The Expert Podcast

So how could a $200,000 house make you into a millionaire? You've seen on our channel many examples of $200,000 homes which are perfectly acceptable in all areas of the country - near big cities, coastal areas, acreage, large square footage - but financially how could that become an advantage for you?
Well, in this market one of the things that's happened with the explosion of prices is many properties are now worth a million dollars and some of these aren't really significant properties, some of them are just average normal everyday properties in areas that have gone up. One of the things that's happened is eight percent of homes nationwide that are a million or more equates to six million properties - that's more than double or close to double just from two years earlier, right?
So it doesn't mean that a $200,000 house today is gonna be worth a million dollars, but many of these homes that are at the million dollar mark were close to $200,000 just a few years ago. Here's an example: this is a house that's currently selling for $729,000, okay, and this happens to be in South Florida. Well, 10 years ago in 2012, that house sold for $194,000.
Well, if you had purchased that house for $194,000 and you had saved $1,000 or $800 a month on rent because, you know, rent for this house or for an apartment might have been $2,000-$2,500 a month and a mortgage on this house would have been $1,500, so if you saved $800 a month for seven or eight years, you would have saved a couple hundred thousand dollars in rent. Add that to $729,000 and you now have an equity position of close to a million dollars.
Now that's not to say that every house that sells today for $200,000 is going to be worth a million in 10 years, but then again why wouldn't it the way the market's going? And a reasonably maintained house in a good area that has been taken care of in 10 years has all the same opportunity to be worth a million dollars because the property market isn't going down. This is a permanent new era of real estate assets - it's a hard asset market and the future of investment is in tangible assets.
One of the things that happened is for the last 10 years property values haven't gone up that much, so even this increase in all actuality wasn't that big of a jump because if you take $729,000 minus $200,000, that's $500,000 over ten years - that's about $50,000 a year on average. That's only about a 15%, 10 to 15% increase, which isn't huge. Some of that came recently but a lot of it, and that kind of investment can make a big difference in the future of whether or not you have equity or if you just paid rent for the next seven or eight years.
And even if the house that you end up buying isn't ideally what you want, having that equity will put you in a position where you can buy something that's upgraded because you have had equity and you saved some money from your rent rather than just throwing money to a landlord and didn't participate in the future appreciation of the market, which all the experts say is going to happen - it's going to continue to happen.