4 Strategic Ways Real Estate Can Build Family Wealth
Investing in Real Estate could help build long term wealth for your family. Below are 4 strategic ways to look into this concept…Real Estate has always been known as the best long term investment. See our thoughts below:
Home Equity / Appreciation
With the rising home prices over time, this is one of the majority ways wealth is built in Real Estate. You always wonder how people make large waves of money, and this is one of them. Though the market does fluctuate with prices, over the long run Real Estate values have always gone up, and there is no reason to think that is going to change. Even with corrections in the market which is normal, long term investments shows proof that the market is a true benefit as an investment.
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 $300,000 and it appreciates to $350,000, your property had made you a 15% return – that’s hard to find in different avenues of investments. Though, if you didn’t pay cash for the property and instead mortgaged against it. You can consider that you may have put 10% down ($30,000), you might have actually have doubled your investment.
Real Estate is one of the easiest assets to leverage which you will ever come across—might be 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. If you have a good amount of assets, this allows you to invest in multiple transactions and watch the growth over time.
Plan to pay-off the debt
One of the best parts of investing in Real Estate is the fact that you’re slowly paying down your loan balance with each payment to the bank. After enough time passes, a good chunk of every payment comes off the loan balance, and wealth is created, therefore more equity you have built in the property.
Artificial 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 more, buys in a down market, and watches the market move upwards to create more equity!
An example would be adding an extra bedroom and bathroom to a property with only to increase the bed / bath count, adding these additions to a property with or adding more square footage to a property with less than the surrounding houses. This would virtually enable an increase in property value over time.
At the end of the day, there are many ways to build wealth in America, but Real Estate might be the safest, steadiest and simplest way to do so and benefit for the long term.