My husband and I thought that we began investing in real estate in 2003 when we purchased our first duplex. The truth is, we first invested in real estate when we purchased our first home in 1999. At that very moment we began building our net worth by owning an asset that increases in value, and every month paying down a little bit of principal. The key concept there is that a little bit done consistently turns into quite a bit!
The average net worth of someone who rents their home is about $5,000. The average net worth of a homeowner is about $230,000. So that little bit every month really adds up! The reason for this is because you have two things working in your favor: appreciation and debt reduction. If you put 10% down on a house, the magic is that a 1% appreciation on a $200,000 is $2,000. However, if you calculate your return from the down payment of $20,000 a 1% appreciation rate is a 10% return on your money! That’s what we call leverage.
Why I am talking about homeownership when this is supposed to be about rental property? I wanted to first sell you on the idea that owning real estate is a very smart thing to do. Leverage and appreciation make sure of that. But with rental property you get something that makes this even better: monthly cash flow. Even if your cash flow is minimal, your tenant is paying your mortgage so that you enjoy the reduced mortgage amount and the appreciation on the property.
Build wealth by buying rental property, start today!