Published by Real Wealth | July 9, 2024
If you’re looking to build wealth, real estate is a great way to do it.
Real estate investing is no different from any other business. In fact, a slight shift in mindset can be all you need to overcome limiting beliefs and get your first income-generating property.
A common limiting belief among real estate investors is analysis paralysis. Analysis paralysis is a term that describes when too much information makes it difficult to reach a decision. This can be problematic, because the longer you wait to make a decision, the less time you have to act on it.
The returns from real estate investing generally accrue over time and only if you purchase judiciously and invest enough to properly maintain properties (which means more than just buying low priced houses).
But the normal trajectory for new investors is to buy a B-class, single family home that doesn’t cost much and rent it out for a modest price (about $1,000+). You hold this until you have enough cash to buy another low-priced property because you have always been told that debt is bad. You are your own Realtor and property manager. You do everything you can to minimize costs. The problem is that this isn’t passive income at all! Over time, when a sudden market upheaval affects your cash flow, you can’t wait to rush out. This was the experience of many small investors during the Covid-19 pandemic.
The truth is, real estate investing is a risky business. The market can be unpredictable, and your investment could depreciate. Supply and demand, the economy, demographics, interest rates, government policies and unforeseen events all play a role in real estate trends including prices and rental rates.
But here’s the thing: none of these really matter when you’re focused on long term returns.
Why Real Estate Creates 90% of Millionaires
If you’re looking to build wealth, real estate is a great way to do it. Real estate tends to increase in value over time, and while it’s not a liquid investment (you can’t just sell it at any time you like), it offers tax benefits and protection from inflation.
One of the original steel tycoons of the 1800s and early 1900s, Andrew Carnegie, once said that “90% of all millionaires become so through owning real estate.” It has become a very popular real estate wealth statistic. While it hasn’t been proved, we know that it’s true that countless millionaires have been created through real estate investing. In fact, Andrew Carnegie himself was a wealthy real estate mogul who built one of New York City’s most treasured music venues with his wealth.
The thing about real estate is that it doesn’t lose value when inflation hits—in fact, it may even increase in value during times of uncertainty, because it’s seen as a safe investment. And you can take advantage of the tax benefits: real estate assets are depreciable, and you might be able to claim depreciation on your tax return.
