🏠 Real Estate · Lesson 1 of 8 · 9 min
Why Real Estate Makes Millionaires
🏠 A bank will lend you $240,000 to control a $300,000 asset. It will not lend you $240,000 to bet on stocks. Real estate investors noticed this difference decades ago and used it to build a huge share of America's household wealth.
💡 Key idea
Leverage: control $300k with $60k. A 10% gain = 50% return.
🧠 Why it matters
Real estate is unique because you can borrow most of the purchase price. Put 20% down, control a $300k asset with $60k.
🌍 In the real world
👩 Sarah bought a duplex for $200k with $40k down. Rents covered the mortgage. Now worth $380k. $40k investment = $220k+ in equity, plus years of cash flow.
📌 Takeaways
- Leverage amplifies returns
- Tenants pay your mortgage
- Property appreciates + cash flows
✅ Test yourself
$300k property, $60k down, +10%. ROI?
- 10%
- 20%
- 50%
- 100%
Answer: C · 50%
Property rose $30k. You only put in $60k — so $30k ÷ $60k = 50% return. That is leverage.
What is 'leverage' in real estate?
- Buying with all cash
- Using a loan to control a bigger asset
- Selling fast
- Renting only
Answer: B · Using a loan to control a bigger asset
Leverage means borrowing to control an asset worth far more than your cash — it multiplies your gains (and risks).
Who effectively pays your mortgage on a rental?
- You
- The bank
- Your tenant
- The government
Answer: C · Your tenant
Your tenant's rent covers the mortgage. They build YOUR equity while you sleep.
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