Using Real Estate As An Iinvestment Tool

By Kenya Simmons

have been a Realtor for 20 years and I'm often asked, “How Can I Use Real Estate To Build Wealth?”

One of the ways is to buy an investment property and slowly build up your portfolio Generally, there are two primary ways to make money from real estate assets appreciation, which is an increase in property value over a period of time, and rental income collected by renting out the property to tenant. Unlike the stock market, I feel that Real Estate is a more solid way to obtain wealth, but it requires patience, strategy and longevity. Real estate investment is not a “get-rich-quick scheme ” Instead, it's a long-term strategy that can steadily build wealth over time As you continue to own and manage properties, their value appreciates, and your equity grows. Diversifying your investment portfolio is a crucial wealthbuilding strategy.

For me personally, my first real estate investment was our primary residence. We lived in that home for a few years and then moved onto a larger home and took that home and rented it out and started our journey of investing in real estate and building our portfolio. Ideally, if you can purchase properties without a loan, that is a great way to go but realistically most people cannot and that’s okay , however we were able to purchase homes using our own resources therefore, we did not have a mortgage and any money that we made from those properties is mostly profit. However, one way that you could begin to build your real estate portfolio is doing a cash out refinance What does that mean?

Cash-out refinancing is another way you can tap the equity in your existing home to help purchase a second property With a cash-out refinance, you take out a new mortgage for an amount higher than what you owe on your existing mortgage

This loan effectively pays off your existing mortgage and allows you to receive cash for a portion of the equity you have built, which could then be put toward the purchase of a second property The beauty of utilizing Real Estate as a wealth building tool is, you have so many options and scenarios that you can use to get to that goal

Also, I encourage people that want to use Real Estate as a wealth building tool to educate yourselves and even get your real estate license so that you know the ins and outs of what you were doing It is important to understand that you have to be strategic in the properties that you purchase so that they are solid investments, and therefore minimize your risks

A lot of investors will use leverage as a tool in building a portfolio and with anything particularly investments there's the pros and cons But if utilized properly, it can be effective in helping you Increase your portfolio and make money which is the ultimate goal here What does leverage mean?

Leveraging is a technique that real estate investors use to increase potential returns and build wealth over the long term. Also known as other people’s money (OPM), real estate leverage involves using debt plus a small amount of equity in the form of a down payment to purchase investment property

For example, by making a $30,000 or 25% down payment on a $120,000 single-family rental (SFR) home, an investor collects 100% of the rental income and net cash flow, plus any profit from the increase in equity over the long term.

However, the real estate market and rent prices can go down as well as up, just like the stock market. That’s why it’s important to use leverage wisely when growing a real estate portfolio A down payment can help investors avoid potential negative monthly cash flow if rent prices decline or vacancy rates increase and owning a property that is upside down if real estate values decline and the mortgage balance exceeds the property value

My grandfather used to tell us when we were younger that you could never lose with real estate When I was younger, of course, I didn't know what that meant until I began to purchase properties and build our wealth using the Real Estate I completely understood With any type of investment, there are risks and there are pros and cons, but Real Estate I have personally found to be the investment tool that I prefer and that works for me and with any investment you have to weather the storm , when the market is up when it is down, but in the long run of things , it will give you the returns you need to build wealth utilizing real estate If done correctly, you can comfortably retire and have income from your real estate investments flowing in steadily for generations. Let me help you realize your goals!

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