What Do The Rich Do Differently With Their Homes?

This is a questions that gets asked often, because the answer changes based on each person's situation. Generally speaking, the money in a person's home is about as secure and stable as the real estate market for the area in which the house is located. The traditional way of thinking was to keep the equity in a home until it was needed for a major expense, like a home remodeling, debt consolidation, retirement, and other expenses of this nature. In the past, this was a very acceptable way of thinking. The value of your home was almost guaranteed to go up. Unfortunately, that is no longer the case. People that had a lot of equity in their home as recently as a few years ago could do nothing but watch as their homes dropped in value and their nest egg began to become a burden, rather than a blessing. Because of this, most Americans did not have the opportunity to take advantage of the money in their house. Everyone was hit by the downturn of the real estate market, but it appeared as though some were not even phased by it. How can this be?

Well, more than likely, these people had two things in common. First, they were probably planning on being in their home (or at least owning it) for a very long time. If this were the case, then the drastic changes in home values did not affect them, simply because they were not in the market for a home. They continued to do everything the same as normal.

Second, they probably took money out of their home when it was available. As far as wealth building is concerned, the main idea behind this is to immediately put this money into an asset that offsets your monthly payment to the bank for taking out the second mortgage or home equity line of credit. This can be a dividend paying stock, real estate, or anything else that will give you a return on investment that pays for the money you took out. This sets in motion a chain of events that the rich use to accumulate wealth.

In any case, the safe bet is to hold onto assets and make sure they are paying you back. Real estate "day trading" offers much less security, especially in flat, waving, or declining markets. The only time quick flips really work are if you bought property for cash at auctions, or from desperate lenders that need to move property, two options which are extremely washed out in markets like the one we are in at the moment. Long term investments that pay you as you pay for them are the best and most reliable, and will help you accumulate sustained wealth, rather than create short bursts of money.

Anthony Flores is a real estate, mortgage, and investment consultant in Riverside, Ca.  For articles about the houses for sale in Riverside Ca, please visit Southern California Home Source, your instant access portal for real estate and investment information.