributed annually to retirement accounts.
Brokerage Accounts
It is also possible to invest in an account that is not designated for retirement. At a brokerage firm, these are often simply referred to as brokerage accounts.
Brokerage accounts are considered taxable accounts. You pay taxes on realized capital gains — meaning, when you sell investments and actually reap a gain or loss. Because dividends are typically paid in cash periodically, you would owe tax on the dividend amount.
In contrast, tax-advantaged retirement accounts only involve paying taxes when you make a contribution or withdraw your money, depending on the type of account.
It all comes down to the individual. You’ll need to look at your risk tolerance, time horizon, and personal preferences to determine the most suitable investing path or accounts.
For short-term goals that require more flexibility, a non-retirement account may be a better choice. Because there are no special taxation benefits, there are generally no rules about when money can be withdrawn or how much can be contributed. Because of this, non-retirement accounts can also be a good place to invest for those who have met their maximum contribution amount for the year in their retirement accounts.
The Takeaway
At any given time, there are a plethora of potential investments for your money. You can invest in stocks, bonds, real estate, commodities — the list is long. But each has its own considerations and risks that must be taken into account. Overall, your goals and financial situation are the most important things to keep in mind when deciding where to invest your money.
As for where to open an account, new investors may want to focus on an institution or platform where they are able to keep costs low. There’s not a lot that investors can control, like investment performance, but how much they pay in fees is one of them.
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FAQ
Which investment gives the highest returns?
Higher-risk investments tend to deliver the highest returns, but they can also deliver the biggest losses. These can include certain stocks or investment funds, particularly those focused on market segments that are risky or volatile. It’s important to invest with an eye to how much risk makes sense for you.
Where can you invest your money as a beginner?
Beginners can choose a number of investment vehicles to invest their money. Some choices include investment funds like ETFs or mutual funds, which tend to be lower cost and provide some basic diversification.
Where can you invest money to get good returns?
There are numerous investment vehicles that might provide returns, but those returns are never guaranteed, and can be thwarted by down markets. It might be wiser to consider an overall strategy that can help your money grow, so you can reach your goals, rather than looking for a single investment that might hit the jackpot.
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Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
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Investment Risk: Diversification can help reduce some investment risk, but cannot guarantee profit nor fully protect in a down market.
Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Investment opportunities are different ways to put your money to work, and they can include any number of things, such as buying assets and waiting for them to appreciate, or investing in real estate or a business opportunity.
There are varying degrees of risks and potential rewards with each option, but if you’re looking to put your money to work this year, you may want to consider a range of ideas. Every idea needs to be vetted, of course, and it’s important to do your due diligence before investing. Only you can decide which opportunities make sense, given your goals and long-term plans.
Key Points
• Investment opportunities may include buying assets, investing in real estate, or investing in a business opportunity.
• Each opportunity comes with varying degrees of risk and potential rewards.
• Examples of investment opportunities may include bonds, real estate or REITs, ETFs and passive investing, automated investing, and investing in startups.
• Buying precious metals like gold and silver are also potential investment opportunities.
• Investors should do their due diligence and consider their goals and long-term plans before investing.
1. Bonds
Bonds are a common type of investment, and are actually debt instruments that are often used to diversify or balance the risk profile of a portfolio.
Types:
There are many different types of bonds. The most common, and generally considered to be the lowest-risk category of bonds, might be the U.S. Treasury bonds, typically called treasuries.
The Treasury regularly auctions off both short-term and long-term Treasury bonds and notes. These bonds are, generally, thought to be one of the safest investments on the market, as they’re guaranteed by the U.S. government. The only way for investors to lose their entire investment would be for the U.S. government to become insolvent, which has never occurred.
Governments are not the only entities that issue bonds. Corporations can also raise money by offering corporate bonds. These types of bonds tend to be riskier, but they often pay a higher rate of interest (known as the yield).
