5 ways to build wealth through real estate
Posted on August 26, 2021
Did you know that over 90% of the world’s millionaires created their wealth through investing in real estate? I want to give you five reasons why investing in real estate is the best way to build wealth.
1. It’s leveraged
Simply put, leverage is the term used to describe borrowing somebody else’s money to purchase an asset. So, unlike investing in business or stocks, real estate allows you to build wealth off the money you borrow, not just the money that you invest.
Appreciation right now in real estate has astronomical numbers. We’re seeing anywhere from 8–13%. For context, if you take $10,000 and put it in this stock market with an appreciation rate of 10% over the course of three years, your $10,000 is going to earn you an additional $3,000, giving you a total of $13,000. Now, if you took that same $10,000 investment and dumped it into a $300,000 property over the course of three years, with a 3% appreciation rate, Your equity in that home is going to be nearly $9,000. Now what sounds better, $3000 or $9,000? The reality is that, right now, in the real estate market, homes are appreciating anywhere from 8–12%. If you take that $10,000 investment on a $300,000 home over the course of three years at 10% appreciation, that’s $30,000.
Very few investment vehicles give you the ability to cash flow. Simply put, owning a rental property allows you to make money per month while somebody else is paying down your mortgage for you. This gives you the ability to receive monthly income without having to withdraw from your 401k retirement plan or your stock.
4. Tax Deductions
There’s many tax benefits to owning real estate. One example of this is the 1031 exchange. A 1031 exchange is where you take the proceeds from an investment property and dump that into another investment property without having to pay capital gains tax. Another factor about tax write-offs for owning real estate is that the interest that you pay throughout the year on your mortgage is going to be tax deductible, as will any depreciation of that investment property that you have. Both of these allow you to save a ton of money come tax time.
Investing in real estate is a great way to hedge against inflation. Inflation is simply the cost of goods and services rising, which is great because this means that your rental income and property value will continue to increase significantly over time.
I hope this video has piqued your interest. If you’re curious at all about investing in real estate feel free to reach out. I’m always happy to help.