Building Wealth Through Real Estate
Building wealth through real estate has been the greatest opportunity in human history. Land ownership was, until modern times, limited to the privileged class. Land was handed down through families, helping them to increase their wealth and consolidate their power.
Now the average person can take advantage of what the wealthy have known for centuries: the best way to build long-term wealth is through real estate.
Investing is the Key to Building Wealth Through Real Estate
While you can make quick money flipping real estate, you need a long-term, buy fix and hold strategy to build long-term wealth. You need to have assets working for you in order to leverage your efforts. Look at it this way: if you trade your time for money, such as in a typical job or even owning your own small business, the amount of time you have is limited. There are only so many hours in the day and only so much you personally can do in those hours. Wealthy people don’t trade time for money. They buy assets that generate passive income for them. And that’s what real estate can do for you.
About 66% of Americans own their own home, but less than 5% of Americans have investment property. While owning your own home is a good first step, one property does not begin to yield wealth. On the other hand, you don’t need 1,000 properties or even 100 properties in order to build true wealth through real estate.
Building Wealth Through Real Estate – How Long Will It Take?
While you can realize cash flow almost immediately with any investment, true wealth takes a bit of time to grow. During the boom, when properties were appreciating at unheard of rates, many people made a lot of money very quickly. But it seems like money made fast spends even faster. Many of those same people got caught in the bubble and saw their profits drop as rapidly as they rose.
Fast money is not the way to long-term wealth. Many lotto winners are broke within a few years of winning. You want your wealth to stick around for a long time.
How long will it take to build wealth through real estate? It all depends on you, your goals and the time you have to work on your portfolio. You can have your investment portfolio up and running, generating a substantial income within a year. You may or may not have much in equity at that point, but you will have what is necessary to create wealth – assets that generate cash flow for you.
You might take a slower route and add one or two houses per year. Over the course of 5 – 10 years, you can build a nice portfolio of 10 – 20 properties, each generating a monthly cash flow. If the properties are valued at an average of $100,000 each when you start, you will have over $1,000,000 in real estate within 10 years. More importantly, you will have assets working for you, the marker of true wealth.
I prefer to acquire my assets more quickly – real estate is about leverage. You leverage your down payment into an asset worth far more than the money you have put into it; you leverage the cash flow to pay down the balance of the loan so the asset pays for itself. You can leverage appreciation and inflation as well as tax benefits. The faster I can bring properties into my portfolio, the faster I can start leveraging both the cash flow and equities that are generated.
One of the first exercises I do with my coaching clients is to establish their goals. We talk about the lifestyle they want, what their current needs are, what their future needs will be. From there, we set out their personal and business goals. Then we work backwards from their goals, creating a plan, figuring the number of properties and average cash flow per property they need in order to achieve those goals.
Wealth isn’t built by chance or luck. You need to have a practical, well-thought out plan in order to meet your goals. By creating a calendar or schedule of milestones, you know what needs to be done and when. You can track and measure your progress. If you start falling behind in your goals, you know it right away and can take measures to get yourself back on track.
Whether you want to rule your own real estate empire or just have a “comfortable lifestyle,” the main thing is that you get started and these REI tips are a great way to get started. There has never been a better time for building wealth through real estate.