Common Sen$e: Building Wealth Through Real Estate

Art Wood

I know you have probably heard it from your parents, from your friend who is a real estate agent, or from a spokesperson on TV, but now you are hearing it from ME! Real Estate is a fantastic way to build wealth. I will make some assumptions that one of your goals is indeed to build wealth. If not, you can flip to the next page, but if it is, I want to share a few reasons why I think it is the easiest way to increase your net worth.

To begin, you really don’t have to have THAT much money to buy your first home. Minimum down payments for a mortgage are only 3%-3.5%. On a $300,000 home, that is around $10,000, and then you have to add closing costs to that, but in the grand scheme of things, it is a small drop in the bucket to what you can earn in the long term.

You may have had to save for years to be able to afford the down payment on your first house, but now you are a homeowner. You are making your mortgage payments much like you would make your rent payments, except now, your mortgage balance is going down and the value of your house is going up each month. If you consider $500 per month going towards principal and normal 3% appreciation, then you “make” $1250 the first month. Now, let’s take that out over five years. You owe about $270,000, but your house is now worth about $350,000. Again, all you did was make your mortgage payment that was very similar (if not less) than your rent payment, but you now have $80,000 in equity.

So now, after five years, you want or need to move. You have two choices: you can either sell the previous home and use the down payment to purchase the next house, or, you can use your savings for the down payment and rent out the previous home and make passive income in the form of rent. If you choose to rent it out, then you are making money with minimal effort, and your renters are paying your mortgage for you. Now you are watching two homes gain in value, and continue to pay down the mortgage balance, all while just paying “rent” in the form of a mortgage payment.

You can do this over and over again until you end up like me. I bought my house in 2001, and somehow (it wasn’t planned), I have a real estate portfolio with several homes in it. It has become my retirement plan. Granted, housing prices have ebbed and flowed over the past years. We have seen crazy appreciation over the last two years, and we saw home value tank in the great recession. But as my grandfather always said, “Real estate ALWAYS goes up…they aren’t making any more dirt.”

Art Wood (NMLS #118234) is the branch manager of The Art Wood Mortgage Team of Goldwater Bank, located at 2341 Main Street in downtown Tucker. “Tucker’s Mortgage Guy” for fifteen years, he is a former Tucker Tiger (Class of ’92), and co-founder and organizer of Taste of Tucker. Family guy, community guy, and definitely not your typical mortgage guy - it’s all that he does that makes Art Wood who he is. Contact him at 678.534.5834 or art.wood@goldwaterbank.com