How to get rich with real estate: The following is a guest post from an inspiring millennial named Tracy Ma. In the not-so-distant past, Tracy was working three jobs, totaling 70 hours per week, just to cover expenses. Today, she has a multi-million dollar real estate portfolio which has even been featured in the Canadian Real Estate Wealth magazine. In short, she’s winning at life! After you read her post, there’s more information below about Tracy, her blog, and how she can help you become successful with real estate…
Action may not always bring happiness; but there is no happiness without action. – Benjamin Disraeli
I grew up knowing that real estate was a great investment, but I didn’t fully understand why. Then I rented out my first condo to nice tenants and I realized how investing in real estate can be a powerful cash machine. I finally had multiple streams of income!
Here’s How I Did This:
There is a process to getting rich with real estate. The rent from my tenant paid the monthly mortgage payment, condo fees, and expenses. After four years of holding onto it, I sold the condo on Facebook for a healthy profit (in the six figures as gracefully shown in the graph below) and decided to reinvest the profits and cash flow into more real estate investments. I also discovered what Einstein described as the most powerful force in the universe, “compound interest”. Compounding is the process of generating earnings on an asset’s reinvested earnings. Albert Einstein called compound interest “the greatest mathematical discovery of all time”.
For the past 8 years, I’ve been investing in real estate to create a life I want to lead. It’s working because of the POWER of real estate investing. Here is a real life example of how it works and how you can do the same by turning your money into a cool cash machine using real estate.
1. Positive Cashflow (Rent – Expenses = Cashflow)
I purchased a cute 1920’s starter home, modernized it, and rented it out to several young professional couples over the past 7 years. The rent coming in paid for all the expenses including property taxes, mortgage, insurance, maintenance and still made a decent amount of monthly cash flow. After seven years of holding it, I netted over $9,000 in cash flow, even with two months of vacancy.
2. Mortgage Loan Pay Down Helps You Get Rich with Real Estate
Tenants pay down your mortgage on a monthly basis and produce more equity for you! For example, my tenants have down over $43,000 towards the mortgage. That is money locked in a pretty piggy bank that you can use to pay for your kid’s education or go towards your retirement fund – all paid by your tenants.
Read the article on how to house hack with roommates.
3. Appreciation (Increase to property values)
The markets are a business of transferring money from the impatient to the patient. -Warren Buffett
That is the same with real estate. The longer you hold, the more you can potentially make. Generally, I like to hold for more than 10 years to account for any dips in the market. For example, over the past seven years even with a dip in the market, my cute war home has increased in property value (approximately $120K!) And the longer I hold it, the greater its potential for appreciation. I bought the house originally for $226K and it was appraised at $345K in 2015.
Increase your chances of appreciation by “blinging” a home, i.e. modernizing a kitchen, painting, and landscaping. Just make sure that any renovations you invest in don’t get out of control. My rule-of-thumb is to spend less than the sum of two years of gross rent. This also helps to increase the speed of the investment recovery. Lastly, purchasing a property in a desirable neighborhood will help increase your chances for greater appreciation, too.
4. Tax Advantages Help You Get Rich with Real Estate
There are loads of tax advantages to having a rental income. Expenses like mortgage interest and maintenance costs are tax-deductible. So, in a way, you can think of the savings in taxes as if your expenses were paid partially by the government. This reduces taxes that you would have paid annually to the government, which means more money in your pocket.
For example, I write off property management fees, maintenance expenses, mortgage interest, and insurance. Additionally, I depreciate the cost of the home on an annual basis, which offsets any income that I net in the home.
5. Power of Leverage to Get Rich with Real Estate
Real estate assets can be highly leveraged without substantial risk or cost, which is rarely the case with paper assets. I bought this cute home with a down payment that was leveraged by borrowed money from the bank, i.e. a mortgage. While the tenants paid for my mortgage, I benefited from the growth of both my down payment AND the borrowed money from the bank. After 7 years of holding it, I’ve made over 270% return on my initial capital investment, including the benefits of positive cash flow, equity growth, and appreciation. Imagine doing that with paper assets without taking a lot of risks!
6. Compound Interest
Now add up the above advantages and you can dramatically affect your rate of compound growth! If you save up the cash flow from your investment property and reinvest the profits towards another property (after you sell), then you are golden! You have exercised the power of compounded growth, making your properties into cash machines. You’re well on your way to getting rich with real estate. Of course, this requires discipline and sound money management, which is easier to do once you discover your true motivation for growing your financial fortress.
These multiple streams of income can transform your real estate investment into cash machines as you can see in the above graph! And the longer I hold this cute war home, the more it grows. I encourage you to minimize time-wasters in life and reinvest that time to starting your journey into real estate. I promise that if you invest in real estate wisely, it will help you reach your financial goals sooner and shorten your path to financial independence.
Financial Nirvana Mama
Tracy Ma is an entrepreneur and real-estate investor with an unquenchable thirst for lifelong learning dedicated to helping you invest like a pro so that you ultimately live a better life.
MY MISSION Learn to Grow your Income. Build your Wealth. Live your Best Life.
MY WORK is for the ambitious, the hustlers, the entrepreneurs, and the action takers who are building their wealth through real estate, businesses and investments and accelerating their path to financial independence.
BEST PART, I teach you principles, tips, rules, and techniques to get into real estate investing, stock investing, develop passive income without any inheritance, winning the lottery, becoming a slimy salesperson and any experience.
Check out Tracy’s blog at www.financialnirvanamama.com!