Benefits:
Investing in bonds is relatively low-risk compared to assets like stocks. So, it can be a conservative investment strategy, designed to seek a small-but-safe return.
Governments, municipalities, and companies issue bonds to investors who lend them money for a set period of time. In exchange, the issuer pays interest over the life of the loan, and returns the principal when the bond “matures.” Individuals can buy them on bond markets or on exchanges.
Upon maturity, the bond-holder gets their original investment (known as the principal) back in full. In other words, a bond is a loan, with the investor loaning another party money, in exchange for interest payments for a set period of time.
Risks and Challenges:
Bonds generally don’t generate returns like stocks or other assets do. So, investors may want to temper their expectations. Aside from that, bonds also have risks, including that the issuer could default, changes to interest rates can affect their values.
How to Get Started:
Investors can purchase bonds through their brokerage account, or even directly from issuers, in some cases. For example, it’s possible to buy Treasury bonds directly from the U.S. government.
2. Real Estate or REITs
Real estate is the largest asset class in the world, with a market cap well into the hundreds of trillions of dollars. Accordingly, there are a lot of opportunities for investors to add real estate, in some form, to their portfolio.
Types of Real Estate Investments:
When thinking about investing in real estate, residential properties may be one of the first things that comes to mind, such as buying a single family home. But owning property, like a home, can come with an array of responsibilities, liabilities, and expenses. In that way, it’s different from owning a stock or bond.
Generally, real estate investments take the form of actual real estate — such as a home, apartment building, or commercial property — or through shares of REITs, which are real estate investment trusts. These are similar to “real estate ETFs,” in a way.
REITs are popular among passive-income investors, as they tend to have high dividend yields because they are required by law to pass on 90% of their amount of their income to shareholders.
Historically, REITs have often provided better returns than fixed-income assets like bonds, although REITs do tend to be higher-risk investments.
There are many different types of REITs. Some examples of the types of properties that different REITs might specialize in include:
◦ Residential real estate
◦ Data centers
◦ Commercial real estate
◦ Health care
Benefits:
Real estate tends to appreciate over time, but there are many factors that can affect property values. REITs can also allow investors to gain exposure to the real estate world without the hassle and liability of owning physical property, though they do come with risks.
Risks and Challenges:
For people with smaller amounts of capital, investing in physical real estate might not be a realistic or desirable option — first and foremost. Annual property taxes, maintenance and upkeep, and paying back mortgage interest can add to the cost of treating a home as an investment. It’s also worth remembering that residential properties can appreciate or depreciate in value, too.
Other real-estate investment options involve owning multi-family rental properties (like apartment buildings or duplexes), commercial properties like shopping malls, or office buildings. These tend to require large initial investments, but those who own them could potentially see significant returns from rental income. (Naturally, few investments guarantee returns and rental demands and pricing can change over time).
As for REITs, these have certain pros and cons, like other investments, and generally are high-risk investments. But companies can be classified as REITs if they derive at least 75% of their income from the operation, maintenance, or mortgaging of real estate. Additionally, 75% of a REITs assets must also be held in the form of real property or loans directly tied to them. So, there may need to be some research before an investment is made.
How to Get Started:
Shares of a REIT can be purchased and held in a brokerage account, just like a stock or ETF. To buy some, it’s often as simple as looking up a specific REIT’s ticker symbol.
Buying real property is a much more complicated process, and speaking with a real estate agent might be a good place to start — not to mention a financial professional.
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3. ETFs and Passive Investing
Passive investing, which refers to exchange-traded funds (ETFs), mutual funds, and other instruments that track an index and do not have an active manager, have become increasingly popular over the years.
Weighing the merits of passive vs. active investing is an ongoing debate, with strong advocates on both sides.
Types:
Passive investing tends to be lower cost compared with active investing, and over time these strategies tend to do well. Passive investing can include buying ETFs or index funds, or even mutual funds.
