Tips for Creating Long-Term Wealth With Real Estate

Creating long-term wealth with real estate.

Elizabeth Carlassare
3-minute read
Episode #15


Today’s topic is tips for creating long-term wealth with real estate.
Several years ago, when my grandfather passed away, I saw the statement from the probate of his estate. By the end of his life at the ripe old age of nearly 90, most of his retirement savings had been spent. Where was his wealth when he died? In his Westport, Connecticut house, which he and my grandmother owned for more than 40 years. During his working life as a chemical engineer and later after he retired, his house was quietly working away too--chugging along and generating considerable equity over time.

The lesson to take away from this little story is simple and really important: Over time, real estate goes up in value and, over the long term, it can go up a lot! Although appreciation has slowed recently in the U.S., owning real estate for the long term can be a powerful wealth building strategy. As the old saying goes, “Don’t wait to buy real estate; buy real estate and wait.”

Why to Own a Home

On average, homeowners have higher net worths than renters. According to the U.S. Federal Reserve’s Survey of Consumer Finances, the average net worth of renters is $54,000, but the average net worth of homeowners is $625,000!(1) More than 11 times more.

If you don’t already own your own home, consider making it a goal to buy one. It’s easier than you might think. There are many loan programs available that allow for low (and, in some cases, even no) down payment for home buyers.

And keep in mind, you don’t necessarily have to live in the home you buy. If you live in a pricey area and can’t afford or don’t want to buy there, consider buying a home in another city where the prices are lower, rents and the economy are strong, and the population is growing. Rent the house out using the services of a good property manager. Years down the road, after it's appreciated, you can sell it or refinance it using a cash-out refinance to free up funds that you could use as a down payment on another home.[[AdMiddle]

If you already own your own home, consider setting a future goal of buying another one. You can move into it and rent out your first home. When repeated, this can be a solid wealth-building strategy, particularly if you live in an area where the rents are high enough to cover the mortgage and other costs of owning the property.

As always, everyone’s situation is different so it’s a good idea to consult a tax or financial advisor.

Today, I’m giving away another copy of Investing in Real Estate by Gary Eldred, an excellent book on real estate investing. If you’ve sent me an e-mail or posted to the blog, you were automatically entered in the giveaway. And the winner is Adam in Cambridge, Massachusetts. Congratulations, Adam! Check your email for instructions.

For next week’s book giveaway, I have a trivia question. The first person to call or e-mail me with the correct answer will win next week’s book. Here’s the question:

Which three states in the U.S. are growing the fastest?

E-mail your answer to money@quickanddirtytips.com.
Cha-ching! That's all for now, courtesy of Money Girl, your guide to a richer life.

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1.“Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances”, Bucks, Kennickell, and Moore. Federal Reserve Bulletin, vol. 92 (February 2006).  The average family net worth is $54,100 for renters and $624,900 for homeowners. The median (or middle) family net worth is $4,000 for renters and $184,400 for homeowners.

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