This piece is part of my 2016–2026 archive migration. Some original formatting, content, and external links may be missing, changed, or not be optimized.
How the wealthy handle property equity
Unlike what most people do, which is utilize equity to pay off debts or consume unnecessary items, the wealthy use their equity to buy more real estate that can create more passive income.
The 2008 Housing Crisis
California Woman made the following comment on the article: Your advice could get a lot of people in a lot of trouble. Remember 2008?
I thought her comment was the perfect opportunity to explain another perspective.
One of the primary reasons for the 2008 housing crisis was that many people bought homes they couldn’t afford in the first place.
Chris Lies says it best: Wrong. This advice is nothing like 2008. This is simply a quick read on BRRRR (minus the renovate portion), a great strategy. 2008 was people buying $1M+ homes with 0% down and interest-only loans, which imploded.
I kind of mention this in the following article:
Why Do We Want Giant Homes For A Few People?
Living In Your Means Doesn’t Have Consequences
People are addicted to bigger and better without considering the consequences. Do you really require all that space for a family of 3–5 people? Probably not.
But society has taught us that we need to have huge homes because that’s the new normal. We must consume more than we need, so we can spend the rest of our lives as financially enslaved people and create more wealth for everyone but ourselves. Does this sound like the kind of life you want to live?
Another Use For Your House’s Equity
You can utilize your house equity to buy another home that is less than $100,000. Sh*t, people have proven you can buy homes for $30,000 or less and still build wealth. You don’t have to go big to build wealth; you can start from wherever makes the most sense for your finances.
When you live within your means, you don’t have to worry about a housing crisis like the one in 2008 because you can afford the house you live in and every other expense in your life.
Utilizing your home’s equity to purchase a rental property does equate to a certain level of risk, which is why you need to purchase a home that you can afford the payments while you’re looking for a tenant, or maybe you don’t want a tenant at all. As long as you can afford the payments, it’s another way to create wealth that you could cash in on at a future date.
This content is for informational purposes only — not professional advice. Consult a qualified professional before making any major decisions.