An ETF is a security that usually tracks a specific industry or index by investing in a number of stocks or other financial instruments.
ETFs are commonly referred to as one type of passive investing, because most ETFs track an index. Some ETFs are actively managed, but most are not.
These days, there are ETFs for just about everything — no matter your investing goal, interest area, or industry you wish you invest in. Small-cap stocks, large-cap stocks, international stocks, short-term bonds, long-term bonds, corporate bonds, and more.
Benefits:
Some potential advantages of ETFs include lower costs and built-in diversification. Rather than having to pick and choose different stocks, investors can choose shares of a single ETF to buy, gaining some level of ownership in the fund’s underlying assets.
Thus, investing in ETFs could make the process of buying into different investments easier, while potentially increasing portfolio diversification (i.e., investing in distinct types of assets in order to manage risk).
Overall the biggest advantage to passive investing is that it’s hands-off, and as such, relatively cheaper (in terms of saving on fees and commissions) compared to an active approach.
Risks and Challenges:
Specific ETFs or funds may have their own risks — those risks will largely depend on the securities, industries, or other factors contained within each one. But in a more broad sense, if there is a challenge or downside to a passive investment strategy, it may be that there’s the possibility of missing out on appreciation within specific stocks or assets.
That said, passive investing is supposed to be a relatively low-risk approach, but it’s not risk-free.
How to Get Started:
Perhaps the simplest way to start passive investing is to buy ETFs or index funds through your brokerage account. It can be that simple.
Automated investing often incorporates a “robo-advisor” to handle the heavy lifting. Typically, a robo advisor is an online investment service that provides you with a questionnaire so you can input your preferences: e.g. your financial goals, your personal risk tolerance, and time horizon. Using these parameters, as well as investing best practices, the robo advisor employs a sophisticated algorithm to recommend a portfolio that suits your goals.
These automated portfolios are pre-set, and they can tilt toward an aggressive allocation or a conservative one, or something in between. Typically, these portfolios are built of low-cost exchange-traded funds (ETFs). These online portfolios are designed to rebalance over time, using technology and artificial intelligence to do so.
You can use a robo investing as you would any account — for retirement, as a taxable investment account, or even for your emergency fund — and you typically invest using automatic deposits or contributions.
Some investors may also use a target-date fund to automate their investing. Target-date mutual funds, which are a type of mutual fund often used for retirement planning and college savings, also use technology to automate a certain asset allocation over time.
By starting out with a more aggressive allocation and slowly dialing back as years pass, the fund’s underlying portfolio may be able to deliver growth while minimizing risk. This ready-made type of fund can be appealing to those who have a big goal (like retirement or saving for college), and who don’t want the uncertainty or potential risk of managing their money on their own.
Benefits:
The biggest benefit of automated investing is that it’s, well, automated! It’s a hands-off approach, which means you don’t need to worry about what’s happening with your portfolio on a day to day basis – though it can still be wise to monitor regularly. Again, if you want to take a set-it-and-forget-it approach to investing, this may be worth checking out.
Risks and Challenges:
Some investors may not like handing the reins off to an algorithm or robo-advisor. Accordingly, the approach may oversimplify your portfolio, costing you potential gains (or avoiding losses). And, of course, technology isn’t perfect, so it’s possible that there could be a glitch in a system somewhere, and other cybersecurity risks in the mix.
How to Get Started:
There are numerous robo-advisors on the market — check some of them out, do a bit of research, and choose one. You can also look at specific target-date mutual funds that could be a good fit, and start investing in those.
Gold is one of the most valued commodities. For thousands of years, gold has been prized because it is scarce, difficult to obtain, has many practical uses, and does not rust, tarnish, or erode.
Silver has historically held a secondary role to gold, and today, serves more of an industrial role. For those looking to invest in physical precious metals, silver will be a relatively affordable option.
