Building wealth. A simple statement. Everyone wants to “build their wealth”, or simply “get rich”. Historically, one of the most recognized ways to build wealth has been through investing in real estate. I use the word “path” deliberately as the path to real estate wealth is not normally one of “overnight success.” It has long been, and continues to be, one of the surest 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 taking action. So how does the term capital accumulation apply here? Equity is the difference between what is owed on a property (mortgage or loan) and the actual market value of that property, or what it will sell for. It is the cash you withdraw from the closing table after you have sold the property. Before charging is equity.
Now that we have defined equity, we can talk about the accumulation of equity. One of the most powerful tools for acquiring wealth through real estate investing is capital accumulation. As it grows? It can happen naturally, or it can be forced. When it happens naturally, it is usually over a longer period of time and is the result of natural appreciation. Buy a property, keep it for a long time, let the rental income cover the 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 right (right means low) and have instant capital, you can buy something that needs fixing and improve it, 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 quick cash from real estate. By far the quickest of these is to simply buy a property in good condition, from an extremely motivated seller, and then re-sell it as soon as possible for a short-term profit.
Buying a property to fix up or “rehab” as it is generally known in the business is the second fastest. Buying land, building a house, and then selling it would be in third place. Any of these three can usually be accomplished in less than a year. Buy low and resell immediately can be anywhere from one 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 a property, add a small profit, and sell the contract to a buyer who wants to do any of the above. That is a completely separate topic, and will be covered in another article.
I have deliberately omitted the quotes around the win numbers here, as they can range from a thousand to five thousand or more for a simple task, up to even six figures in any of the other methods. Everything is focused on your market, your research, your knowledge and your exit strategies.
If you want to learn more about these and other useful strategies, please visit my website, as shown below.
