How can you leverage your property?
As we age we have a need to become more conservative on our investments. The shortening timeframe makes it more difficult to “make-up” for years with bad returns. Youth provides an opportunity to take risks and try for outsized returns. I feel an overlooked aspect of real estate is leverage. Too many people get too conservative and think that making extra mortgage payments and getting debt-free is the best path. It is a conservative path and can bring peace of mind, but it comes at a tremendous cost to your wealth over time.
Take this illustrative example:
If you fully own a $500,000 house, with no mortgage, and it goes up 10% you made a pre-tax gain of $50,000. You earn $50,000 on your $500,000 in capital or 10% return. Now with that same money, you own 1/3 of three houses of $500,000 each and have three mortgages of $333,333 each. You would now get $50,000 appreciation times 3 house or $150,000 in gains. Then subtract say 4% interest on your three mortgages for about $40,000 in interest costs. You then gain a net of $110,000 on your $500,000 or a 22% return on our capital. That comfort in no mortgage means you are electing to see 10% returns vs. 22% returns. This is the power of using leverage.

Of course, there are many other considerations, including the downside to using too much leverage, but the heart of the matter is the return on your capital tied to your investment in real estate.