Net worth is a term you’re probably familiar with, especially when it comes to celebrities. But what exactly does true net worth mean and how can you grow yours through a real estate investment? We’ll go through that and more in this post, but first, we need to understand some fundamentals.
“Real estate will make you a millionaire. Ask any millionaire and they will tell you almost half, 35 to 50 percent of their net worth is tied up in real estate.” – Alux.com
Net Worth: What does it mean?
You might wonder: is real estate a part of net worth? It absolutely is! In short, your net worth is the total value of all your assets minus any liabilities. Assets include properties, cars, jewelry, investments, and other things of value that you own. Liabilities are things such as loans, mortgages, credit card debt and any on-going financial obligation you are responsible for.
Luckily, there are tons of online resources out there that can help you calculate your Net Worth, such as this one.
Now that you know what net worth means, how can you increase it through real estate?
Invest In Real Estate to increase Net Worth
Real estate is like liquid gold when it comes to increasing one’s net worth. It’s a unique investment in many ways, one being the value of a property tends to increase overtime. Therefore, your net worth will increase with it, especially if you decide to sell the property when its value has increased.
Passive income is an attractive feature of real estate investments. If you decide to rent out your property, you’ll be earning a consistent stream of passive income which in turn can help you to payoff debt, therefore increasing the worth of your assets.
But how can you make sure your investment is safe?
Manage Your Budget
A significant aspect of boosting your net worth through real estate is managing your budget. Understanding your credit score, calculating your expenses, and using information to create a detailed budget will help ensure you’re on top of your finances.
Listen, life happens. That’s why it’s important to come up with a firm plan to manage unexpected costs that might pop up. You can factor this into your budget as an emergency fund. If you stay on top of your finances and make calculated decisions, you’ll have profitable and sustainable outcomes which increase your net worth.
Use the 72 Rule
This is a rule which allows you to track how long your investment takes to double. Historically, appreciation growth happens at a rate of around 4% when compared to stocks which grow at a rate of 8-12%. But, if you add in investment activity through rentals or other property use based business, and tax savings on investment, the average return increases to 12-36%. A decrease in purchasing power in currency can increase costs.
Hard capital assets that equate to basic human needs will always out perform luxury items and soft capital assets during economic downturns. This is why you can rest assured that owning property in these times will only increase your net worth as this hard capital asset withstands economic volatility. The only time that real estate diminishes in value is due to volatility caused by environmental, catastrophe, political or surplus supply risks.
Reach out to an Investment Pro
If you’re seeking to grow your net worth through real estate investment, Evergreen Investments can help. It’s important to have a knowledgeable real estate investment expert on your side who can help you to achieve your goals. Increasing your net worth isn’t far out of reach if you have the right strategies, stay on target, and work with a team. Investing in real estate is just one way you can skyrocket your net worth and send your debt packing.