In January 2000, BLACK ENTERPRISE introduced the Black Wealth Initiative with the goal of making you wealthier. Since then, we’ve given out approximately 87,000 wealth building kits, spreading our message of fiscal responsibility through paying yourself first, making every dollar count through enlightened consumerism, and implementing a systematic program of investing to keep your family financially secure for generations to come.
By your testimony, it’s been working. The 10 wealth-building principles that have anchored our Declaration of Financial Empowerment have helped many of you move closer to your financial goals. But we want to do better.
That’s why, as we enter 2004, we are re-introducing the 10 Wealth Building Principles of the Black Wealth Initiative. The new Declaration of Financial Empowerment (see “A Home is the Foundation for Wealth,” this issue) has two major revisions. First, we’ve placed an emphasis on homeownership. Principle No. 1: to use homeownership to build wealth drives home what the wealthy have known for generations: that real estate is a linchpin to building a fortune. We’ve also placed greater emphasis on mastering your money with our new Principle No. 3: to commit to a program of retirement planning and investing. We want to reinforce the idea that only a planned approach to saving can safeguard your future and help you achieve your financial goals.
You’ll find other minor adjustments, but the motive of The Black Wealth Initiative is still the same-to help you become wealthy. We hope the new and improved Declaration of Financial Empowerment will be even more effective in meeting the goal Publisher Earl G. Graves Sr. intended for African Americans: to create wealth by building the cornerstones of economic empowerment through education, equity, enterprise, and excellence.
A Home Is The Foundation For Wealth
Daphne and Gary Dixon have used real estate to ensure their prosperity
By Lisa Armstrong
Daphne Dixon has a secret she’d like to share: It doesn’t always take money to make money. Sometimes you can use real estate.
Daphne, 43, a word processor, and her husband, Gary, 46, a mechanic, make approximately $50,000 a year combined. That’s the most the Dixon’s have ever earned, but they’ve managed to buy eight properties throughout their 25-year marriage. In fact, the four properties they currently own are worth between $130,000 and $400,000 each.
The Dixons have indeed used their home as a foundation to create wealth. Their strategy has been to build equity, refinance, and take the equity out of the home to buy other properties.
The Dixons used rental income to pay the mortgages on their properties, building equity that can be used to make future acquisitions. A commercial property the couple co-owns with Gary’s brother will also create future wealth.
Daphne says
that making money through real estate is something anyone can learn to do. The Dixons have a son in college and their daughter will enter college next year, but “neither of us has a college degree. We weren’t able to do this because we made a lot of money,” says Daphne, modestly. “We just used what little we had wisely.”Daphne and Gary have always considered DOFE Principle No. 1: To use homeownership to build wealth to be paramount. “If you’re not a property owner, you have nothing tangible to show for all your hard work,” says Daphne.
The Dixons lived economically and saved faithfully during their first year of marriage. They amassed $7,000 and purchased a brand new $42,000 home in Miami, Florida, in 1980. They sold the home 14 years later, making $24,000 on their investment, which was put toward the purchase of other properties.
The first investment property the Dixons bought was a $25,000 single-family home, which Gary refurbished top to bottom. “We refinanced and took the equity out of that house three times before we sold it. So we got our money’s worth,” says Daphne.
They eventually sold the house in 1996 for about $90,000 and the proceeds provided the 20% down payment on the home the Dixons currently live in, which cost them $160,000. That house is now worth $370,000.
Then
they bought a $60,000 commercial property in the mid-80s with Gary’s brother James. Both brothers contributed half the cost, and Gary, James, and Gary’s stepfather converted the property into a grocery store/ produce stand/car wash. That property, which is run by James, is now worth about $400,000.From 1993 to 2003, the Dixons purchased five other properties, repeating the pattern of buying below market value, fixing them up, and then selling them at a higher price. This includes a dilapidated 60-year-old house they purchased for $38,000 that is now worth $130,000.
The Dixons’ real estate investments proved to be a godsend two years ago when they lost $100,000 in the stock market. They had taken $60,000 in equity from their current residence and $40,000 from their rentals; they were investing the money to provide for their retirement. They lost the entire amount. “We were able to sell one of the houses, refinance the others, and we revamped [our portfolios],” says Daphne. “The properties saved us. Because we had [real estate] investments, we were able to start over.”
While the Dixons continue to invest in the stock market, their main plan is to pay off their home and liquidate or refinance their rental properties to provide income after they both retire. They stress the importance of maintaining good credit and offer these other suggestions for real estate success:
BUY LOWThe Dixons found their properties by “being watchdogs,” as Gary puts it. They read the papers, scouted neighborhoods, and kept their ears open for good deals. “We always paid under the market value, even for the new homes, because we bought them when there was nothing there but a trailer on empty land,” says Daphne. They tried to determine which areas would be the next to boom and have hit the jackpot several times. They purchased a home in Wellington, Florida, in April 2003 and six months later it was worth $70,000 more than they paid for it.
CONSIDER A 15-YEAR MORTGAGE
Getting a 15-year loan, rather than a 30-year one, will mean that you have to pay the money back faster, but it also means that you can build up equity twice as fast. The Dixons have always chosen 15-year loans.
HOLD, DON’T SELL
“The money comes with keeping the house and getting equity. The longer you keep it, the more money you can make,” says Daphne. “You can take out equity more than once, reinvest, and still have that house pay for itself.” She also points out that if you refinance rather than sell, you avoid paying capital gains.
The revised BLACK ENTERPRISE Wealth Building Kit is available free online at www.black enterprise.com or by mail by calling 1-877-WEALTHY.