Have you ever thought about creating wealth with real estate? No, I’m not talking about flipping houses. I believe that wealth is built best by renting your property to others.
Many people immediately write off this income suggestion because they think that it’s only available to the rich, or they see it as a risky investment when there’s a small amount of money down on the property. These statements hold some truth, but I believe that the real estate market it open to everyone, and it’s one of the best places to create a passive residual income that will eventually make you rich.
Get Rich by Buying Low, Selling High
While we won’t actually be selling our real estate investments (until much later in life anyway), it’s definitely important to find an inexpensive property to start your empire with. More than likely, you won’t have that much cash to put down on it, so the best deal you can find, the better. If you’re willing to wait, you may find a deal through a short sale, but just beware that these purchases can take longer than six months, and sometimes more than a year!
Another way to find discounted housing is by checking out the foreclosed properties. Typically, these properties just need a little cleaning and a lot of paint (for some reason, foreclosures always have ugly painted walls…). If you can overlook these small imperfections when you view the property, you could soon find yourself a deal that no one else is able to see.
Other properties may be discounted because the sellers are looking to get rid of the house fast. Perhaps they’re moving out of state, or maybe the house was an inheritance that is of little use to the current owners. Whatever the case may be, if you find out that the house needs to be sold quickly, you probably have a deal on your hands.
A Positive Cash Flow is Key to Building Wealth
When you find a discounted property and you’re thinking about making an offer, it’s important to first estimate how much you’d be able to charge for rent. This is your monthly income. Now, how much with your expenses be per month? Obviously you’ll include the mortgage payment here, the insurance, the property tax, and also any potential repairs averaged out on a per month basis. If your income is still higher than your expenses, then you might have a winner on your hands.
Build The Empire
If you continually collect a profit each month from your rental, you’ll soon have enough money to invest in another property. Without overleveraging yourself, continue to repeat this process over and over again. You’ll soon find that because of the increased sources of income, you’ll be able to reinvest in another property in far less time that you did from your first property.
For me, I’m more risk averse, so I like to invest without debt. With the first property, you could get a mortgage, but with the rental income and your own income, you could pay down the loan on the property quite rapidly. Once paid off, you could buy the next property, and then the next and the next… With cash only, the process moves more slowly, but it still could allow you to build an empire that produces over $10,000 a month, and a net worth of over $2 million!
Have you had any success in building wealth with real estate?