We have often seen in the media, celebrities’ rags-to-riches-to-rags stories. It is unfortunate that some people can earn an adequate amount of money, more than the average American, only to squander it on commodities, or sometimes they, unfortunately, fall on hard times. Real estate is a great way to grow your wealth because asset tends to appreciate over time. What you do with that asset, and what financial decisions you subsequently make, will determine whether you get to keep your wealth.
The wealth you earn from your real estate purchase is known as equity, although fond family memories are a great wealth too. Equity is the difference between the home’s value and what is owed on the property. Once you purchase your home, you can begin to increase equity, starting with the down payment you put on the house. Location is important because an increasing demand for homes exponentially increases its value. Areas that see a decline in population would often face a slowdown in the growth of the value of their property, but you can still increase your equity by paying down on your mortgage. Another way to improve your home’s value is by making in-demand upgrades. A home that is well-cared for will attract more buyers, thus increasing its value.
Now that your home is increasing in value, allowing you to build your equity, you are now able to make huge financial decisions. Equity has cash value but is not readily available. Some owners use their equity towards personal loans, like business or student loans. Those loans are taken out with the expectation that you would obtain a higher return in the future. A business loan, if put towards a stable and flourishing business, will allow you to repay that loan, keep your home, and will let you make more money as a business owner. That is one way owning a home can enable you to acquire even more wealth. Keep in mind, that if that business fails, you are still responsible for paying that loan. So, make wise decisions.
Another way homeowners use their equity is by cashing it out. You can sell your home, pay off your mortgage and walk away with your equity in cash. You may also request a home equity line of credit from the bank and keep your home. That way your cash is readily available. Keep in mind that you will pay interest on a line of credit. You may use your cash to purchase a smaller home or condo and earn more equity on that property.
An essential part of keeping your wealth is the concept of posterity. With posterity, you pass on your wealth to others, like your children after you are gone. By conducting estate planning with a wills and estate attorney, you will make sound decisions so that your wealth continues to grow after you are gone. A key aspect of continuing wealth is in teaching your children or your beneficiaries these gems in building and keeping wealth so that they don’t squander your money and lose the assets they inherited. They can use the assets you leave behind for future wealth to be earned in your family and your community.