There are some people who get incredibly wealthy through stocks and some other people who do not. For the people who don’t succeed, is it that stocks don’t work or that the people using them don’t all possess the right knowledge and skills?
It’s funny because every man is a “self made man,” it’s just only the rich who admit to it. The wealthy are what they are because they have applied knowledge that works. Studies repeatedly conclude that over 90% of wealthy individuals have become wealthy through real estate. Does it really work? It works better than any other system of business to produce wealth with the right knowledge and skills.
I think if you invest in residential housing, it will make you worth more, but doesn’t necessary make you rich. However, if you invest in commercial real estate then it can really make you rich very quickly.
I think that’s generally true. However, you can still get rich in single family investing. It only depends on how deep you go into any track of investing.
For example, my in-laws built a $15M real estate “empire” buying a couple hundred single family homes in the Northern California over ten years.
They stayed with what they knew; created a management system to follow; and by all accounts were relentless accumulators of single family houses. They were the uber buy-and-hold investors.
That said, and this supports what you posted, that the usual course for most investors is to start with residential real estate, and move slowly into commercial/multifamily investing.
That was the model I planned to follow, until it became apparent to me that investing in “ghetto” houses for cash flow, was not the same thing as investing for appreciation in “bread and butter” houses.
And the ghetto house investing was not going to get me into multifamily very fast.
That’s when I dumped ghetto house investing. However, I didn’t move into bread and butter houses. I moved directly into ghetto multifamily investing.
And I don’t mean ghetto duplexes or triplexes.
I mean I started investing in 30-unit apartment buildings.
Something very interesting happened to me at that point. I discovered that terms were MUCH more acceptable to multifamily sellers. These sellers were much more sophisticated, and aware of the value of accepting terms to get their buildings sold, than homeowners were.
Just to drive this point home, while I was in the process of getting conventional financing on a multifamily project, the mortgage broker showed me how I could practically negotiate 100% financing on the deal I was working on.
Of course, I didn’t need him to tell me this, because I purchase with 100% financing all the time. Of course, 100% financing leverage on a $300K house is not the same thing as 100% financing leverage on a $3M apartment building.
One’s gonna move you 30x’s faster into a higher financial orbit than the other.
I like your post. I tend to agree. Tried a lot of businesses and investments. REI by far is not only the safest but the most profitable long term. I mean it’s not perfect either, you can make a lot of mistakes along the way if you don’t know what you’re doing. Actually that said you can even go broke if you do it wrong. But generally speaking it’s hard to screw it up. Buy and hold or flip. It’s pretty easy to do. Some training and study can be worth it’s weight in gold. Or finding a mentor in your area, or both. :beer
Real estate is a key to wealth - that is a fact. But like any investment opportunity, there are some that succeed and many others that fail. It seems that the difference is understanding the mathematics of real estate. Real estate investing is a business, not a hobby. Hobbies are done for fun. Businesses are run for money. Check emotion at the door and look at real estate as a business - I believe that is the key to success.
Actually, in my opinion, when a crisis comes, real estate investment is more secure than stocks. Rental properties, whether commercial or residential, will be in demand regardless of the economic conditions. Residential properties represent housing and everyone needs a place to live. Long-term commercial leases with established businesses usually are situated to ride out economic lulls. As long as you do not need to refinance or sell, a sit and hold position often becomes very profitable down the road.
A lot of how much you make depends on the risks and determination you want to take.
Here’s a new local self made millionaire I heard of called Fernando Palazuelo, who bought the over 3million square foot Packard Building in Detroit for $400K and is going to turn it into condos, offices and commercial space.
An interesting background story on him. He was a self-made real estate mogul that started from nothing originally from Spain who made his fortune buying and rehabbing properties in Madrid and in 2008 during the financial crisis he filed for bankruptcy and lost everything: his palace in Mallorca, a huge art collection, an old collection of Ferraris, etc. He then moved to Lima, Peru, and started all over again borrowing on credit and made another real estate fortune rebuilding that city. Now, he’s investing in Detroit. The interesting thing to note is how he lost everything and used his past knowledge to rebuild what he lost.