Benefits:
Gold, silver, and related securities are sometimes considered to be “safe havens,” meaning most investors perceive them as low risk. This asset class tends to perform well during times of crisis (and conversely tends to drop when the economy is going well), but past trends don’t guarantee that gold will perform one way or the other.
Risks and Challenges:
Precious metals are volatile, and the industry itself is volatile as well. Also, for investors who are buying physical precious metals, they may face a challenge in storing them and keeping them safe from thieves. You may need to even get insurance on physical assets, or add them to an existing insurance policy.
How to Get Started:
Buying physical gold or bullion (which comes in coins and bars) isn’t the only way to invest in gold and silver. There are many related securities that allow investors to gain exposure to precious metals. There are ETFs that tend to track the prices of gold and silver, respectively. Other ETFs provide an easy vehicle for investing in gold and silver mining stocks. So, there are some different ways to invest in the field.
Companies that explore for and mine silver and gold tend to see their share prices increase in tandem with prices for the physical metals.
The Takeaway
The investment opportunities described above are just some potential points of entry for investors in 2026. Investors can look to the stock, bond, or crypto markets for new ways to put their money to work, or consider active strategies vs. passive (i.e. index) strategies. They can look at commodities, like precious metals, or automated portfolios.
All these investment opportunities come with their own set of potential risks and rewards. There are no guarantees that choosing X over Y will increase your investment returns. It’s up to each investor to weigh these options, especially in light of current economic trends, such as inflation and rising rates.
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FAQ
What is the most popular thing to invest in right now?
Stocks, bonds, and ETFs tend to be among the most popular investments at any given time, though the specific popularity among those classes can vary wildly.
What are some of the best investment opportunities for beginners?
For beginning investors, investing in ETFs, index funds, or mutual funds may be a simple way to get started. Those assets will give investors exposure to broad parts of the market.
What are the lowest risk investment opportunities?
Generally, the investment with the lowest risks are Treasuries, but even those are not risk-free. Bonds tend to be less risky than stocks, too.
What are the highest risk investment opportunities?
There are many high-risk investments out there, including cryptocurrencies, certain stocks, REITs, and even venture capital all have a relatively high risk compared to, say, Treasuries.
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Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.
Investment Risk: Diversification can help reduce some investment risk, but cannot guarantee profit nor fully protect in a down market.
Mutual Funds (MFs): Investors should read and carefully consider the information contained in the prospectus, which contains the Mutual Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or SoFi's customer service at: 1.855.456.7634. Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risks. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may have tax implications.
A no-closing-cost refinance may sound wonderful, but it’s important to understand that it means rolling the closing costs into the new mortgage or exchanging them for a slightly higher interest rate. Because you’ll either fatten your loan principal or pay a higher rate, your monthly payments and total interest paid will likely be more than if you had paid the closing costs with cash. However, a no-closing-cost refinance can help some homeowners make their finances more manageable.
Note: SoFi does not offer no-closing-cost refinance at this time. However, SoFi does offer traditional mortgage refinancing and cash-out refinancing.
Read on to decide if a no-closing-cost refinance is right for you.
• A no-closing-cost refinance allows homeowners to refinance without upfront closing costs by rolling them into the mortgage or accepting a higher interest rate.
• This option can lead to higher monthly payments and more interest over the loan’s life.
• Closing costs usually range from 2% to 5% of the loan amount, which is a significant upfront expense.
• Homeowners should evaluate the refinance break-even point to see if this option is financially beneficial.
• This type of refinance is beneficial if you don’t have a lot of cash on hand to pay loan-related expenses at closing.
No-Closing-Cost Refinance: How Does It Work?
You know how they say that if something sounds too good to be true, it usually is? Well, that also applies in this case.
When you undertake a mortgage refinance, you’re taking out a whole new loan, hopefully with a lower rate or shorter term.
The costs to do so are usually 2% to 5% of the total loan amount. For a refinance loan of $300,000, for example, the range is $6,000 to $15,000, which is a lot to take in if you need to pay the costs upfront.
