Who doesn’t want a higher net worth? Whether you’re new to the investing game or you’ve been in it for years, there’s nothing quite as exciting as knowing that you’re building up your long-term investment portfolio and securing your financial future.
Sometimes our portfolio growth can just seem slow or stagnant. As real estate investors, we’re not always doing all that we can to grow our net worth efficiently and effectively. It’s important that even as passive real estate investors we’re actively pursuing our own success!
While there are a thousand different schools of thought and strategies to follow when it comes to investing in real estate, there are two things every real estate investor should be doing for the sake of growing their net worth.
2 Essential Steps to Raising Your Net Worth in Real Estate
One of the keys to becoming a millionaire through investing is using other people’s money. In the industry, this is called leverage. Whether you borrow from a bank and have a mortgage on your investment property or you’ve raised capital from private money lenders, using other people’s money instead of your own is a great way to raise your net worth.
In theory, real estate is an investment that appreciates every year. You as an investor are strategically selecting properties in markets that are growing and appreciating, so this is to be expected. When your net worth is calculated by all of your financial and non-financial assets, it behooves you to hold on to your financial assets and gain non-financial assets, like investment properties.
When you’re only responsible for a down payment, you can level jump and afford higher value assets. These assets then have higher value gains when a market raises in value by, say, 5%, versus an asset that you could have paid for in full.
There is a debt (liabilities) to net worth ratio to consider, but if you are using your cash flow to pay down debts and mortgages and have carefully conducted your due diligence and are invested in strong, reliable markets, there is little to fear that your leveraging will turn against you.
For many investors, utilizing leverage allows them to scale their investments much more quickly than paying in all-cash for their investment properties. There are risks to utilizing leverage, of course, but when done properly, it can be a powerful tool.
Acquire Investment Properties
Did you know that the vast majority of real estate investors never make it past one or two properties? In order to truly build a successful portfolio, it takes more than owning a handful of investment properties. A huge part of building your net worth is simply about actively acquiring new assets.
One great advantage to real estate is that it provides us with measurable wealth. When you pay off that mortgage, you know that you have a net worth equal to the market value of that property. When it comes to other intangible investments, it’s a little harder to quantify the actual net worth that is being added to your wealth.
Acquiring properties seems simple enough, but many new real estate investors struggle to take that next step after their first or second property. It might be nerves, it might be passivity, it might be problems saving for a next down payment. Whatever the reason, they stop.
You can’t stop!
One of the best things you can do is plan. Project for yourself a goal. How many properties do you want to buy this year? It might be just one. But if you’re aiming for something, it will help keep your portfolio and your investment career growing.
When everyone else around you is content to stay stagnant, this is a power move. Take the initiative. Talk to your turnkey investment company. Plan. Strategize. Look at new markets. Analyze your returns.
If you want to raise your net worth through real estate investment, you have to actively seek to acquire properties. It’s how you scale your portfolio, increase your streams of passive income, and grow into a successful real estate investor.