5 Ways To Build Wealth In Real Estate Also 43 Foreclosure Homes This Month

5 Ways To Build Wealth In Real Estate Also 43 Foreclosure Homes This Month

1. Appreciation of the asset.  Yes, it is correct that residential real estate appreciates on average over the long term about 4%-5% a year, and that this is generally only about 1%- 2% above the inflation rate. But this is not the only way that we make money on our investments!

It is also true that if you purchase real estate when it’s really cheap, as in the periods from 2000-2003, or 2009-2011, your appreciation rate over the next few years is likely to be far greater than the historical averages.

Also keep in mind that as the property appreciates, it is compounding the return that you receive. The $200,000 home becomes $210,000 the first year, but then $220,500 in year two as the 5% appreciation is compounded off the higher value achieved after year one.

2. Cash flow. This is the money that comes from renting real estate to tenants. Think of rent like a stock dividend. Whether the value of the asset—be it stock or real estate—goes up or down, the dividend (rent) is paid out every month. By taking in more from rent than you pay out in expenses (mortgage, taxes, insurance, repairs), you create a positive cash flow on a monthly basis.

3. Principal pay-down. When you have a mortgage on a property, part of the monthly mortgage payment (that you pay from your rent) goes toward the loan principal. Over time, the principal that gets paid off builds up equity in your property.  When you sell, or if you ever refinance the property, you will collect that equity at the closing table.

4. Start-up equity. When you buy a property that is sold as a distress sale (foreclosure, short sale, estate sale, etc), and fix it up, the difference between the after repaired value (ARV) and the amount you paid + repairs/improvements is called “sweat equity”.

For example, if you buy a home for $150,000 and spend $30,000 on repairs or improvements, and the newly remodeled home is then worth $220,000, you have created $40,000 worth of sweat equity.

5. Tax benefits. There are a number of tax benefits to owning investment properties, and although you won’t actually see that money in your pocket, it will come back to you in the form of deductions that will reduce your income taxes. Money spent on mortgage interest, insurance, repairs, and association dues is all tax deductible. You can even deduct half of your travel and meal expenses if you have to travel a distance to where your properties are located.

Here is a list of 43 foreclosure homes in and around lafayette this month.


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Phone: 337-552-7240
Dated: December 21st 2016
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eXp Realty Louisiana
2000 Lake Street
Lake Charles, LA