21 Sep 2021
What Happens When the Cash Rate Increases?
Read more
Billionaire Andrew Carnegie is famously quoted as saying that 90% of millionaires invest in real estate. His words receive credibility since he built a steel empire. In 2021, there are several reasons why millionaires invest in real estate. Here we outline a few and briefly provide some insight.
Investors use real estate to build wealth. A homeowner builds wealth through homeownership too. Every property receives a valuation. When the outstanding debt on the property is less than the property’s valuation, the difference is equity. Savvy individuals leverage equity to build a real estate portfolio. The portfolio is a series of income streams. Those income streams pay off the debt on each property and the difference is profit.
Real estate profits also increase with government-approved tax breaks and incentives. The goal is to encourage investors to reinvest their tax savings in their communities. By handing over the housing to private entities, the government spends less on these services.Â
Owning property also serves as a hedge against inflation. Government entities do their best to prevent severe economic fluctuations, but they occur anyway. Property resists interest rate fluctuations because they’re locked in. The valuations may fluctuate but the property will always be worth something because it’s a tangible asset.
The reason why millionaires invest in real estate is the incentive. They receive tax breaks, the opportunity to build wealth, and invest in their communities. Building wealth through real estate starts with one mortgage product. For more information, try our home loan calculator and contact our Mortgage House loan specialists.