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Recently, David Greene, co-host of the BiggerPockets podcast and a nationally renowned author and speaker, wrote an article in Forbes explaining how investing in real estate could help build wealth. Many of the points he made also apply to a family owning their own home. Here are a few:
1. Appreciation
βThe rising of home prices over time, is how the majority of wealth is built in real estate. This is the βhome runβ you hear of when people make a large windfall of money. While prices fluctuate, over the long run real estate values have always gone up, always, and there is no reason to think that is going to change.
One thing to consider when it comes to real estate appreciation affecting your ROI is the fact that appreciation combined with leverage offers huge returns. If you buy a property for $200,000 and it appreciates to $220,000, your property had made you a 10% return. However, you likely didnβt pay cash for the property and instead used the bankβs money. If you consider that you may have put 10% down ($20,000), you actually have doubled your investment, a 100% return.β
2. Leverage
βBy nature, real estate is one of the easiest assets to leverage I have ever come acrossβmaybe the easiest. Not only is it easy to leverage the financing of it, but the terms are incredible compared to any other kind of loan. Interest rates are currently below 5%, down payments can be 20% or less, and loans are routinely amortized over 30-year periods.β
3. Paying Off the Debt
βOne of the best parts of investing in real estate is the fact that β¦ youβre slowly paying down your loan balance with each payment to the bankβ¦ After enough time passes, a good chunk of every payment comes off the loan balance, and wealth is created.β
4. Forced Equity
βForced equity is a term used to refer to the wealth that is created when an investor does work to a property to make it worth moreβ¦
Example of this would be adding a third or fourth bedroom to a property with only two, adding a second bathroom to a property with only one, or adding more square footage to a property with less than the surrounding houses.β
Though Green was talking about investors, the same could be said about a family upgrading their own home.
Bottom Line
Green put it best by saying:
βThere are many ways to build wealth in America, but real estate might be the safest, steadiest and simplest way to do so.β
To read the full article, click here.
Contact us and let’s explore your best options to start building wealth on real estate.
Ady Simion Call/Text at (626) 607-8652 or email me at Ady@AdySimion.com
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Posted on March 6, 2019, in Uncategorized. Bookmark the permalink. Leave a comment.
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