4 Proven Ways Real Estate Can Build Sizable Family Wealth

JOHN RICE ASSOCIATE BROKER | REALTOR

4 Proven Ways Real Estate Can Build Sizable Family Wealth

4 Proven Ways Real Estate Can Build Sizable Family Wealth | Simplifying The Market

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.

Source: Michigan Real Estate Updates

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It was a wonderful experience working with John. His professionalism, honesty, experience, and knowledge of the Grand Rapids market, helped us in multiple ways. John sold our home in one day, was honest about what we could expect from offers, and was spot on. As we progressed toward finding our new home, again, he was extremely knowledgeable about the neighborhoods, home values, and history of the homes. We are more than happy to say, that he helped us find our dream home within our budget! Anything I needed, he was there through emails, texts, or phone calls. He definitely put in a lot of work for us. Without a doubt, I will ask for his assistance again when the time comes. Thank you John!
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Purchased and sold with John, he is: Professional, an extremely good communicator, precise, and acted on our behalf 24/7. He kept us up to date on listings for purchase and preparation advice for selling our home. He was knowledgeable about neighborhoods. Photography for sale of our house was impressive. We were appreciative of the guidance regarding making offers, inspections, when to list our home, writing contracts, detailed review and presentation of offers on our home and being realistic about our purchase of new home. Great experience, Great Realtor.
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