I have yet to meet a multi-millionaire (unfortunately I do not personally know any billionaires) who does not own real estate.
And I am not talking about just their primary residence.
Success leaves clues. And if you pay enough attention to those who have gone before you and look at what made them successful, you do not have to outsmart the room.
When you consider the fact that just about every millionaire (and billionaire) owns real estate, that should tell you what you need to do if you wish to increase your net worth (the sure way).
However, what holds most folks back from investing in real estate (among other things) is the cash required to get started.
This is what I feel so many people on social media LIE to you about.
How many of you have been peddled a course that will teach you how to QUIT your W2 job and LIVE off of the residual income from rental properties?
I see them all of the time. Usually, the short-term rental kids that show them traveling the world and living their best life all because they own some Airbnb’s.
That is just not the way it works. Sorry to bust your bubble if you have invested in one of these courses already.
Real estate, unlike stocks, requires large sums of cash. And for the overwhelming majority of people out there, that cash will need to come from their day job or if you are an entrepreneur, your business needs to provide excess funds that you can then pool together to plant your first seed (rental property).
Real Estate is NOT a get rich quick plan. Sure you can hit a few home runs here and there but overall, wealth through real estate occurs slowly. ESPECIALLY in the first few years and even more especially in TODAY’s economy.
Let me explain:
The average long term rental property in our market provides about $250 dollars free and clear of cash flow each month.
Average home price = $250,000
(20% down payment = $50,000)
Let’s say you need $10,000 a month to live off of for your living expenses and discretionary spending.
You would need to buy 40 of these $250,000 properties assuming you put 20% down each time! That would be $2,000,000 to get to $10,000 a month in cash flow.
Clearly, cash flow is NOT what makes rental properties so appealing. Can you imagine if that was the only benefit of owning rental properties? It would be one of the worst investments out there especially when you consider the risks involved vs putting your money in a bond making 5% returns.
So why do millionaires and billionaires own so much real estate?
ANSWER: ?
APPRECIATION that can be achieved with significant leveraging power along with built in tax savings!
Oh and by the way, you enjoy the benefits of having someone else pay off that leverage (debt) all while making an additional $250 on average each month in cash flow!
Did you know that…
Since 1965, residential property values have risen significantly compared to income, boasting an average return of 9.5% when including rental income. (This is without leveraging by the way).
Remember the 4 pillars of real estate that we preach all the time.
- Appreciation outpaces average inflation by 3x
- Tax savings
- Leverage
- Cash Flow
Looking at the 4 pillars of real estate, here is what is so powerful about buying that $250,000 rental property with 20% down:
Appreciation: Buy and HOLD the property for 10 years at 9.5% appreciation: $630,000 in 2034.
Taxes: During the time you own this property your CPA will have you deduct: mortgage interest, property taxes, operating expenses, depreciation, and repairs.
Leverage: You can do a cash out refinance to recycle your money and purchase several more properties which will soon compound the number of homes you own without requiring you to put more of your personal money into a deal.
Cash Flow: Year one is generally the lowest cash flow for a property. As rents increase on average by 3%, your payment stays FIXED for 30 years which enables you to increase your ROI every year.
Hopefully this small example of buying one simple rental property opens your eyes up to the possibilities of what real estate can do for you financially.
Remember, this is a tortoise in the first 5-10 years…However, it starts to compound and snowball as you continue to focus on buying additional properties every 1-2 years.
This is why real estate is the SURE thing to becoming a millionaire.
While business on the other hand can be much faster (and statistically incredibly more risky) than real estate. However, if you learn the skills of entrepreneurship to far outpace your expenses, you can then use that discretionary income to pump back into your business or perhaps peel off a few real estate investments in order to reduce some of the risk that comes from owning a business.
If you are looking to get into real estate investing and you have enough capital saved up to do so, let’s connect. ?
