Why Real Estate Builds Wealth

Real estate has produced substantial self-made wealth in part because investors can use leverage. A stock investor needs $300,000 to control $300,000 of stock, while a buyer might put $60,000 down to control a $300,000 home. If its value rises 5%, the $15,000 increase equals 25% of the original cash down payment, before rent and debt paydown. That calculation excludes interest, repairs, closing costs and taxes; leverage multiplies losses as well as gains.