A no-closing-cost refinance means you get to take out a new mortgage without paying closing costs out of pocket, or you accept a higher rate for the new loan.
Let’s break it down.
Closing Costs? What Closing Costs?
When a borrower signs mortgage documents, a variety of fees and expenses come along for the ride, which you probably recall from signing your mortgage the first time.
Right away or after a set number of months, depending on the kind of mortgage they have, homeowners can attempt to lower their mortgage rate and shorten their loan term with a refinance or, if they’re sitting on enough home equity, apply for cash-out refinancing.
They may want to transition from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage — or from a fixed-rate mortgage to an ARM.
Some may want to refinance their FHA or USDA loan into a conventional loan to get rid of mortgage insurance; others may be looking to refinance their jumbo loan.
But there’s no free lunch when it comes to closing costs; even with a no-closing-cost refinance, the mortgage refinancing costs add up.
Here are costs that might be rolled into the refinanced loan:
Lender fees: Borrowing money costs money. Your lender might assess an application fee, a processing fee, a credit report fee, and an underwriting fee. Most lenders charge an origination fee. Any points on the mortgage, aka discount points, may be rolled in.
Title insurance fees: A title search ensures that no one else can claim ownership of your home.
Appraisal fee: The home appraiser’s fee is usually charged early in the closing process, so you probably won’t be able to add it to the new loan.
Other closing costs can’t always be rolled into the new loan. These include:
• Prepaid property taxes
• Homeowners insurance
• Any homeowners association dues
If you compare no-closing-cost refinance offers, ensure that each lender is willing to cover the same items. And be aware that a lender that will cover lender fees, third-party charges, and prepaid items will also probably charge a higher rate.
The Cost of a No-Cost Refinance
Given the heft of closing costs, a no-cost refinance might be sounding better and better. But whether you opt to accept a higher rate or roll in the closing costs, you’ll likely still end up paying those costs over time.
And depending on their total amount, as well as the interest rate and mortgage term, closing costs can eclipse the savings you stand to gain by refinancing in the first place.
That’s why it’s important, given your anticipated new loan rate and term, to use a mortgage calculator and scour the loan estimates you’ll receive after applying for a mortgage refinance to find out the full amount you’ll pay over the life of the loan.
With any mortgage refinance that includes closing costs, it’s a good idea to look at the refinance break-even point: closing costs divided by the expected monthly savings. That will give you the number of months it will take to recoup the costs to refinance.
For instance, if a refinance adds $100 a month to your mortgage payment and your lender is covering $4,000 in closing costs, you’ll break even after 40 payments, or three years and four months.
No-closing-cost refinances have upsides and downsides to consider.
Benefits of a No-Closing-Cost Refinance
• This kind of refinance can help keep homeowners from owing a hefty bill all at once, allowing them to refinance if they don’t have a lot of cash on hand.
• If you opt for a higher rate, you won’t use up home equity on a no-closing-cost refinance.
Drawbacks of a No-Closing-Cost Refinance
• A higher interest rate may compensate for closing costs, but that can be costly over time.
• If the closing costs are added to the principal loan balance, borrowers very likely will pay more interest over the life of the loan than they would have if they’d paid closing costs upfront.
• If you are already close to a lender’s loan-to-value threshold, then adding in closing costs could push you to the very edge. You may even find that the new mortgage will require private mortgage insurance.
If you stand to save money by refinancing your home — and if you’ll be in your home long enough that you’ll break even on the refinance — it might be worth footing the elevated interest rate or higher loan principal of a no-closing-cost mortgage refinance.
For those who don’t have the cash on hand to pay for closing costs upfront, this approach is the only feasible way to achieve a refinance at all.
If, however, you’re able to pay the closing costs upfront, the loan may be less expensive over its lifetime.
