Today, we’ll talk about the difference between passive income, which everyone loves to talk about, and net worth, which no one seems to want to talk about. We’re going to make a five-year plan for buying real estate to make things easier.
#1: Think about the long term.If you’re trying to figure out what will happen tomorrow instead of what will happen in five years, you’ll have a hard time making decisions if you focus on tomorrow for the next 30, 60, or 90 days instead of over the next five years. You don’t wait to buy property; instead, you buy property and then wait. This is a different way to think if you flip houses or are just an investor. That is always up to you.
#2: When interest is added to itself, the value of your property goes up over time.If that house goes up in value by an average of 5% per year, it should be worth $1,050,000 next year if you buy it for $1 million. When you look at this over a longer period of time than the next 30 days, this is very helpful. Okay, now let’s talk about the other part of this, which is your equity or principal paydown. The difference between what you owe on your home and what you own is your equity. So, if you have a mortgage, the difference between what you owe and what the house is worth is your equity. The home’s value will go up as it appreciates, and the amount you spend on it will go down as you pay down the principal. When you pay that mortgage payment every month, you’ll be adding money to your net worth.
#3: Using the equity in your home to buy a new oneA lot of people use their first property to live there for 5–7 years, build their network, and then trade all that into their next property, which is worth more money. This means that your payments will be higher, but your appreciation will also be higher because real estate goes up in value. So, if you buy a bedroom townhouse for $500,000, a single-family home for $1,000,000, and a pool house for $1,000,000, you can see how it all adds up over 20 years. If you can’t wait, you can get to your dream home. I hope you can see that buying real estate is almost always a good idea in the long run. So, if you want to learn more about this or talk to us about your situation, check the value of your home and we’ll get in touch with you.