How to Create Wealth Investing in Real Estate

Interest rates are currently high. This can create a discouraging market for new investors, but it’s important to look at the patterns of those interest rates so we can learn how to create wealth investing in real estate.

Real estate investing is one of the most accessible ways to create generational wealth. It takes two things to be successful:

1. Leverage: knowing how to use other people’s money (bank loans, etc.) to turn a profit
2. Math: know how the numbers work so you can use them to your advantage.

Even though interest rates are currently high, if we understand how to use leverage and math to our benefit, we’ll be creating wealth in no time.

It Comes Down to Numbers (and Interest Rates)

We’re all in real estate investing to create income, wealth, a better life. Interest rates are a significant aspect of that. We need to understand exactly how to leverage high interest rates to help you create the wealth you’re here for.

Here’s the good news: interest rates will likely go down soon.

If you buy a property when rates are high, you can refinance when rates drop to increase both your income and equity. 

For Example…

• Let’s say you have a 4-plex that you’re going to purchase with the following figures:
  • 4-Plex (Initial Numbers)
    • Loan Amount: $500,000 
    • Interest Rate: 8.5% 
    • Monthly Payments: $3,800

  As we said earlier, rates are likely to decrease soon. We’re heading into a big election year which tends to drop rates, and the Fed is hitting their apex. So what happens when the rates decrease and we look at refinancing?

  • 4-Plex (Refinanced!)
    • Loan Amount: $500,000 
    • Interest Rate: 7.5%
    • Monthly Payments: $3,496 (+ $360 income/month)

Even if interest rates only drop by 1%, you still end up with over $4,000/year more in your pocket.

Similarly, because of the  shifting value, that initial $500,000 now has a value of $550,000 (10% higher than before).

If all you do is refinance when rates drop by 1%, you can easily build income and equity. Imagine the strides you can take when interest rates drop even further.

This same strategy applies to portfolio/multi-family homes. When rates drop, you can look into refinancing any investment property to explore these possibilities and take advantage of this opportunity to build generational wealth.

 

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