Albert Einstein once said there is nothing more powerful than compound interest. Apply that logic to buying a stock in the stock market, and you can double your money in ten years. Further leverage that logic by putting 5% down on a home, and you can possibly multiply your money by four times, eight times… even twelve times in those same ten years!
Let’s say you have $10,000, and want to find the best return for your investment. You can certainly put your money in the stock market, and if your stock goes up by an average of 7% per year, your $10,000 nest-egg will be worth nearly double after 10 years. ($19,472 to be exact.) Not bad for passive income!
However, if you take that same $10,000, and apply it as a down payment toward a 200,000 home that appreciates by half the rate of the stock market (3.5% a year average), your home will be worth over $282,000! Even if you get an interest-only loan, your initial $10,000 investment will be worth over $92,000 after selling the home and paying off your loan! If your home appreciates at the same rate as the stock market (an average of 7% per year), and your initial $10K investment that bought a 200,000 home, will parlay into owning a $384,000 home! Pay off your $190,000 loan, and you’ll be sitting on $194,000 in cash!
If you’re wondering about monthly payments, you have two options: If this is for a home you will live in, the monthly payments will likely be the same as you would be paying in rent anyway, and there are additional tax benefits that haven’t even been discussed in this article. If you buy this property as a rental property, your tenant’s rent payments should more than cover your mortgage payment. (There’s nothing more beautiful than letting someone else pay for your real estate invenstment. You just can’t do that in the stock market, but it’s done all the time in Real Estate.) If you’re still in doubt, you might want to read a couple other well-known books — «The Wealthy Barber» by David Chilton, «Rich Dad, Poor Dad» by Robert Kiyosaki, or «How to get Rich» by Donald Trump. If you don’t feel like running out and buying a book right now, feel free to listen to a free recording where a Colorado real estate investor shares his secrets to success. Listen to the free recording at: http://www.automatedhomefinder.com/education/investments101.php
Too much risk?
Yes, there is risk, but it is doubtful that your risk is any higher than the risk involved with investing in the stock market in the first place. The higher the risk, the higher the reward, and real estate has been a time-proven investment vehicle for millions of wealthy individuals — Donald Trump, Warren Buffett and David Chilton («The Wealthy Barber» himself.)
How to get started:
If you’d like to explore the idea of investing in real estate in your area, simply look up a buyer-agent in your area, or start a search on the internet and start a couple real estate searches to see what kind of home you can get in your area. If you’re not sure how much home you can afford, your Realtor can help, or put you in touch with a lender who can.