Building Wealth Slowly Through Real Estate | Real Estater Blog

Many people across the country are hurting. Most of that pain comes from the real estate market and the bursting of the speculative bubble. This real estate bust will never be forgotten. We have been going through a major market correction for the last 5 years. Our current recession was caused by the collapse of the housing market.

However, things are starting to looking better. Like all markets and economies, real estate moves in waves or cycles. Prices go up, down and sideways. Sit with any old timer and ask them about it. They have seen all kinds of markets with this one probably being the worst since the depression. We have been in the cycle for 5 years and it looks like we might be hitting a bottom.

How Can You Make Money From This?

Large amounts of money can be made and lost in real estate. Lately, most people have just been losing money. However, that may end. Investors have either been flippers, developers, home builders or simply just bought and held for the long road. The great thing about buying and holding is that you don?t need to time the market perfectly. If you buy right you can ride out the waves.

Timing is very important in flipping. If you are in a declining market you need to buy a home at a wholesale price, often times fix it up and then sell it before prices decline. If it takes you 6 months to fix up a home you are subjecting yourself to market risk. If your real estate market declines 10% within that 6 months you could be in trouble.

If you are a long term investor you don?t need to worry as much about timing the market. You can buy a property right and sit back and let the market do the work for you. To oversimplify things many investors use the formula of buying good properties at reasonable prices in good locations. Hopefully, you can do that and get a break even cash flow. It has been very difficult to find these properties but as prices have moved south they are getting easier to find.

Time Value of Money

Money will grow over time with appreciation. Real estate will eventually start increasing in value again. Imagine if you purchased near the bottom of this real estate market and held on for 20 years. The house you buy will not only increase in value but your tenant will help pay off your mortgage.

Let?s assume that you bought a nice rental property for $75,000 and obtained a 15 year mortgage. In 15 years when the home was paid off the value of the home would be:

* 2% appreciation a year ? $100,940

* 3% appreciation a year ? $116,847

* 4% appreciation a year ? $135,070

* 5% appreciation a year ? $155,919

What if you bought several rental properties? Within 20 years using the tortoise approach and assuming increased home prices you could be worth millions. Not only that but you would have a portfolio of homes providing a nice monthly income. 20 paid off homes generating $1,500 a month each is a nice way to retire. Don?t you think?

LuxurySarasotaRealEstate.com is the best resource for finding Sarasota homes for sale.

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