Real estate is a wonderful way that anyone can build wealth. What fascinates me about real estate is the face that it has always been a tool for wealth. Wars were fought of land for a reason since the beginning of time. Money=Land=Power. Land has always been around and always will be, you just need to make sure you are buying it in the right place.
There are a LOT of reasons one should invest in real estate. I could say that it will make you happier, or will help you with your goals, however, I want to get specific. Real estate will build you wealth. I want to explain 3 reasons why, and therefore, 3 reasons why you should acquire as much real estate as possible.
- Equity.
We have all heard the term “equity” before right? Equity is ways that we own wealth, not necessarily in the form of liquid cash. Let me me explain. When you pay your rent, that money goes to your landlord who does who knows with it. Well when you pay a mortgage to own a home (and in turn real estate) you are building equity. A large chunk of your mortgage payment will got towards interest yes, but some of it goes into home ownership. After 30 years, the typical home owner will have an asset worth hundreds of thousands of dollars in equity and the renter won’t from their rent payments alone.
2. Appreciation
Yes, while you will appreciate owning a home, this is not what I am referring to. Appreciate is another way home ownership can pay off. Homes go up in value over time. If you buy a house for 300 thousand dollars and it goes up in value 20 thousand dollars, you have made that money from appreciation. Now you won’t have that money in cash unless you sell the house, however you can always take out a loan on that appreciation and use the money to start a business, buy a car, or remodel your house. Appreciation is a tool that a lot of people use to build their net worth.
3. Cash Flow
When you own real estate you have the option to rent it to someone that typically doesn’t. In most scenarios you can rent out your real estate for more than your mortgage payment is. When this happens, you get cash flow. Cash flow is probably most people’s favorite reason to invest in real estate because is it physical cash that they can hold from doing almost no work! Yes it can take a lot of work to acquire multiple houses, but once you start getting cash flow from them it certainly pays off.
At the end of the day, real estate is a tool that can help normal people make money in multiple ways, it is not a get rich quick scheme, but it can be very effective. Before you spend your money on a new car, boat, or toy, consider saving the money to buy a house so you can learn for your self why real estate is the key to building wealth.
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