Buying Houses as an Investment
The house you live in is one of the biggest investments
that you will make. But, the more you learn about
real estate and how it works, the more you might want to
invest in other houses purely for prooft. Unless you get a
really bad deal on the price of property, you can’t really
go wrong buying houses.
Land has continued to increase
in value for the last
fifteen hundred years and it
will continue to do so.
If you purchase a
house for $150,000 and hold
onto it for five years, in most cases, it will be worth at least
$200,000. That is an increase of $10,000 a year. Even if
you have bad credit, your payments will be around $1,000
a month. You could rent it for perhaps $800 a month.
I know what you are thinking. “That’s a horrible
investment that will cost you $200 every month. How can
that be good?” This is another example of not thinking like
the wealthy. You have to look at all the pieces.
Each year, you will put $2,400 into the house. Your
renter will pay the rest of the mortgage payment, but it will
cost you that much. However, the value of the house has
gone up $10,000 over the same time period. That is actually
a profit of $7,600, a 400% return on your money. That
is not including the extra tax deductions that you will get.
It is not a $200 a month loss. It is a 400% return.
If you are still renting that house in fi ve to ten years,
the rent will have increased to $1,200 a month and then you
have a profi t of $200 a month beyond the other increase.
In ten years, that house will be worth at least
$270,000, which will give you a profit of $14,000 a year.
Not too bad for a small investment. Now imagine that you
have four or five houses, all doing the same thing.
You need a credit score of 660 or higher and you
will have to put 5% to 10% down, so you will need a maximum
of $15,000 to get started. If you do not have that,
consider getting some partners. Save your seed money
until you have enough. Do whatever you need to do in
order to get started.
Another type of investment is what is called “flipping”
houses. Someone might buy a house for $150,000
and then resell it at a higher price. It might be a fixer upper
or the owner might have been behind in payments and just
needed to get out quickly. Most times, they have a little
equity in their house but they will lose it if it is repossessed,
so they will make a great deal for the right buyer.
If you decide to invest in those kinds of deals, you
can make a quick $10,000 per house. Be sure to include
all expenses like your real estate costs and loan and administrative
costs, but when you do it right, you will average
around $10,000 profit.
You can do this with the house you live in. Buy a
fixer upper, fix it up, move in and put it on the market. You
can live in it until it sells. If it does not sell right away,
it’s no big deal because the house increases in value every
month that goes by. You are using the bank’s money plus
you get the tax deduction. Once it sells, do the same thing
again. Then you can start buying more than one at a time.
In a relatively short period, you build up a tremendous
amount of value in the properties that you own.
The important thing to realize is that you are no
longer thinking in terms of just getting by. Your house is
not just an expense that you pay every month so that you
have a place to live. It is an investment that can make
you very wealthy. That is how the rich think of everything
they own. The more you learn to think that way, the
wealthier you will become.