Investing in real estate is a great way to build wealth and hedge against inflation. Even with the market being crazy on fire right now, and prices hitting astronomical highs, real estate can be a great wealth building strategy.

Unfortunately, many people think they don't have the money to get involved because they don't have buckets of cash lying around.

You've put all of your cash into your home.

If you're like me, you've been taught the principles of personal finance are based around screaming "I'm Debt Freeeeeeeeeeee!".

BUT:

• Not all debt is bad.

• Wealthy people use debt as a tool.

With a little knowledge from the wealthy, I will show you how you can start your wealth-building journey.

Here's how:

Step 1: Develop a relationship with a bank.

All wealthy people have a personal banker, but that is only an extension of how it used to be. Everyone that had a bank account, had a personal banker. That was the day of local banks. Today most people think you can't have that because of the commoditization of banking. Not true! Find a local bank or credit union where you can be known.

Step 2: Get a HELOC on your home.

A HELOC is a Home Equity Line Of Credit. This operates much like a credit card based on the equity you have in your home. With the crazy appreciation of the housing market, you likely have untapped equity. Your bank will tell you the terms of the HELOC, but it's likely based on an 80% loan to value (LTV) of your home's equity.

Step 3: Find a small single-family home to buy with your HELOC.

Having equity available that you can use quickly will help you in negotiating the price of the home. Then you can wire the funds from that HELOC to pay for the house. That will allow you to close quickly and many times be the preferred offer. Do any renovations you need, and advertise it for lease. Make sure you run the numbers so that when you refinance the rent is 1.4x (or more) of your monthly mortgage plus expenses.

Step 4: Refinance.

This is where the magic happens. Once you have a renter in place, the bank will see this as a commercial property. You can show a signed lease that has a Debt Service Coverage Ratio (DSCR) that is 1.4+ which will qualify you for a commercial loan. With any repairs you've done, it's likely that you have now put equity into this new property. The bank will then put a commercial loan on the property, and each month you will cashflow the amount of rent that is over and above your monthly expenses.