Did you know that you can actually earn money living in your home? The key to this concept is purchasing property, since you will surely NOT earn anything if you rent.
Just by living your life normally on your own property, you will earn money that can be utilized for many purposes to build wealth. The reason why you earn is linked to a concept called equity, which basically describes the amount of property that you actually have already paid for and own outright.
If you want to know how simply living in your own real estate makes you money, then read on… You are in for a real treat to your investing sensibilities!
Building Equity in Your Home
If you rent, each month you must pay your landlord. You probably also have to pay for all your utilities, such as electric, television, internet, heat, etc. 100% of this money is gone, never to be recouped. The only benefit you may receive, depending on many factors, is some tax credit.
However, if you own a property and make payments towards your mortgage each month, then a percentage of each dollar spent will stay with you. Any money paid towards mortgage principal will essentially come back to you. It is liker a forced savings account, if you will.
Equity is not only savings. It can also be leveraged to borrow money, since you have the property as collateral. The more equity you have in a property, the more you can borrow. This borrowed money can be used for many financial gains, including business use, home improvement to build more equity or even additional real estate investment.
Save Money Living at Home
There are 2 divergent schools of thought when it comes to equity:
One school of thought believes that it is important to be debt-free. The idea here is to pay off your mortgage in full as soon as possible. Better yet would be to purchase a property without a mortgage at all, paying cash for the entire purchase. Debt involves paying interest and over the life of a loan, the amount of interest can equal or surpass the actual price of the property. This means that you can actually buy 2 or more properties in cash for the same cost as paying off 1 property over time with a traditional mortgage.
The divergent school of thought tells that you should borrow as much as you can and never pay off your mortgages. Instead, use the equity you gain by making payments to borrow more and more money and use this money to make additional money, typically by investing in more real estate. While this is a proven recipe for creating wealth that can be passed from generation to generation (especially if you never sell the properties you buy), it is not a prudent investment solution for everyone and certainly does have more risks and stresses involved then the simpler school of thought detailed above.
Earn the Most Money Living in Your Home
If you can buy property outright without a loan, or only take a small loan which can be paid off quickly and easily, then you are at a distinct advantage. You will have more equity from day 1 of the purchase, wherein with a traditional mortgage, the first few years of payments largely go towards interest, netting you very little equity.
Property tends to go up in value historically. Sure cycles can go down for a time, but with the passage of more time, properties do tend to increase in value almost everywhere in the world. Just through appreciation, you can earn money by living in your home, especially if it is paid off in full. This way, all the appreciation is yours to keep and will occur quicker than someone who must wait to pay off a long life loan.
At the end of the day, the only real benefit from renting property to live in is your freedom. You can leave when you like and move elsewhere. This is why many free spirits choose to rent where they live, even if they do own property which they can rent out to others. If you do value your freedom to move about, then I would recommend this path of real estate ownership as a great means to support your lifestyle. You can rent your property out to finance your life elsewhere. With a good investment in property in an expensive growth market, you can live for free in a less expensive area, buying you complete freedom and autonomy from traditional jobs for the rest of your life. This is a proposition that is appealing to more and more people and a life that I have lived myself since the early 2000s, when I retired in my 30s.
