> ## Content Index > Fetch the complete content index at: https://www.smdp.com/llms.txt > Use this file to discover other available public pages before exploring further. # Wealth by numbers Earning real estate riches the old fashioned way - URL: https://www.smdp.com/wealth-by-numbers-earning-real-estate-riches-the-old-fashioned-way/ - Published: 2007-03-07T16:00:00.000Z - Updated: 2026-10-24T23:33:59.000Z - Author: Guest Author - Tags: Opinion, Santa Monica, #archive-import BUILDING WEALTH TAKES TIME. SURE, LATE-NIGHT television infomercial will tell you wealth can be created almost instantaneously, but the reality is that building real riches takes time. Of the many different ways to generate wealth, real estate is tried and true. Many of the nation’s wealthiest individuals keep their money in real estate because it offers a legal tax shelter. However, real estate is not liquid, which makes it difficult to pull out cash or sell. People wonder how they can get started in real estate. The fact of the matter is that all you need to get started is one property. The best reason to purchase a property is for your personal use. Buying a personal residential property makes sense if you can afford the payments. In fact, the government wants you to own your own home. That’s why good, old Uncle Sam offers tax deductions for owning a residence. Once you decide to purchase a home it is essential to make sure you can afford the payments. If you want to refinance the property in the future, it’s a good idea to make a significant down payment upon the initial purchase, which can be accessed at a later date to acquire an additional property. Leveraging, or pulling out cash from your home to purchase another property, is a popular method to start building a real estate portfolio. The thing to remember is that leveraging real estate without sufficient cash flow can lead to bankruptcy. The reason leveraging real estate can be dangerous is because you are borrowing more than you can pay back. In theory, your property is used as collateral for a loan, which can be sold to cover the debt. In reality, real estate goes through cycles. If you are caught at the bottom of a real estate cycle with a mortgage you can’t afford and a property that is worth less than the mortgage you owe, it is likely to result in bankruptcy. Be careful to avoid bankruptcy at all costs because it ruins your credit for up to 10 years. Acquiring wealth through real estate can be achieved slowly over time if it is done correctly. The trick is to never leverage more than you can repay. For example, if you purchased a home for $500,000 with a $100,000 — or 20 percent — down payment on the property, and properties in the neighborhood appreciate over the next couple of years, you would be able to refinance the $400,000 plus some of the appreciated value of the property. If you borrowed $200,000 from your home and used it as a down payment on a property that has multiple units, you would want to make sure that the entire property generates enough income to cover the costs associated with the amount you borrowed against your home. Make sure your property has positive cash flow and remember to keep cash reserves. Any experienced real estate investor will tell you that properties have problems, and as an owner you must have cash on hand to cover unexpected situations. You do not want to have to sell a great property simply because you cannot afford to place a new roof on it. The road to true wealth takes time. If you decide to use real estate as a means to generate wealth, remember that it too carries obstacles along the way. However, if you remember to do your due diligence, keep a healthy cash flow and maintain plenty of cash reserves, you too — over time — can find yourself on the road to riches. MIKE HEAYN is a Washington Mutual multi-family loan consultant. He (310) 428-1342 or *Originally published in the Santa Monica Daily Press print edition on March 7, 2007.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/030707.pdf?ref=smdp.com)