Contact Us Now! Ask Us Anything
480-470-8505 Call Us Today

4 Ways Real Estate Can Build Family Wealth

Dated: 01/29/2019

Views: 105

Recently, David Greene, co-host of the BiggerPockets podcast and a nationally renowned author and speaker, wrote an article in Forbes explaining how investing in real estate could help build wealth. Many of the points he made also apply to a family owning their own home. 

Here are a few:

1. Appreciation

“The rising of home prices over time, is how the majority of wealth is built in real estate. This is the ‘home run’ you hear of when people make a large windfall of money. While prices fluctuate, over the long run real estate values have always gone up, always, and there is no reason to think that is going to change.
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 $200,000 and it appreciates to $220,000, your property had made you a 10% return. However, you likely didn’t pay cash for the property and instead used the bank’s money. If you consider that you may have put 10% down ($20,000), you actually have doubled your investment, a 100% return.”

2. Leverage

“By nature, real estate is one of the easiest assets to leverage I have ever come across—maybe 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.”

3. Paying 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.”

4. Forced Equity

“Forced 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…
Example of this would be adding a third or fourth bedroom to a property with only two, adding a second bathroom to a property with only one, or adding more square footage to a property with less than the surrounding houses.”

Though Green was talking about investors, the same could be said about a family upgrading their own home.

Bottom Line

Green put it best by saying:

There are many ways to build wealth in America, but real estate might be the safest, steadiest and simplest way to do so.”

To read the full article, click here.

Blog author image

Curtis Johnson

Curtis is a Best Selling Author, the Founder and CEO of The Curtis Johnson Team Powered By eXp Realty, where he runs a dynamic Real Estate Team having sold 5,000 residential homes. The Wall Street Jou....

Latest Blog Posts

Existing-Home Sales Report Indicates Today Is a Great Time to Sell

The best time to sell anything is when demand for that item is high and the supply of that item is limited. The latest Existing-Home Sales Report released by the National Association

Read More

What You Need to Know About Getting A Mortgage

Some Highlights:Many buyers are purchasing homes with down payments as little as 3%.You may already qualify for a loan, even if you don’t have perfect credit.Your local professionals are here

Read More

Homeownership is the Top Contributor to Net Worth

Many people plan to build their net worth by buying CDs or stocks, or just having a savings account. Recently, however, Economist Jonathan Eggleston and Survey Statistician 

Read More

What FICO® Score Is Needed to Qualify for a Mortgage?

While a recent announcement from CNBC shares that the average national FICO® score has reached an all-time high of 706, the good news for potential buyers is that you don’t

Read More