How real estate can produce wealth
How can real estate produce wealth? Have you ever wondered?
Many will read this with anger or pain for having lost their homes in the economic (real estate) crisis of a decade ago.
We thought we would never recover from it, but today many people are building wealth by investing in these businesses.
Many who are investing are generating very positive cash flows after all property operating expenses…
Those expenses to take into account are among others:
- – Mortgage expenses
- – Property taxes
- – Insurance
- – Maintenance and upkeep
- – Administrative expenses
- – Utilities
- – Legal expenses
- – Contingencies
This positive cash flow allows them to reinvest in new properties.
What we usually invest in
Many people invest in different markets and products hoping that their merchandise, goods or services will gain value and then sell again and make a profit.
Others invest, in poorly managed businesses in the hope of recovering them, thus obtaining better income and increasing their value.
However, this is risky, and the work and effort to achieve it sometimes becomes unattractive.
We need a solid and adjusted plan that guarantees a higher value of the investment later on.
What we all hope is that, by investing in something, we will eventually make a profit, otherwise we will feel that we are waiting for have good luck.
What happened in the real estate crisis
Many who bought because prices were rising, then were forced to sell when properties stopped appreciating, to avoid continuing to lose money.
Therefore, investors who understand real estate know that in the long run properties will generate more and better income if they are well managed, no matter how the market behaves….
If values go down, they are still safe because their properties are still theirs, if prices go up, it is even better because they will have more options to negotiate.
The patient, will produce wealth in real estate
So if you are patient, you will surely build wealth in real estate, because properties have always appreciated and it is already like a law, and nothing makes us think that it will be different.
That is why some of these businesses offer great profits, let us explain how to read certain results, so you can consider the real numbers of your investment, for example:
-You ask the bank for a loan of $180,000.
-Then you make a $20,000 down payment.
-Finally you acquire a $200,000 property.
-In a short time your property increases to $220,000.
How much are you earning?
Anyone would say that your return is 10%, but really if you gave $20,000 and the property increased $20,000, your return is 100%, because what you invested, doubled.
Real estate, while it grows your wealth, protects it
Another misconception is to think that depreciation, is that the property loses its value, this is just a fiscal term that allows us to deduct the tax burden of the property each year, which leads us to reduce the taxes of what we earn….
That is why it is such a good business to own a property that generates money, this can increase its value, and protects you from taxes on the money you are earning.
“In other words, real estate, while it grows your wealth, protects it”.
We always mention you to get proper advice on this and other benefits when buying real estate, as these tax exemptions do not apply in all cases.
Real estate can produce wealth and is easy to back it up
Another great attraction of real estate is how easy it can be to back it up, not only because of its financing, but also because of the terms of such loans, their low interest rates, minimum down payments and repayment terms of up to 30 years.
No other investment offers financial terms like these, and if you do it right, you can buy a property, rehab it, rent it, refinance it and reinvest, all while adding value to the property.
And best of all, you can borrow money from the bank, pay it back with your tenants’ money, and keep the difference, so a good cash flow is essential and your property must produce more than it costs you to own and pay for it.
Now as time goes by, each payment you make to the bank reduces the balance of the loan, which creates wealth and generates cash flow month by month, being your tenant who pays for you, this increases your wealth in a passive way, and brings you closer to your financial freedom.
We can force our property to increase its value
Likewise we can force our property to increase its value in different ways, without depending on market conditions or factors that we can not control, some alternatives may be:
- – Buying a property below its market value to add value to it (repairs, painting, new floors, appliances, etc.).
- – Remodeling the property with new features (additional bedrooms, bathrooms or increasing the built-up areas).
The important thing is to find properties with deficiencies, to improve and add what they lack to increase their value and amenities.
Consider the factor that generates the most wealth in real estate over time
We must also consider the factor that generates the most wealth in real estate over time, “inflation”.
Our purchasing power is worth less each year, as our money is worth less, the price of goods and services increases, it’s like when your grandfather tells you that in his youth a soda and a hamburger could be bought with 15 cents.
Inflation is a powerful tool to create wealth when used well, the key in real estate is that the big expenses (mortgage and taxes) remain fixed most of the time while you own the property.
This combined with rising rents and home values (due to inflation), generates excellent results.
If it is reasonable to expect inflation to continue, surprising to see that every day, fewer people are investing in real estate…
So, what are you waiting for to invest in an asset where it will benefit you?
I hope this explains better the reasons to invest in real estate and grow your wealth, being perhaps the safest, most effective, stable and simple way to achieve it.
We are the experts, and we hope you will give us a call (305) 930-1160 or visit us at 605 Lincoln Rd Suite 250, Miami Beach FL 33139 to resolve your concerns.