Wealth: Why Real Estate is a Great Asset

Wealth in real estate asset is greatly awesome and beautiful. Its not much different from any other...risk and huge monetary income, though, it is always worth it.

Real estate wealth is all about business risk and financial reward. When the government gives you subsidies in the form of mortgage interest tax deductions and bails out overextended homeowners over and over again, you’d be silly not to invest in real estate! When you can invest lots of other people’s money and not have to split the proceeds if you make a killing, that’s a wonderful thing!

There’s a reason why every rich person you know owns multiple properties. There’s a reason why enormous fortunes have been made through real estate as well. How can Donald Trump still be a billionaire after declaring bankruptcy? Asymmetric risk and reward!

It’s no wonder property owners were once called lords, or now more colloquially, landlords. The wealthy own assets, while the not-so-wealthy lease assets. After 30 years of paying $2,000 a month in rent, your return on $720,000 is negative 100%, whereas N15,000 monthly, estimates N18,000,000 in Nigeria. At least through a mortgage you’ve got an asset which you can live in rent free or pass on to your children once paid off. You might not make money as the downturn has certainly shown, but at least you have a chance.

When it comes to making money, if there is no risk, there is very little reward. After a lifetime of working, not owning might be one of the biggest risks of all!

EXAMPLE: BUILDING MILLIONS THROUGH ONE PROPERTY

A property can yield millions in real estate

In America, due to population and environmental development, houses are mostly bought unlike a typical Nigeria setting.

In Nigerian, an investor who buys a land at his early 20’s for about N200,000 stands a chance to have 30-50% increase in value in few years’ time. At 30’s, without even knowing, wealth would have accumulated. Also, a more severe handwork could erect a building on that land within 5-10years, attract tenants at N300,000-N500,000 yearly and also reduce your tax-rate. This can passively yield an addition income of millions of naira. Now, slowly reinvesting this same profit on a repeat real estate line, would amass to more millions. Over time, you will relax and watch how a land and a house replicated to an estate irrespective of economic recession.

Funny, but, the truth is…it is never as easy as said.
Also read: How to successfully build wealth as a couple - Marriage

MORE REASONS WHY REAL ESTATE IS A GREAT ASSET

#1 Hedge against inflation. 

You only hate inflation if you don’t have an asset that is inflating. If you own an oil field, a private university, and organic farm, a gold mine, or a rental property, you are loving inflation! Inflation is increasing the prices of your goods hopefully faster than the input costs and the costs to operate your asset. You think rents and prices are expensive now, but I promise you they’ll look cheap 10 years from now.

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#2 A money making play on inflation

Forget about protecting yourself against inflation. Owning real estate is a play on making money with inflation. If there so happens to be hyperinflation, your cash is devaluing rapidly as your real assets start surging in nominal value. Economic tightness will return sooner or later, causing another surge in property and rental prices.
Also read: How to build wealth on a small salary

#3 Generational wealth transfer

You can pass on property from generation to generation, conceivably making their lives a little bit better. Think about all the college graduates nowadays who are complaining they will never be able to afford a home like their parents due to exorbitant prices. Now think how much worse it will be for their children. If your parents happen to just give you one of their properties, life becomes much less stressful as you don’t need to pay rent anymore! You don’t have to study as hard to succeed either. You can pursue un-lucrative fields such as music, dance, and other fine arts if you so choose because those are your dreams.
Also read: How to build wealth from your hobby

#4 Wealth building with less effort

The most effort comes from researching the property you want to buy and finding the right tenants to pay your mortgage. Most Nigerians, buys the land and build the house, also lucrative. Once you’ve run various scenario analysis and screened your applicants, you can basically set it and forget it. I grew to be familiar with a tenant turnover of 2 years, crafty economic supervision of building constructions and caretaking rental buildings, amassing to bulk wealth. The whole idea is to invest in assets that work for you, and not the other way around.
Also read: How to  build wealth from scratch

#5 Tax-free profits

Aside the fact you are totally free from paying rent in your own property. In America, the first $250,000 in profits for singles and $500,000 for couples is tax free if you live in your property for the last two years before sale! If you so happen to be in the top income tax bracket, this is absolutely music to your ears! In order to bank $250,000 in after-tax profits as a top income tax bracket earner, you’ve got to make around $450,000 in gross profits. This special feature alone makes life a bit better.
Also read: How to build wealth for retirement

#6 Utility function

Unlike cash, which serves no utility function, property addresses a fundamental human need, shelter. If our financial system goes to hell, at least you will have a tangible asset you can actually utilize. The only thing I can do with cash is make paper airplanes, paper kite and perhaps, start a fire.
Also read: How to build wealth by saving to invest

#7 Priceless feeling

There’s something nobody really tells you when you finally build or purchase your own home. Perhaps because that something is unquantifiable. Even though you likely won’t own the house outright in the beginning, it feels wonderful not to pay someone else’s anymore and ruling out rent in your budget or emergency funds. It’s an amazing feeling to be the king or queen of your own castle where you can do what you please. So long as you pay your mortgage, nobody will ever be able to kick you out. You grow roots and finally gain conviction to launch your life.
Also read: How to build wealth at a younger age

Conclusively,

Real estate is one wealth venture is invest into, measurable income and a slowly steady wealth that withstand inflation and recession. For cash remains a paper if not used wisely.

Contributions and more suggestions are highly welcomed in the comment box. Do well to share to others. Thanks.

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