In this economy, the rich are getting richer and the poor are getting poorer. The middle class is dwindling. If you are in the middle class, you may be able to secure a decent paying job and afford a few of the finer things in life, but this won’t allow you to acquire any significant measure of wealth. No matter how frugal you are or the number of side jobs you can handle, you won’t be able to work your way out of the middle class.
If acquiring wealth is your goal, one thing to consider is real estate. Real estate allows you many benefits that can get you and your children out of the middle class.
Why Real Estate Can Boost Your Wealth
If you have ever wondered why people would put themselves in the position of having to deal with tenants on a regular basis and being responsible for multiple properties, it is for one reason: wealth. Real estate is one of the most secure investments that someone can make, and in some cases offer great tax benefits (be leery though because there are implications as well). It is usually considered a long-term investment as you won’t buy a property today that will double in price tomorrow. Real Estate is not a get-rich-quickly scheme.
Real estate investing is a great means to get out of the middle class for the patient investor. It takes careful consideration to find a property that will have a positive cash flow (income – expenses), but with even the slightest cash flow and a low vacancy rate, anyone can be a successful real estate investor.
Why Leverage Is So Important
While I will discuss real estate frequently, one of the most important things to understand is the ability to increase your wealth within one generation. While most families will stay within their social class from generation to generation, with little changes over time, real estate offers a way out. The way to accomplish this step-up is through one word: leverage. Leverage means that you are able to take a small amount of money and leverage it to your advantage. In real estate, it means the small amount needed for a down payment. Even with investing 20% of the value of a home, you just invested in a property that is worth 5x the amount of your initial investment. This means that as the property value increases, you are seeing returns on the entire value of the house, not just your initial investment.
If you are able to acquire multiple properties over time, before you know it (maybe one generation later), you will have established wealth. Not only will you have a lot of assets, but if you keep these properties, you will have a huge cash flow. It is for this people invest in real estate. By taking a few hours a week or month, someone is investing for their future and their children’s future.
Have you considered investing in real estate?