The Takeaway
With a no-closing-cost refinance, closing costs are either added to the new mortgage or exchanged for a higher interest rate. A no-cost refinance can make refinancing possible for those who can’t pay the closing costs upfront, but it’s important to look at costs over the life of the loan and your plans as a homeowner to ensure that it makes financial sense. (Note: SoFi does not offer a no-closing-cost refinance at this time. However, we do offer traditional mortgage refinancing and cash-out refinancing.)
SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.
A new mortgage refinance could be a game changer for your finances.
FAQ
What is a free refinance?
Free refinance is just another name for a no-closing-cost refinance. Though borrowers who choose this option do not pay closing costs, they may find the costs are rolled into their loan, which can mean higher payments over the long term.
How much are refinance closing costs?
Refinance closing costs are typically from 2% to 5% of your loan amount, with costs depending on how much money you’re borrowing. Lenders may have differing fee schedules, but 2% to 5% is a good rule of thumb.
Does it make sense to refinance my home?
There are multiple factors to take into account when deciding whether to refinance your loan. Consider your closing costs, your credit score, and how long you plan to stay in your home.
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²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945. All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
One of the time-honored ways to build wealth and financial stability is by buying real estate. Properties typically appreciate over time and may provide cash flow as well.
Owning your own home not only gives you a great place to live, but it will likely turn out to be a good investment that can help build generational wealth for your family.
• Generational wealth includes assets such as cash, stocks, bonds, businesses, and real estate that are passed down from one generation to the next.
• Homeownership can build generational wealth directly through price appreciation, with the equity being passed on to the next generation in their inheritance.
• Indirect benefits of homeownership include the financial security that can be passed on to children, the opportunity to borrow against the equity, and the ability to shield adult children from the financial burden of retirement and health care needs.
• Housing discrimination can have a serious impact on generational wealth.
• Homeownership can be a smart investment, but it’s important to factor in the total costs of owning and maintaining real estate.
What Is Considered Generational Wealth?
Generational wealth refers to assets passed on from one generation to another within the same family. Assets is a broad term that includes:
• Cash
• Stocks, bonds, and other securities
• A family business
• Real estate, including the family home
Because of the high rates of appreciation in the past several decades, real estate can be one of the most valuable assets passed down from one generation to another.
💡 Quick Tip: SoFi’s award-winning mortgage loan experience means a simple application — we even offer an on-time close guarantee. We’ve made $7.5 billion in home loans, so we know a thing or two about what makes homebuyers happy.‡
How Does Homeownership Build Wealth?
Homeownership can help build wealth directly through price appreciation. When the value of a home rises, owners are able to sell for that higher price, sometimes moving into a new, larger home. For homeowners who aren’t selling, price appreciation adds to their home equity and overall financial assets.
Of course, if home values decline, as they did in the 2007-2009 Great Recession, the opposite can happen, and owners may find they owe more than the home is worth. But real estate has proved to be one of the most reliable assets in the long term.
The bottom line: A person’s home is often their largest financial asset, the benefits of which are frequently passed on to the next generation.
If you’re just getting started, know that a first-time homebuyer can be anyone who has not owned a principal residence in the past three years, some single parents, and others. The prospective purchasers can often get assistance (such as a low or no down payment) as they progress toward buying their first property. Programs such as these can be stepping stones to building generational wealth.
First-time homebuyers can
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with as little as 3% down.
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Direct and Indirect Building of Wealth
Next, consider different ways of building wealth over the generations.
Inheritance
Inheriting appreciated capital assets, such as real estate, stocks, bonds, exchange-traded funds, or a small business, can have a big tax benefit, thanks to the “step-up in basis.” The value of the inherited asset is “stepped up” to the fair market value on the date the original owner dies.
If the heir sells the property, the step-up in basis will greatly reduce capital gains taxes due or make them moot if there’s no gain. Any capital gain from the sale of inherited property is considered long-term. Current long-term capital gains taxes are 0%, 15%, or 20%, depending on your income and filing status.
