When people talk about real estate investing, they often erroneously assume their return depends solely on whether the value of the home goes up or down. In fact, one myth created in the popular media is that you can’t make significant money in real estate because it only goes up about 1% more than the inflation rate each year.

While that may be true for your primary residence, it completely misses the boat on real estate investment properties, and thus keeps people from understanding how substantial wealth can be easily created from owning real estate. The fact is that there are five different ways owning investment real estate can help create wealth for you. And here they are:

1. Appreciation of the asset. Yes, it is correct that residential real estate appreciates on average over the long term about 4%-5% a year, and that this is generally only about 1%- 2% above the inflation rate. But this is not the only way that we make money on our investments!

It is also true that if you purchase real estate when it’s really cheap, as in the periods from 2000-2003, or 2009-2011, your appreciation rate over the next few years is likely to be far greater than the historical averages.