You read about it every day. The real estate market is going down the drain and the world is coming apart, right? That's certainly what it seems like if you read the newspaper or watch the nightly news. But is the real estate market really that bad? Is there still money to be made? You bet there is money to be made and this article will show you how a simple investment in a great property can get you started on the road to financial security for you and your family.
Now is a great time to buy a house at a bargain price. We never want to take advantage of other people, but if we find a house that an owner cannot afford and we take it off their hands, making their problem go away, we've done them a favor. If we can get that property for a great price, we can start to build real wealth for ourselves and our families for generations.
Let's say we find a great property we are able to buy for $100,000 in cash and it appreciates at 4.8% per year. In fifteen years, the value of that property will have doubled. Using a technique called the rule of 72s, we can calculate that at the end of 15 years the property is going to be worth $200,000. In this example, we'll say that the house was renting for $1000 a month and that we never raised the rent for the whole fifteen years. If we did increase the rent at all, the money would go to paying expenses, such as taxes and upkeep of the property.
So how much did we make at the end of 15 years? Well, $1,000 x 12 months = $12,000 per year. Over the 15 year period we are holding the property we would have received $180,000 in rental income. So we would end up with $380,000 total, right? Follow along: First, we received $180,000 in rental income ($1000 per month x 12 months x 15 years). Next, the original $100,000 we used to buy the house has increased to $200,000 by the rule of 72s. Adding these numbers up gives us a total of $380,000. If we take out the $100,000 that we originally paid for the property, that's a $280,000 profit that we realized!
How many of you know someone that's made a quarter of a million dollars in the last fifteen years and still has something to show for it? You can do it if you have $100,000 today, and you bought $100,000 home, that's what you would have fifteen years from now. The property would be paid for, and when you take out what you had in it, you'd be worth over a quarter of a million dollars.
Now this is just one technique to use real estate to build huge wealth. In a future article we'll talk about the power of leverage and how we can use this same $100,000 house to build a net worth of nearly $2 million dollars!
