As you accumulate assets, you go through stages of wealth building. In the early phases, it’s all about earning as much as you can, deciding on a wealth-building strategy, and then essentially going from there. It’s important that you choose a trusts attorney to work with you when you build a wealth portfolio, because one day, you need to know what happens to all of that hard work of yours. When you spend your life building something great, you want to know that it will go somewhere you want it to go.
The same is true if you focus solely on real estate. Most people go through the same five stages, allowing and enabling them to get closer to the financial freedom that they want.
- Entry
The first, and probably the hardest stage, is entry. This is where you save up enough money in your checking account to put down a deposit on a property.
This step is usually when you buy your first property, which is almost always the one that you’ll live in. This can be a single family home or an apartment, it doesn’t really matter. As long as you are paying a mortgage instead of rent, you’re well on your way.
- Growth Stage
The second step is where you focus on growth. This phase is the step where you start to build your confidence and look into acquiring further properties. The idea here is to find small rentals or multi-family units that you can use residential lettings agencies to let out for you. Here, you’re not looking to use any revenues, but simply plow them back into the business.
- Expansion
Once you’re well into the growth phase, you can start considering expansion. This step comes when you see opportunities to massively expand your property portfolio and get ahead financially.
Usually, during this phase, your property activities are your full-time business and you are focusing less on salaried work, or doing nothing toward that at all.
At this step, you’re focusing on cash flow and simply managing your debt in a way that’s sensible. You’re not taking massive risks, but you are adding more to the borrowing side of your balance sheet.
You may also find that during this phase, banks are more willing to let you take out mortgages because you have a proven repayment track record.
- Consolidation
The fourth stage of property wealth is consolidation. Here, you’re looking for ways to refine your portfolio, make it more efficient, and pay down debts. You're learning how to focus mainly on the highest-yielding properties instead of trying to expand in multiple directions. And, in addition to this, you may be looking into selling properties that simply don’t meet your requirements for return on investment.
You might also have additional analysts on your team. These professionals can often tell you where to put money next, or where the next opportunity might be.
- Wealth
The final stage is, of course, the wealth stage. This is the point at which you’re making a substantial passive income that’s covering all of your bills and enabling you to live the lifestyle you want. You have financial independence, and you’re able to diversify your assets into different areas to protect your capital base. You’re also able to use your money to do the things you want in life.
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