Wealth Habits

CHAPTER 17Real Estate Investing: The Hat Trick of Building Wealth

I don't know much about sports, but I do know about a thing called the “hat trick.”

In hockey, a hat trick is when a player scores three goals in one game. But in real estate, a hat trick is your ability to get three distinct benefits from the same investment.

Your money is used to purchase a real asset, and while the asset grows in value, the property appreciates. That's goal #1.

While you are renting out that property, you have a business, and now you're able to take advantage of tax savings. That's goal #2.

Plus, you can now use it as collateral to buy other assets, get some of your money back if you make improvements or get tenants increasing its value, which enables you to continue building more wealth, which leads us to another great thing: leverage.

Leverage is a simple real estate investing strategy in which investors borrow money to buy property, with the goal of increasing returns and leverage debt for bigger returns. Leveraging increases your return when the interest you pay is less than the return on investment (ROI).

But we still haven't covered the most important part, two magic words: cash flow. That's goal #3.

In addition to the hat trick, real estate also has diverse flexibility and some great tax benefits (which we will unpack in a bit).

But first, even beyond all of these reasons—as if those aren't enough—why I like investing in real estate, more than any other kind of investing, are these ...