Real Estate…World’s Greatest Wealth builder
Posted on May 20, 2006
If you ask 100 different people to define wealth, you’ll probably get 100 different answers. It seems that wealth means something different to everyone. One might say that wealth is having an abundance of whatever is important to you. I won’t argue that point, but for the purpose of this article let’s talk about wealth as it relates to your financial condition.
Many people confuse standard of living with wealth. They see people living in expensive homes, driving fancy cars and wearing fine clothes and say to themselves, “Wow, they must be rich.” The problem is, there’s a big difference between earning a living and building wealth. An individual with the ability to earn a large income may be living a high standard of living, but may be just a couple of paychecks away from financial disaster. Wealth is not measured by the standard of living people enjoy, but rather by how long they can maintain that standard of living if they suddenly can’t work and earn. In other words, wealth is measured by the size of one’s ability to generate passive income; that’s money coming in that you don’t have to trade time and labor to earn. It could be interest, dividends, rent, or any other form of income that you don’t have to work for.
The reason real estate is the world’s greatest wealth builder is because it’s the only investment that ordinary working people can purchase with little or none of their own money that can earn enough to pay for itself. In my Weekend Millionaire book series (McGraw-Hill Publishing) I explain step-by-step how anyone can invest a few hours of his or her spare time in real estate and have it pay huge dividends.
The beauty of income producing real estate is that when you purchase it properly and hold it over time the longer you own it the wider the margin of profit becomes. Properties that when you first purchase them, only break even after expenses and loan payments, gradually produce a growing stream of income as the mortgages pay down and inflation raises rents. Equity, which is that portion of the properties you own, grows as the mortgages decline and appreciation increases the market value. Each month when tenants pay their rent, they are making deposits into your future. That’s why real estate provides a safe and secure way for ordinary people to accumulate wealth without having to scrimp and save from their earned income.
Here’s a tip! Real estate investing may seem terrifying if you’ve never done it, but so was driving a car the first time you got behind the wheel. When you turned the key and started the engine, your hands were probably shaking and your stomach was filled with butterflies. You can expect these same feelings when you first start investing in real estate, but if you approach it with the same enthusiasm that you approached learning to drive, you’ll be amazed at how quickly your hands will steady themselves and the butterflies will start flying in formation.
One of the scariest things I ever did was buying my first real estate investment. I looked for almost a year before I found a property that made sense to buy. At the closing, my palms were sweaty, my mouth was so dry I could hardly speak, and when I looked at the note and saw how much money I was about to obligate myself to pay, I almost backed out of the deal. That was more than 30 years ago. Looking back, I realize that it took a few years and several deals to develop my confidence. Real estate investing was just like driving, the more I did it the better I got and the more comfortable I became. I bought one property that first year, two the second year, four the third year and the rest is history. Today I enjoy a comfortable retirement from the income produced by my real estate investments, a retirement I was able to achieve by age 50.
I’m amazed at how many people work 40 hours a week, 50 weeks a year for 40 years and end up with little more to show for it than the meager retirement Social Security provides. Wouldn’t it make sense to invest a few hours per week of your spare time looking for good real estate investments? If it took an entire year to make your first purchase, like it did me, in just 15-20 years, that one purchase could pay you more than the Social Security check you work your entire life to get. Imagine if you did that just once a year for 15 years. Can you see how this could soon cause your passive income to exceed your earned income and allow you to retire early?
Sure, real estate investing seems overwhelming when you first start, but so were high school, college, driving, marriage, a new job, and virtually anything else you attempted for the first time. My tip is simple! If you apply the same courage and enthusiasm to real estate investing that you applied to mastering these other daunting tasks, your financial position will dramatically improve and you’ll have more of everything you want in life.
» Filed Under Success Tips Articles
Comments
Leave a Reply