Einstein once said that compound interest is the most powerful force in the world. If you use this reasoning to buy a stock on the stock market, your money will double in ten years. Using this logic even more, if you put 5% down on a home, you could make your money grow by four, eight, or even twelve times in the same ten years.
Need Evidence?
Let's say you have $10,000 to invest and want to get the most out of it. You can put your money in the stock market, and if your stocks go up by an average of 7% per year, your $10,000 nest egg will be worth almost twice as much after 10 years. Exact amount: $19,472. Not bad for a passive income!
But if you put that same $10,000 down on a $200,000 home that appreciates at half the rate of the stock market (an average of 3.5 percent a year), your home will be worth more than $282,000! Even if you get a loan for just the interest, your $10,000 investment will be worth more than $92,000 when you sell the house and pay off the loan. If your home goes up in value at the same rate as the stock market, which is about 7% per year on average, your initial investment of $10,000 will turn into a $384,000 home. After you pay off your $190,000 loan, you'll have $194,000 in cash.
You have two choices if you want to know about monthly payments: If this is for a home you will live in, the monthly payments will probably be the same as what you would pay in rent anyway, and there are other tax benefits that haven't even been mentioned in this article. If you buy this house to rent it out, the rent should be more than enough to cover your mortgage payment. (Letting someone else pay for your real estate investment is the most beautiful thing you can do. On the stock market, you can't do that, but it happens all the time in real estate.) If you're still not sure, you might want to read "The Wealthy Barber" by David Chilton, "Rich Dad, Poor Dad" by Robert Kiyosaki, or "How to Get Rich" by Donald Trump. If you don't want to go out and buy a book right now, you can listen to a free recording where a successful real estate investor from Colorado talks about how he got there. You can listen to the free recording at http://www.automatedhomefinder.com/education/investments101.php.
Too much risk?
Yes, there is risk, but it's unlikely that your risk is higher than the risk you take when you invest in the stock market. The higher the risk, the higher the reward, and real estate has been a good investment for a long time. Donald Trump, Warren Buffett, and David Chilton are just a few examples ("The Wealthy Barber" himself.)
How to start off:
If you want to look into investing in real estate in your area, all you have to do is find a buyer's agent or do a couple real estate searches on the internet to see what kind of homes are available. If you don't know how much house you can afford, your Realtor can help or put you in touch with a lender who can.
