This week I have been mixing business with pleasure while sunbathing on Coppacobana beach in Rio de Janeiro. As I traveled this week dancing to the samba beats of Latin America, I noticed the huge divide between the wealthy Brazilians, with their ostentatious apartments, and the really poor locals who live in squalor in Rio’s overcrowded “favella” communities. I began to understand how the rich get richer and the poor stay poor. In this world, money really makes money, the more you have, the more it makes for you. I remember once a wise old man told me “he never sells a property” and he always “uses other people’s money” to buy a property.
I have read many books on real estate development and investing and the power it has to make you rich. One of the best sources of information I found was reading the Rich Dad Poor Dad series of books. These books teach you how to use other people’s money, i.e. banks, to buy properties and then leverage up to buy more properties using the capital earned from the old ones, through capital appreciation.
Historically, property has always risen in value, with only a few flashes on the market due to economic conditions. It has always outperformed the stock market, so investing in bricks and mortar represents a very safe and prudent way to increase your wealth. Naturally, you have to do things right, but by investing wisely, in the right place for the right price, and in the right location, you can make a lot of money on those bricks.
One way is to “flip” the property, that is, buy cheaply, fix it up, and then quickly resell it for a profit. The other alternative is to “buy to let” to earn passive income through rentals and hold it long-term for capital appreciation. Another good way to invest in property is to buy “off plan,” whereby you put a deposit on a property and then wait for it to be built and then sell it before completion or hold it for rental. Either way, you can make a nice profit due to increased property value upon completion.
You can build a fairly sizable property portfolio by releasing equity from each of your properties and then taking out a buy-to-let mortgage to buy an additional property. Eventually, you will be able to sell some properties and with the money from the sale you will be able to pay off mortgages and still be able to keep some of your portfolio for rental income and capital appreciation. So the goal is to eventually be mortgage-free while also earning a passive income from your remaining properties.
People are often scared to death by the word mortgage, they consider it a death sentence, a noose around their neck. In fact, a mortgage is good debt, while a car loan or credit card is bad debt. Banks love property and mortgages because they see property as a good investment that will grow in value all the time. They love lending you money to buy that property, so don’t be put off by the word mortgage, it’s good debt. So be bold, take the plunge and invest in your next property and if you invest wisely it will rise in value and make you a lot of money, it could even make you super rich.
