How do Investors build wealth through investment properties? In this Blog post, we discuss 5 habits for building wealth via your property investments.
5 Habits for Building Wealth
1. Capital Growth
Real estate has the great potential to increase in value over time – this is called capital growth.
Whether you’re buying a new purchase to live in yourself, or you’re buying a property as an investment for rental income, capital growth always gives worth to a financial situation.
You can potentially access the capital gains as you go along by refinancing your loan – effectively using the property as a money tree!
2. Cash Flow real estate investingCash-flow investing
can build long-term wealth that continues to grow throughout multiple generations. For many investors, wealth generated with real estate cash flow investing can also fund charitable organizations, fund exciting vacations with family and friends and providing a better life for future generations.
3. Principal pay-down.
When you have a mortgage
on a property, part of the monthly mortgage payment (that you pay from your rent) goes toward the loan principal. Over time, the principal that gets paid off builds up equity in your property. When you sell, or if you ever refinance the property, you will collect that equity at the closing table.
4. Sweat Equity
When you buy a property that is sold as a distress sale (foreclosure, short sale, estate sale, etc), and fix it up, the difference between the after repaired value (ARV) and the amount you paid + repairs/improvements is called “sweat equity”.
For example, if you buy a home for $150,000 and spend $30,000 on repairs or improvements, and the newly remodeled home is then worth $220,000, you have created $40,000 worth of sweat equity.
5. Super and SMSFs
With its built-in tax advantages, super is a powerful vehicle for long-term wealth creation, so it’s important to make the most of it. Real estate crowdfunding platforms can help you take advantage of the benefits super has to offer, while navigating an increasingly complex regulatory landscape.
Is Building Wealth Good For You?
Wealth means different things to different people, and for a lot of people, it can seem bewildering or out of reach.
Figuring out how much investment income you need when you start building wealth or become financial freedom is a good way, and from there, you can determine the combinations of monthly contributions and rates of return you need to achieve those goals.
You can build any realistic wealth target and passive investment income that you have in mind, as long as you act and plan accordingly.
"Any advice provided on this blog is general in nature. Readers are urged to seek their own professional advice before making decisions."
Dec 15. 2017