Hello, I am Kana the Realtor®. I started getting in Real Estate world after I saw my spouse, who’s worked all his life as an employee of technology companies, purchasing properties to the point to own, today, 4 in Orange County and 3 in Maui, HI. Yes, he has been always, W2 employee, with decent salary. But not C-level, not VP. How could he get that much money?
It is fascinating to know his financial principle and how he built up all that wealth including liquid asset on top of the real estates by having more or less “regular” job.
The key is this comment he made about when he bought his first property in Southern California when he relocated from Arizona for the new job;
“Paying the rent is giving money to someone else (Landlord). If you can pay rent, then I wanted to own a house, no matter how far down I had to go, I kept going south and found a property that I could afford. There were nothing but mountains back then”
That property was in Aliso Viejo, in early 90’s. Now there are shopping centers, cafes, restaurants, movie theaters all walking distance, and the value went up triple fold.
Instead of paying rent, you pay mortgage. This way you build equity. After a few years, when you save up some money for downpayment, then buy another house. Instead of selling your old house, you rent it out. This way, your mortgage and tax of the first house can be paid by the rent income. And regardless of the market’s ups and downs, over the time, it appreciates eventually, if you are holding on to the properties you own. Thus you can build up more equity.
It’s really fascinating, isn’t it? Especially coming from the country (Japan) where the houses can only depreciate, not appreciate (the land value could go up and down, but the building itself would not in Japan in most cases), it is a very exciting concept.
Building wealth in that way, you are looking at two major goals.
- Paying mortgage is a forced form of saving. You will be certainly building up equity of the house you are living in.
- You will make passive income (rent) for the house(s) you are renting out, on top of equity building.
This is the way to the comfortable retirement living.
As I get in deeper in the Real Estate world, I learned there are a lot of things you can do in order to increase your asset even more, if you own a house with good equity. You can get a loan by using the equity of your house as collateral to invest in other things, you can get reverse mortgage and live comfortably in the downsized house, or assisted living, etc.
However, buying a house is, of course a BIG Decision!!! Whether you live in it or not, big part of it is still “investment”. You really need to gather information, study and understand about the property and the area to make a wise decision on whether it makes sense from investment point of view.
I will be posting random articles that might be a little help on your wise investment decision!