Building wealth. A simple statement. Everyone wants to “build their wealth”, or simply “get rich”. Historically, one of the most recognized ways to build wealth has been through real estate investing. I use the word “path” deliberately as the path to real estate wealth is typically not one of “overnight success.” It has long been, and still is, one of the surest paths to riches. It can be a safe path if you do your homework, and it involves study, planning, research, some degree of risk, and most of all, a plan of action. Nothing happens without taking action. So how does the term capital accumulation apply here? Equity is the difference between what is owed on a property (the mortgage or loan) and the actual market value of that property, or what will sell. It is the cash you withdraw from the closing table after you have sold the property. Before charging is equity.

Now that we have defined equity, we can talk about accumulating equity. One of the most powerful tools to acquire wealth through real estate investment is the accumulation of capital. As it grows? It can happen naturally, or it can be forced. When it happens naturally, it is usually over a longer period of time and is the result of natural appreciation. Buy a property, keep it for a long time, let the rental income cover the mortgage, taxes and insurance, then sell it for more than you paid for it. Many people have used this method as a means of building a secure retirement portfolio.

The second method, or forced appreciation, occurs as a result of specific actions on the part of the investor, and can occur using several different methods. You can buy good (straight means low) and have instant capital, you can buy something that needs repair and upgrade it, thus creating instant capital, or you can build it from scratch and sell it, also creating instant capital. Any one of these last three ways is generally used to develop quick real estate cash. By far the quickest of these is to simply buy a property in good shape, from an extremely motivated seller, and then resell it as soon as possible for a short-term profit.

Buying a property to fix up or “rehab”, as it is generally known in the business, is the second fastest. Buying land, building a house and then selling it would be in third place. Any one of these three can usually be accomplished in less than a year. Buying low and reselling right away can be anywhere from a day to a few months. It all depends on your marketing methods. Another way that does not involve capital accumulation, but can produce quick cash, is called “contract assignment.” Contract a property, add a small profit and sell the contract to a buyer who wants to do any of the above. That is a completely separate topic, and will be covered in another article.

I have deliberately omitted the quotes around the winning numbers here, as they can range from a thousand to five thousand or more for a simple task, to even six figures in any of the other methods. It’s all about your market, your research, your knowledge, and your exit strategies.

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