For married couples, the death of one spouse results in a partial step-up in most states, but here’s a simplified example. Let’s say you inherit your grandmother’s home, purchased in 1940 for $10,000. The home is valued at $450,000 on the date of her death, which is the stepped-up basis. If you sell the home for $450,000, you’ll pay no capital gains tax. If you sell for a higher sum, capital gains tax will apply only to the amount over $450,000.
Imagine using the stepped-up basis provision over more than one generation of a family. An heir could sell a phenomenally appreciated asset and pay a minimal amount in capital gains tax or none at all on their inheritance, as long as the asset was included in the decedent’s estate.
Indirect Benefits
Heirs of homeowners may inherit the actual real estate, but generational wealth can also be more indirect. Consider these points:
• Homeowners are often more financially secure than renters, passing that security on to children.
• Homeowners can borrow against home equity to improve their property (and often boost its value) or take care of other financial needs.
• Many homeowners are located in districts with high-performing schools, enhancing overall opportunities for their children.
• Down the line, the equity in a home can help finance retirement and health care needs, shielding adult children from that financial burden.
All of these factors can positively affect the next generation and add to their wealth.
How Discrimination Can Affect Generational Wealth
When housing discrimination occurs, it can keep people of color, women, families with children, immigrants, and people with disabilities from living in the places they want. Importantly, it can also have a serious impact on generational wealth.
Considering the following statistics from the U.S. Census Bureau for the fourth quarter of 2025:
The homeownership rate for non-Hispanic white households overwhelmingly led the pack at 75.1%. Asian, Native Hawaiian, and Pacific Islander families came in a distant second at 63.1%. Hispanic families of any race had only a 48.7% homeownership rate, and Black households logged in at 44.2%.
A number of factors have contributed to the race gap in homeownership, particularly the legacy of race-based discrimination in the housing market.
When homeownership lags among a certain group because of housing discrimination, so does the possibility for generational wealth.
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Understanding Home Appreciation and Home Equity
To understand how homeownership can build wealth, it’s important to know about the concepts of home appreciation rates and home equity. Here are some key points:
• Appreciation and appreciation rates refer to the increase in the value of a home over time.
• Home equity is the property value minus the outstanding balance of mortgages, liens, or other debt on the property.
• A down payment is your first contribution to home equity.
• Monthly mortgage payments reduce the amount you owe. With each payment, you slowly pay part of the principal on your loan, which builds equity.
• Home equity can increase through price appreciation and home improvements.
Most people purchase real estate with the expectation that their homes will increase in value over time. But many things come into play when it comes to home appreciation and the amount of home equity you can build. Some you can control, and some you can’t.
Housing prices can be affected by several economic indicators. When a recession hits, unemployment rises, or inflation jumps, the real estate market often declines.
Interest rates are also vitally important. Low mortgage interest rates can fuel demand, which can increase home prices in many areas. Conversely, a rise in mortgage rates can have a cooling effect on buyer demand.
The correlation between the housing markets and the rest of the economy can be surprising at times. For instance, during the initial stages of the Covid-19 pandemic, when economic indicators were showing signs of trouble, the nation saw a giant rise in home prices. This was particularly true in rural and suburban areas, as urban dwellers sought more space and fewer crowds.
Federal legislation can have a big effect on the U.S. housing market. Government tax credits, deductions, and subsidies aimed at certain homeowners can fuel this market.
Local policies and regulations can also affect housing appreciation. Local investments in infrastructure or new schools and parks can increase your home’s value. Local zoning laws can also have an effect, positive or negative.
Home Improvements
This encompasses everything from an extensive addition to a fresh coat of paint. All kinds of improvements can add to the resale value of your home and, importantly, enhance your life while you’re living there.
Whether you decide to remodel a kitchen, bathroom, or living room, update your appliances and décor, or make energy-efficient improvements, these can be valuable.
