nvesting real estate houses can create wealth. In fact, it is the best way to build wealth. Almost all of the world’s billionaires have a fat real estate portfolio. You need proper knowledge, resources, skills and aptitude.
With careful planning, you can get returns of 15 to 25 percent. Be happy with these. Forget about overnight returns of 50 or 100 percent. They are too good to be true.
You don’t need a boatload of money to start investing in real estate. You do need money for a down payment. If you don’t, save for a down payment. Don’t fall for the folly of no-money down investments. They can do more harm than good.
If you keep your eyes open, you can locate big opportunities in your hometown. It is easy to identify the neighborhoods and properties that can go up in the near future. Use your common sense to find out which properties would go up and which ones would go the other way.
A Hypothetical Case Study Of Holding A Condo For 20 Years
Think about a $100,000 condo. At the right location, you can get annual rental income of $15,000. It is a clean 15 percent return. We are yet to talk about property appreciation.
On a $100,000 property, $80,000 comes from the mortgage lender. If the $80,000 loan is for 20 years with an interest rate of five percent, you have to pay roughly $6,600 per year. With rental income at $15,000, you have a difference of $8,400 to keep. There are expenses of taxes, maintenance and renovations.
If the value of the property appreciates by just four percent, the rental income also increases at that level. That is, the $15,000 rental income can go up. The mortgage payment remains at $6,600. Thus, you have extra money for investments every year.
In the above scenario, your original investment is just $20,000. The investment is returned in less than two years. By the time you repay your mortgage after 20 years, you will already have made $200,000 in rental income only. This is after taking into consideration mortgage payments, taxes and maintenance costs.
You can now sell the property for more than $200,000 – based on a four percent annual appreciation over 20 years. In other words, your original $20,000 has now returned $400,000 in 20 years.
If you have reinvested the rental income, the figures can be overwhelming for the newbie investor. They appear too good to be true. In fact, you can have at least fifty such properties spinning money for you. Make your calculations and find out for yourself. That will be millions of dollars in passive income.
Real Riches Are There In Real Estate
Investing in real estate houses is the way to go if you want to build wealth the most stable way. It takes time, dedication and energy. Stay away from exaggerated claims. You can build wealth steadily by investing in real estate houses.