Whether you want to retire early or help secure your family’s future, it’s likely that you have given some thought to how you can grow your net worth.
Maybe you already invested in stocks, bought some cryptocurrency, or have a 401(k) plan set up to help fund your retirement.
But have you considered buying real estate as part of your portfolio?
Owning a rental property can be a great way for you to build wealth, especially if you may be wary of investing in the stock market or crypto. Data released in 2017 shows that 47% of rentals were owned by individual investors, and they get lots of perks from these investments.
In today’s blog post we’ll have a look at three reasons why real estate investing is one of the most effective ways to grow your overall net worth.
Reason #1: It Generates Passive Income
We love the idea that I can make money without physically needing to be present. That’s called passive income, and it’s many people’s dream. It’s also one of the best reasons to hold real estate as part of your investment portfolio.
Whether you buy a single-family home or an apartment block, you can almost certainly find interested tenants who will live there. And by renting out your property, you get other people to pay your monthly bills, and you’ll start building equity on your property right away without paying a dime toward a mortgage.
When the rent is higher than your monthly property expenses, it will produce passive income for you. And as rents go up in your city, this income will continue to grow over time.
Understand that real estate is not generally a 100 percent passive activity, but over time, the systems you create can help you outsource most of the landlording process.
Reason #2: It Increases In Value Over Time
Another great reason to invest in real estate is that in most cases, it increases in value over time. As long as you are maintaining the property and investing in its upkeep you have a decent shot at it being worth more in the coming years, should you decide to sell.
It fact, CoreLogic recently reported that homeowners with mortgages have seen their equity increase 29.3% since 2020. So if you bought an investment property just a few years ago, you would already be able to sell it for a profit now (or borrow against it to buy another property – for details see Reason #3 below).
But keep in mind that real estate is cyclical and that it’s not always going to be the right time to sell and realize your gains.
Reason #3: You Can Leverage Equity To Buy More Properties
Finally, our third reason that real estate is the best way to build your worth is your ability to use it as leverage to buy more real estate.
For example, say you decide to purchase a house valued at $100,000 as an investment property.
Once the mortgage on that home is paid off, you have an asset valued at $100,000 that you can then borrow against. So you can go out and buy another $100,000 home without having to sell the first!
As you can see, this can scale quite nicely over time. And like with any investment, the earlier you start, the more you will reap the benefits later.
Conclusion: Why Buying an Investment Property Is the Best Way to Build Your Net Worth
Buying investment properties is the best way to build your net worth finally reach your financial goals. The amazing thing about investment properties is the sky is the limit.
If you are ambitious about the growth of your real estate portfolio, AQRE Home offers all the resources you need to get started. You can literally have as many properties as you want, and use property management companies to turn them into a truly passive income.
If you are interested in learning more about real estate investing, read more on the AQRE Home Blog for real estate investors.
And to learn how you can make the most use of mortgage financing to purchase properties, feel free to reach out to our partners at AQRE Lending. They are happy to share their insights and expertise as well as advise you on the best mortgage products to help reach your financial goals.