Four Tips to Wealth Through Real Estate Investment (Plus One to Grow On)

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One of our favorite quotes about growing wealthy is this, anecdotally from billionaire financier Bernard Baruch:

“The quickest way to make money is with your rear end.  Buy land and sit on it.”

Baruch was not the first, nor was he the last, to sing the praises of real estate as a wise investment strategy.  From Theodore Roosevelt to Warren Buffet, the wealthiest Americans in each generation have advised that investing in one’s own home is a shrewd investment.

Investing in Real Estate for Wealth

“Real estate is the basis of wealth,” said Roosevelt, who, in addition to a stint as President (which you may have heard about) was also a successful real estate developer.

Andrew Carnegie, one of the richest entrepreneurs in American history, put it this way:  “90% of all millionaires became so through owning real estate.”

And for a current example we need only look to Warren Buffet, who has a net worth of $50 billion and still lives in the Nebraska home he purchased in 1968 for $32,500.

“It is a totally sound premise that houses will become worth more over time because the dollar becomes worth less,” he is quoted as having said.

Enough with the Quotes!  What’s the “Why?”

So why do these billionaires agree wealth can be attained by investing in your home? Here are four huge reasons why investing in real estate is one of the surest ways to a wealthier future - plus a few perks and advantages that homeownership has to offer along the way:

1.) Housing Values Are Expected to Climb

According to CoreLogic, home values are currently expected to jump by 4.9% by 2018. That means that a home that costs $250k today may cost around $262k a year from now.

Put another way? Even if you put down just 10% in your down payment, and housing values go up that ~5%, you’d already be up nearly 50% on your money down. That's pretty remarkable! And if you need proof, just ask anyone who gambles or plays the stock market how many of them would expect to be seeing a 50% return on a cash investment.

And, to sweeten matters even more, mortgage rates also currently hover near historic lows. Despite rising in recent months, recent data from Freddie Mac show us you can still get a 30-year mortgage for 4.2%, and should able to secure one for less than 5% through next year, if current projections hold. That makes buying a home an easier proposition than many might think. 

2.) The Long-Term Financial Benefits of Owning vs. Renting are Inarguable 

One of the problems with renting is that the cost of rent always goes up, and practically never goes down. Never.

By locking in a low mortgage rate, like the ones we talked about above, you will have fixed housing costs for 30 years (unless you choose to refinance). That frees up your finances in other areas, and allows you to weather downturns in the economy with more surety and stability than if you had to deal with rent costs, which could be in a constant state of flux. 

There is a reason that real estate is considered a good investment. It is stable, and it is almost always going to appreciate - and put the equity into your pocket (which we'll get into in a bit more detail below). We're not alone in believing that the advantages of ownership are unparalleled as an investment opportunity: In fact, real estate ownership has taken the top spot in investment surveys from CoreLogic and Gallup over the years, routinely beating out stocks, precious metals, and mutual funds as the top long-term investment option. 

3.) When You Own a Home, You Build Your Own Equity

When you rent, you are building your landlord’s equity and paying his or her mortgage. You're increasing his or her wealth, and simply transferring money from your pocket to theirs. 

On the other hand, when you invest in home ownership, each successful mortgage payment is a move toward building your equity and brightening your own financial future. There's a reason, for example, that homeowners are better equipped to retire than non-homeowners. As Zillow puts it:

"Individuals who retire with a paid-off home... are more likely to live a comfortable retirement than people who must pay rent or a big mortgage payment each month after they retire."

4.) Think of the Tax deductions.

Owning a home comes with all sorts of unique tax benefits, helping you to save money each and every year. We have a pretty extensive list of those tax breaks available here, but suffice it for now to say that earning credits on your mortgage interest and being able to avoid capital gains tax when you move offer plenty of personal power to homeowners. 

Plus One? Creativity Rests In Your Own Hands.

When you own a home, you're free to make it over exactly as you'd like to see it. Finally, you get to live in the space that's exactly right for you and yours. Paint the walls purple. Pound countless nails in the walls. Foster 18 cats. While this may not make you wealthy, it will go a long way toward inner peace. There's a reason, after all, that more homeowners report higher levels of health and happiness than non-owners. 

Just do us a favor and be ready to depersonalize that property when we come in to help you sell it in a few years! 

The bottom line? If billionaires of each generation agree that investing in one’s home is the surest path to wealth, maybe we should listen. And if you want more information on how to get started, don't hesitate to shoot us an email or give us a call! The Real Group team has the experience and the skills you need to make buying or selling in Chicagoland a breeze. We're here day or night and always happy to help.

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Chicago, IL 60614

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