Building wealth. A simple statement. Everybody wants to “build their wealth”, or just “get rich”. Historically, one of the most recognized pathways to wealth creation has been through real estate investing. I use the word “path” deliberately, as the path to real estate wealth is not usually one of “overnight success.” It has long been and remains one of the safest paths to wealth. It can be a safe path if you do your homework, and it involves study, planning, research, some degree of risk, and most of all, a plan of action. Nothing happens without acting. So how is the term capital accumulation applied here? Equity is the difference between what is owed on a property (the mortgage or loan) and the actual market value of that property, or for what it will sell for. It is the cash you withdraw from the closing table after you sell the property. Before charging, it is fairness.
Now that we have defined equity, we can talk about equity accumulation. One of the most powerful tools for acquiring wealth through real estate investing is the accumulation of capital. As it grows? It can happen naturally or forced. When it happens naturally, it is generally over a longer period of time and is the result of natural appreciation. Buy a property, keep it long, let the rental income cover your mortgage, taxes, and insurance, and then sell it for more than you paid for it. Many people have used this method as a means of creating a secure retirement portfolio.
The second method, or forced appreciation, occurs as a result of specific actions on the part of the investor and can occur using several different methods. You can buy good (right means low) and have instant capital, you can buy something that needs repair and improvement, thus creating instant capital, or you can build it from scratch and sell it, also creating instant capital. Any of these last three ways is generally used to develop fast real estate cash. By far the quickest of these is to simply buy a property in good condition, from an extremely motivated seller, and then resell it as soon as possible for a short-term profit.
Buying a property to repair or “rehab”, as it is commonly known in the business, is the second fastest option. Buying land, building a house, and then selling it would come third. Any of these three can generally be accomplished in less than a year. Buying cheap and reselling right away can be anywhere from a day to a few months. It all depends on your marketing methods. Another way that does not involve capital accumulation, but can produce quick cash, is called a “contract assignment.” Contract for a property, add a small profit and sell the contract to a buyer who wants to do some of the above. That is a completely separate topic and will be covered in another article.
I have purposely omitted the quotes for the win numbers here as they can range from one thousand to five thousand or more for a simple allocation, up to six figures in any of the other methods. It’s all about your market, your research, your intelligence, and your exit strategies.
If you want to learn more about these and other useful strategies, please visit my website, as shown below.
