There is a group of real estate investors that build equity over time in a manner not exactly like a flip but in a similar fashion. The process is methodical, planned out and provides the investor with a new home every few years. This group is not affiliated with other investors but is a type of investing thatbuilding equity over time has created long term wealth for those that know how to put the transactions together.

The process involves building a brand new home in a growing area, living in the property for a year or two then using all or part of the down payment to build a new home or buy an existing property.

For example, say an investor owns a lot that’s worth say $20,000. She goes to the bank for a construction loan after getting quotes from builders who say that the cost to construct is $150,000 and the bank determines the final value will be $225,000. She proceeds to build the home and at the end of construction instead of selling it she keeps it as her own home. In 18 months, her real estate agent tells her that the property would sell for $250,000, or $25,000 more than what she originally paid for it. She does sell then takes the net proceeds of $50,000, uses that amount as a down payment then buys a larger home. She obtains a new mortgage but borrows the same amount as with her original loan and uses the equity gained over the past 18 months to increase the size of her down payment.

Over time, she can buy, hold and sell. Buy, hold and sell all the while qualifying for a similar mortgage amount each time. The only difference is the amount of down payment she used. Each property provided her with more down payment which she used to buy still a larger home. As the years progressed, she retired, downsized and paid cash for her retirement home with lots of money in the bank left over.