It is clearly established that real estate builds more millionaires than any other wealth building class. There is no other asset class that has the following attributes:
1. Higher net worth than non-owners – It is also well documented that even if you only own one house, the one you live in, you will have a much higher net worth than someone who rents.
2. High leverage – your own home requires only 3.5% of the purchase price as a down payment if you use government backed loans like Fannie Mae, Freddie Mac, FHA, USDA and other programs. There are also down payment assistance programs you can leverage. Duplexes, Triplexes and Fourplexes also qualify for 3.5% down payment loans and are considered “Single Family Residences.”
3. Long term financing – while you can pay a lot of total dollars in interest with a long term loan, it makes the monthly payments manageable.
4. Interest and business expenses are tax deductible – The costs of interest are reduced by writing off the interest for your personal residence and if you have any part of the property that is rented out for income, you now have a way to write off business expenses of operating, maintaining and upgrading the property.
5. Other people pay your mortgage – If you have 2-4 unit properties, the income from the other units covers the cost of the mortgage and your tenants are the ones who pay off your mortgage to build your wealth.
6. You can build passive cash flow – when you buy multiple properties you develop outstanding cash flow, especially after 30 years when the mortgage is paid off and the rents are free and clear cash flow without a mortgage. There are strategies to pay off a smaller portfolio sooner without hurting your cash flow.