Real estate has made the most millionaires in America, but has also forced the most bankruptcies. Whether you own a home or are thinking of purchasing one, it’s super important to remember that an investment is only worth as much as it pays you. So before unloading yourself onto a mortgage worth hundreds of thousands of dollars, it’s best to have a strategy in place so that you don’t get all caught up in the glitz and glamour of finding your dream home.
It’s important to go into this process knowing that the first house you buy isn’t going to be your dream home. Yes, buying real estate is a huge win and you need to celebrate that victory! But what happens when you’ve become a millionaire and you’re ready to buy that beach house or vacation cabin?
The average millionaire has seven streams of income.
Millennials like myself that are just starting out aren’t quite there yet. Realistically, we can get to three or four income streams by the time we’re 30. You can receive income from your main job, rental property, investment income, and side hustle money.
This is a huge win if you can make it happen because by the time you get into your higher earning years, you’ve already laid the groundwork for your success.
So how does this relate to buying a home? When making a home purchase, it’s important to take into consideration whether or not you can turn your first home into an income-producing investment. You could always utilize short or long-term rental options while you are living in your home, which we get into in this article. However, there will come a time when you’ve outgrown your home and want to move on. Most people sell their home, take the equity, and buy a new house. Don’t fall for this trap!
It would be smart to consider turning your first home into a rental, and taking the income from the property to pay off your new home.
This way you are leveraging your assets, using someone else’s money to pay off your mortgage, and you’re setting yourself up to have extra money going into the bank once that’s paid for!
Think about it like this; imagine that instead of a mortgage payment every month, that same amount of money is deposited into your bank account instead. That’s huge!
Now this may not work for everyone, but speaking from my experience, this strategy has worked! Since I purchased it, my home has increased in value over $100,000 and is paying me over $2,000/month in rental income. And yes, I live in an apartment that I’m renting!
Renting has allowed me to turn my home into an investment and live below my means so that I can use the extra money to pay off student loans, bills, etc. So before buying a house, find a way to determine whether or not the place is in a rentable location.
Josh A.K.A. Chachi