In my pursuit of reaching FIRE (Financially Independent Retire Early) or Financial Freedom by age 40, I aim to use Real Estate to build wealth. This desire is more of a recent one, in fact, just last year. Through a finance blogger Tim Kim, I was able to discover Bigger Pockets where I found an incredible amount of free information on getting started in Real Estate.
Why Real Estate?
I want to diversify my income streams and Real Estate is a good option because it provides 1 of 6 of basic human needs for survival, shelter. We all need a place to live. When was the last time you paid for rent? Who does that money go to? For those who own homes, you understand this idea. Paying off your home is building your wealth (equity), which you could then use to invest in more properties.
3 basic ways to build Wealth through Real Estate
- Own it. Even if you have a loan on your property, the money you are paying off is going straight to your equity. In other words, it can be thought of as a piggy bank. If there is an appreciation or depreciation in your home value, you benefit. Appreciation is clear; your home increases in value. For depreciation, you can write it off on your taxes.
- Rent it. If you own property, PITI (Principal, Interest, Taxes, Insurance), and other necessary expenses may amount to a sizable cut off your pay. Consider renting out a room either through Craigslist or Airbnb (this is an affiliate code that will give you a discount for your next reservation).
- Keep it. Owning property should be a selective process. Choosing the right location is key to Real Estate investing. Consider buying a home in areas with low Capitalization Rates and hold on to your property, tend to it either on your own or through a property manager. If you chose a location near a college, an area with potential economic growth, and/ or you choose a place experiencing gentrification, you can benefit from property value increase.