The answer to that question isn’t always straightforward. Your home is where you live, of course, so hopefully you derive happiness from that. In that sense, the costs associated with your home and your mortgage payment can be considered living expenses, not necessarily investments.
On the other hand, appreciation and home equity can be seen as returns on your investment in your home.
The sweet spot is often a combination of the two: a great place to live and a profitable investment.
Still, homeowners’ net worths far outpace renters’. Every three years, the Federal Reserve issues the Survey of Consumer Finances, which compares the net worth of homeowners and renters. The latest report shows that homeowners had a median net worth of $396,200 compared to $10,400 for renters.
Keeping your expectations realistic can effectively put your home value into the context of your overall financial wellness and estate planning. To do that, you may need to keep in mind the total costs of owning and maintaining real estate. Too often, people subtract their purchase price from the expected sale price and figure the difference is the return on investment. But there are many more costs involved in homeownership.
To calculate your true return, you’ll want to add up the following:
• Down payment
• Closing costs
• Mortgage points
• Any mortgage insurance
• Home maintenance expenses
• Home improvements
• Total mortgage payments
• Taxes
• Any homeowners association fees
• Estimated selling costs (such as the real estate agent’s fees and staging charges).
That total is the number you want to compare against home appreciation to determine your actual return.
The Takeaway
Homeownership builds generational wealth in direct and indirect ways. The real estate itself can likely grow in value, and the homeowner may enjoy such benefits as raising a family in a good school district. Buying real estate can build a foundation for a family today and for generations ahead.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
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FAQ
What is generational wealth?
Generational wealth refers to assets or financial resources passed down from one generation to the next in a family. These assets can include cash, real estate, stocks, bonds, businesses, and other investments.
Is homeownership a good way of building generational wealth?
Yes, homeownership is generally considered to be a good way of building wealth and financial stability. Real estate can be one of the most valuable assets that you can transfer to the next generation in your family.
How does homeownership build generational wealth?
Homeownership builds generational wealth through appreciation, which enables you to build home equity. The next generation can inherit your home and benefit from its equity.
Photo credit: iStock/Capuski
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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‡SoFi On-Time Close Guarantee: If all conditions of the Guarantee are met, and your loan does not close on or before the closing date on your purchase contract accepted by SoFi, and the delay is due to SoFi, SoFi will give you a credit toward closing costs or additional expenses caused by the delay in closing of up to $10,000.^ The following terms and conditions apply. This Guarantee is available only for loan applications submitted after 04/01/2024. Please discuss terms of this Guarantee with your loan officer. The mortgage must be a purchase transaction that is approved and funded by SoFi. This Guarantee does not apply to loans to purchase bank-owned properties or short-sale transactions. To qualify for the Guarantee, you must: (1) Sign up for access to SoFi’s online portal and upload all requested documents, (2) Submit documents requested by SoFi within 5 business days of the initial request and all additional doc requests within 2 business days (3) Submit an executed purchase contract on an eligible property with the closing date at least 25 calendar days from the receipt of executed Intent to Proceed and receipt of credit card deposit for an appraisal (30 days for VA loans; 40 days for Jumbo loans), (4) Lock your loan rate and satisfy all loan requirements and conditions at least 5 business days prior to your closing date as confirmed with your loan officer, and (5) Pay for and schedule an appraisal within 48 hours of the appraiser first contacting you by phone or email. This Guarantee will not be paid if any delays to closing are attributable to: a) the borrower(s), a third party, the seller or any other factors outside of SoFi control; b) if the information provided by the borrower(s) on the loan application could not be verified or was inaccurate or insufficient; c) attempting to fulfill federal/state regulatory requirements and/or agency guidelines; d) or the closing date is missed due to acts of God outside the control of SoFi. SoFi may change or terminate this offer at any time without notice to you. *To redeem the Guarantee if conditions met, see documentation provided by loan officer.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
