TOP 3 WAYS to become rich with real estate

Real Estate Acquisition

In my opinion, real estate acquisition is the number one way to become rich with real estate, or super rich, on a very consistent basis.  When it comes to technology or stocks, you can make it big but the risks are much greater. The majority of millionaires are still made in real estate.  Around the year two thousand, I read that over ninety percent of millionaires in California were made in real estate. Since then, that has changed due to the surge in technology companies.  But at the time, this gave me something to focus in on and start learning. Within four years, I had great success.

Real estate has many benefits because people are always going to need housing; and with the current exponential and unchecked growth of the human population, there will surely be someone needing a place to live if you have a place for rent. Real estate is a hedge against inflation.  If inflation starts increasing, your rents and property values will increase with inflation.  As the cost of living goes up, so will your cash flow. Your properties will give you tax benefits, passive income, property value appreciation, and leverage. Leverage is the most important factor because it allows you to make a lot of money fast off someone else's money. Leveraging, of course, only works if your borrowed investment increases in value more than the money you borrowed.  This is how leveraging works; let’s say, you have twenty thousand dollars, you invest it in an investment account, and at the end of the year you earn ten percent interest, and your gains would be two thousand dollars. However, if you invest that twenty thousand into buying a two hundred thousand dollar house and finance the other one hundred eighty thousand dollars and that house appreciates by ten percent,  then your gains would be twenty thousand dollars, and because your initial investment was twenty thousand and you made twenty thousand, then your return on investment was actually one hundred percent instead of ten percent in the first scenario. This isn’t taking into account the rents, depreciation, nor the tax benefits you can get from the property.

Flip Real Estate

Research properties in your area through websites like TheMLS.com, Zillow, HomeFinder, or ZipRealty, and find a property that is below market value, usually, because the property is being foreclosed, owners need a quick sale, or the property is in bad condition.  When you find one, negotiate the price ($220,000 purchase price), figure out how much it would cost you to fix the property ($40,000 repairs), and add that to your estimated purchase price for a total ($260,000). Figure out what that house would sell for if you bought it and fixed it up ($300,000 sale price), and see if the profit ($40,000) is worth your effort.  This is something that depends on your earning potential, and how long you estimate it’ll take you to fix the property and sell it. If making $40,000 in three months is a good deal for you, and it’s more than you would make doing something else, then it’s a good investment. But, if your contractor says it’ll take 6 months to fix the place (instead of a month) and the houses in the area are on the market for about 6 months before they sell according to realty websites, then you have to figure out if it’s worth it to make $40,000 over the course of a year.  The good thing about this type of deal is that it can be a side job and you can still have other businesses going on while you remodel the house. Flipping houses is ideal for people who know something about construction and would like to start working for themselves fixing the houses they are buying and reselling them. You also have to figure in other costs such as hold costs for the loans to buy the property, interest on repair loans, fees for the real estate agent to sell it, and any other costs you may incur.  Generally, this is a pretty straight forward business, and the better you are at doing repairs with your own crew, the more you’re going to save, and the more you’re going to make. You will also learn other strategies to save on expenses like selling your own house on for sale by owner (FSBO) sites or Craigslist, buying directly from the owners to save on commissions, making owner financed sales to save on bank fees, and using your low-interest credit card balance transfer offers to make the repairs or even to purchase the properties. Here is a strategy for becoming rich and even super rich.  Use the real estate acquisition strategy with leveraging to keep buying and buying more properties to rent or flip them.

One of my colleagues bought over forty buildings here in Los Angeles by leveraging them one by one and buying more.  Generally, you start this with regular investment loans, and as you scale up, you use private money loans. He would buy one for $300,000 and $30,000 down. Fix it up, start renting it, and once the property value went up some, he would take a line of credit or refinance the house and use that money to acquire another property, and just keep repeating the process over and over. The first way to increase the property value is to raise the rents because you increase the cash flow on the real estate.  The second way is property appreciation which can happen by either you making upgrades and remodeling or simply the general market increasing in price. As long as you can keep finding ways to increase your property value, you can keep leveraging your properties pulling money out of them and buying more. If the property prices stop appreciating, which is cyclical and happens around every seven years, you simply hold on and just keep renting your properties till the next price upswing, and then continue the same strategy.
What if there is a large price drop in the property prices?  In 2008, I had one property drop from being valued at $500,000 to $160,000 in about one year; this happened to me several times.  The interesting thing is that rents actually increased during this time as people got scared and allowed the banks to foreclose on their homes and they were pushed into the rental market.  So I ended up making more money than ever during the real estate downturn, because I stuck to my investment plan of buying, fixing, and renting. Just don’t get scared, the market will eventually recover as people keep reproducing and they’ll need places to live.  In this example, that property went back up to $750,000 about eight years later. Meanwhile, I kept making money from the rents, because I focused on the cash flow and not on the property value. As long as I was paying $1200 a month for mortgage and expenses and I was taking in $2000 in rent, making $800 in profit or $9600 a year, what difference did it make what the property was worth? Sure, I was concerned watching my net worth and the property values declining, but I knew it was temporary and I kept making money on the property.  So don’t get rattled and give up, or you’ll be stuck on the sidelines for about seven years till your credit recovers. Had I allowed the banks to foreclose on my properties so I didn’t have to absorb the temporary property value drops, I would have lost the opportunity to cash in when the properties were recovering, and I would have lost all of the rental income, which went from $2000 a month to over $6,000 a month eight years later and the mortgage stayed the same $1200.  So I was making $4800 a month or $57,600 a year on that same property.
Another way to look at properties is not to consider them yours.  This helps break the material attachment to them when you have to make decisions to sell or demolish them.  They actually belong to the banks, because they own the note on the property and you’re just a tenant of theirs.  The bank is your partner and your job is to make the property as productive as possible so you don’t default and you can earn something for your work.

Real Estate Crowdfunding

You can buy individual shares of real estate property through websites like RealtyMogul, Fundrise, Groundbreaker, CrowdStreet, Groundfloor, RealCrowd, RealtyShares, or Patch of Land.  According to these sites, investors can earn an average of twelve to fourteen percent annually on their investment. This helps reduce the risk you may incur by investing in real estate ventures on your own.  It also allows you to invest in real estate, even when you don’t have much money to start investing.