If you’re moving to the United States from another country, or an American interested in striking it rich in real estate, there’s a lot to learn. However, the formula is surprisingly simple. Even in a short post like this, it’s possible to paint the picture in broad strokes.
Property ownership is and always has been one of the fastest paths to prosperity in the United States of America. If you are relocating from Iceland to the Texas Hill Country, you’ll be glad to know that American houses are one of the most efficient and secure investments that can be made. If well-chosen, houses appreciate in value reliably, and that’s not the only place that owners are making money.
It’s common for US homeowners to buy houses with multiple units (multifamily houses), live in one, and then rent the other(s) to tenants. Oftentimes the money brought in through rent more than pays for the owner’s mortgage. Even in places where multi family properties are not common, these same owner-investors are buying up single family homes. The same financial process applies. A renter pays a monthly figure that is more than the monthly mortgage price. This allows the landlord to own property while (essentially) paying nothing for it. The monthly payments are kept as equity, and wealth gradually accumulates.
There are other costs associated with homeownership, but the basic plan is sound. The problem for most people is how to pay for it.
The first house is the hardest. Perhaps you don’t own any property at all, or perhaps you own one house that serves as your principal residence. Buying a house is expensive. Most people don’t have the cash on hand to pay for an entire building in cash, so they have to settle for a large down payment. Frequently, this sum is $50,000 or more for a nice house. While people with average incomes may be able to save that up once, it’s hard to do it again.
Additionally, it’s a little more expensive to buy a home that’s going to be used for investment. If, on the one hand, you buy a multi family property that you are going to move into, this can serve as your new primary residence, and you will get financing at the cheap price usually offered to owner-occupants. If, on the other hand, you are buying a home that is solely an investment, you will be charged more in interest and fees by your lender. You may also be required to pay a larger down payment.
Nonetheless, careful planning will let you leverage your money and property in a way that will give you one or more properties at a low price. Once you own two, you are home free. The price of a home that is sold can be used 100% to fund another house purchase, whereas these funds would be heavily taxed if used for another purpose. Look for deals and plan carefully, and you can make a killing in residential real estate in the United States.