Overwhelming at first, investing in real estate is a great way to generate wealth

Republished from CITIZEN-TIMES.COM
ARTICLE by Mike Summey
published May 12, 2006 12:15 am

If you ask 100 different people to define wealth, you’ll probably get 100 different answers. It seems that wealth means something different to everyone. One might say that wealth is having an abundance of whatever is important to you. I won’t argue that point, but for the purpose of this article let’s talk about wealth as it relates to your financial condition.

Many people confuse standard of living with wealth. They see people living in expensive homes, driving fancy cars and wearing fine clothes and say to themselves, “Wow, they must be rich.” The problem is, there’s a big difference between earning a living and building wealth.

In other words, wealth is measured by the size of one’s ability to generate passive income; that’s money coming in that you don’t have to trade time and labor to earn. It could be interest, dividends, rent or any other form of income that you don’t have to work for.

The reason real estate is the world’s greatest wealth builder is because it’s the only investment that ordinary working people can purchase with little or none of their own money that can earn enough to pay for itself. In my “Weekend Millionaire” book series (McGraw-Hill Publishing) I explain step-by-step how anyone can invest a few hours of his or her spare time in real estate and have it pay huge dividends.

The beauty of income-producing real estate is that when you purchase it properly and hold it over time, the longer you own it the wider the margin of profit becomes. Properties only break even after expenses and loan payments when you first purchase them gradually produce a growing stream of income as the mortgages pay down and inflation raises rents. Equity, which is that portion of the properties you own, grows as the mortgage declines and appreciation increases the market value. Each month when tenants pay their rent, they are making deposits into your future. That’s why real estate provides a safe and secure way for ordinary people to accumulate wealth without having to scrimp and save from their earned income.

One of the scariest things I ever did was buy my first real estate investment. I looked for almost a year before I found a property that made sense to buy. At the closing, my palms were sweaty, my mouth was so dry I could hardly speak, and when I looked at the note and saw how much money I was about to obligate myself to pay, I almost backed out of the deal.

That was more than 30 years ago. Looking back, I realize that it took a few years and several deals to develop my confidence. Real estate investing was just like driving, the more I did it the better I got and the more comfortable I became.

Sure, real estate investing seems overwhelming when you first start, but so were high school, college, driving, marriage, a new job and virtually anything else you attempted for the first time. My tip is simple — if you apply the same courage and enthusiasm to real estate investing that you applied to mastering these other daunting tasks, your financial position will dramatically improve and you’ll have more of everything you want in life.

This is the opinion of Mike Summey, the co-author of McGraw-Hill Publishing’s international best selling “Weekend Millionaire” book series. He can be reached at successtips@aol.com or you can visit his Web site www.weekendmillionaire.com.