No doubt real estate is a great investment, but long-gone are the days where prices soared overnight....a time when even a blind monkey could make a quick dollar on a good flip. But what happens when prices don't soar like you thought they would? Worse yet, what happens when they drop?
What goes up, must come down...including real estate, and it's for this very reason that it's a good idea to build your own equity as fast as you can instead of waiting for the market to build it for you. The idea of bringing money to the table to sell a house may not be familiar to YOU, but it's a common occurrence for people in need of selling when the market hasn't produced the gain sufficient to cover the cost of selling and/or closing.
People investing in the stock market understand that what goes up must (eventually) come down, while people investing in real estate never expect to get caught short. The stock market "resets" itself and the real estate market does the same. If that was not the case, a one-bedroom bungalow built in the 1950s would be worth millions today! Though money placed in the stock market is understood to be somewhat of a "gamble," few consumers look at real estate that way. But as surely as the stock market goes up and down...so does real estate. The question is, are you prepared for a downturn?
If you make it your goal to build up equity in your property as fast as you possibly can, you have lots of options regardless of the condition of the real estate market. You might find yourself selling for less than you paid for the property, but you won't be writing a check to get out.
Building up your own equity isn't nearly as difficult as you think it is. It DOES NOT require that you throw more money at the mortgage. It DOES NOT require a refinance. It DOES NOT require a healthy credit score. What it DOES require is a financial GPS system that will guide you to the quickest way to zero by helping you eliminate interest so that your hard-earned money goes toward the principal instead of toward your lender's profit margin. Unless, for some odd reason you just like adding to your lender's bottom line, it's time to get serious about reducing their profits by paying LESS interest on all your consumer debt.
I'm not sure why so many people would rather hang onto their debt for as long as they possibly can instead of doing whatever it takes to reduce/eliminate it, but I AM SURE that if the real estate market ever takes a downward turn (it's inevitable) OR if circumstances change in their household (death, debt, divorce), they'll get caught off guard by a market that refuses to cooperate with their financial needs and they'll be going to the closing table writing a check instead of cashing one.
Getting rid of debt as fast as you can is the ONLY thing that makes sense....yesterday, today, and in the future.
What goes up, must come down.