How much money do real estate investors really have?

General Real Estate Investing
1

I am looking at people in my local REIA and wondering if I really want to emulate them and be like them. Not many of them dress flashy. Quite the opposite. They are dressed like blue collar people. Not that there is anything wrong with that but they do not exactly look rich or act rich either. Aren’t investors supposed to be loaded if they just follow all the proven techniques and stay diligent with everything?

The ones at my REIA do not have eccentric traits like ultra wealthy families. They are mostly penny pinchers. Many if not most have bad eating habits. They drive ordinary cars. Their haircuts look like they are $15, nothing fancy. Many do not look like they exercise. Many look like they came from ordinary family upbringings. I have been to some of their houses and its not too impressive just modest, but maybe they did better financially then it looks.

Then they must have acquired properties slowly. Maybe they have 10 properties. Or maybe 100. Is that really making them money compared to Realtors who sell a house for $2 million. Their commission from a 2 million dollar sale like that is a small fortune from one transaction. Cha~ching it all goes into their banking account! Also Realtors have neat and bright clothes. They have nice haircuts done often. Flashy and clean luxury cars. They live in modern houses. Realtors often look wealthy.

So who is raking in more money?

2

Man, it’s been a long time since I’ve heard that observation.

Do NOT judge these people by their man-boobs and plain clothes.

First thing you’re gonna discover is that the person wearing the Rolex during a negotiation with a seller loses.

The people dressing up for ‘real estate’ are commercial real estate brokers, and real estate agents on the job. Not investors.

I’ve yet to meet a real investor, and I know a LOT of investors who show up wearing not much more than a T-shirt and blue jeans to lunch. To be frank, some will drive their upscale cars, but to look at them, you’d think they stole the car.

One of the richest, multimillionaire, conventional investors I know of, who’s still alive at 91, lives in a mobile home park he built from scratch. During most of his wealth-building years he taught school, and his wife kept the house. They had three kids, and they invested every last penny into real estate.

They were fully diversified into real estate and nothing else.

They bought run down rentals in the most unlikely places in central Orange County, CA, (where our family was also investing), but they literally sacrificed like Pakistani refugees to continue investing in real estate when nobody else thought it was wise. They wore plain clothes, drove plain cars, and were completely invisible as investors to the average person.

They kept trading up, and across, and buying what nobody else would, and capturing and forcing appreciation, until at one point they moved into this huge executive home in the Santiago Hills area of Orange County, forced the appreciation on that, and somehow (for some reason) finagled a 1031 exchange into a giant parcel of land near Canyon Lake, CA. There he developed a mobile home park where he now lives. He continues to invest, albeit a tad less aggressively. However, he’s still willing to re-roof a rental as necessary. No thanks.

Of course, this guy is unusual. However, he’s not selling anything, and has nothing to prove about his financial success, except pulling out his financial statement and able to borrow two or three million on his signature alone.

BTW, I knew this guy, because before I moved away, I used to attend his church.

The flashiest horse trader, is probably the one with no horses. Just saying.

Think “average,” “unassuming,” or “vanilla” as evidence of a proven real estate investor, not someone lounging on a yacht surrounded with bikini clad strippers like, Tom Vu, or William McCorkle. I mean, come on.

Look at Donald Trump for example. Same white shirt and blue blazer, day in and day out, for at least three decades straight, and even running for president. Nice, pressed suits and shirts, for sure, but hardly flashy, or flamboyant.

Anyway…

3

You watch too much TV. There are more millionaires around you than you know. The people who act and look rich are mostly up to their eyeballs in debt.

The guy I just wholesaled a house to is a multi millionaire, he pulled up in a 10 year old car with a bit of rust on it. You wouldn’t know it but he’s worth more than everyone on that block combined.

There’s much more to selling those $2M houses than meets the eye. That high end market is as much of a political game as it is sales. People who are spending that kind of money arent going to just any old realtor.

4

Excellent clarification Jay. You know I am “profiling” my new peers not so much judging them. I am curious about their backgrounds and details about how they grew.

Look at one thing: I am not married. Many successful investors have that element of support and automatic trust with other married investors. They have dual incomes if they want. They have a partner probably looking for properties with them on weekends, assisting them. (Of course being married is not always a good thing, big things can go wrong with the wrong partner, but dont Bankers think married people are more worthy of a loan?)

Secondly they all had jobs. They had steady jobs. They had easy entrance into jobs. They had less competition then today. Today there is an immense disconnect between generations of people. I have applied for entry level jobs and at the interviews they often say that 200, 300, even 500 other people applied.

Also these mom and pop investors are drawing off of social security. I will never see that. They are drawing off pension plans (some of them are phenominal) and those are almost entirely wiped out for my generation. Also it seems like home ownership was just a normal phase of life back then. Today kids can barely afford to rent let alone save enough for a down payment.

The list goes on and on. Im sort of pointing out that the “example” of experienced real estate investors I seen has probably been augmented and distorted, you know?

About Donald Trump: he was sent to the finest financial school in the nation. Then his dad, who was already one of the top real estate people in the New York City borough of Manhattan. !!, Then his dad lended him into the best network of real estate people in the city. Then he was given Millions Of Dollars to get started. !!, That is a huge difference comparing my questions to Trump, but I understand everything you say.

Its not some sob story here but I do not have family. That is an immensely helpful component for growth. I suppose family could be very negative too, but either way, family is huge.

So look also I do not have a 401K to draw off of.

Other investors told me they got started by just cashing in on all the stocks that their job gave them over the years. These people were working fruitful jobs. Sure they were “working hard” but in my case since the Great Recession I have been applying for jobs for years, more years then I care to admit. I have been unemployed, to self employed and not making enough money, to overemployed and underpaid with a toxic workplace to be fired for no reason, to underemployed again and seeking employment, to self employed struggling and underemployed juggling two underpaying jobs with no opportunity for advancement. None of them offer the benefits these mom and pops all seem to have had.

I am probably not unique in these scenarios.

Its a different world today. Corporations used to pay relocation expenses. They used to pay to fly people out to be interviewed. And if they were hired they would get bonuses and all kinds of perks added on. That is all gone now. Literally the employee was in the drivers seat back then. Today the employer is in the drivers seat and they are expected to be very shrewd. That nice land of the free cushion is not so much there anymore. That comfy and fluffy pink cloud from the 70’s through the 90’s is gone.

In grade school I remember first hearing the definition for Landlord. First I thought “lord” was tied to royalty. I thought of Robin Hood how royalty owned all of the land and peasants had very little and worked very hard to be on the land. Meanwhile the royalty ate the best food and wore the finest clothes and had a pampered lifestyle with unlimited opportunity. That concept was probably the norm throughout much of history where money begets more money. It was not so easy to just move from being born a peasant into a higher class and to own your own land and have slaves and have every amenity to think of. Those peasant were generally restricted to that class.

Education today is not even a sure fire way to rise into a higher class. Today people graduate and have a lifetime of Debit to pay off. It is just that a lot has changed…

By the way I managed to get 5K. It is on the way into my checking account For Real.

“Knowledge is a comfortable and necessary retreat and shelter for us in an advanced age; and if we do not plant it while young, it will give us no shade when we grow old.”
-Lord Chesterfield

5

Hi, actually I never watch TV. I quit watching TV ten years ago.

Also I quit smartphones several months ago. Highly recommended.

Nah I am just looking for answers. Thank you for your comments.

6

You realize that most realtors know next to nothing, right? They will overestimate their own value and tell you a bunch of “facts” that may or may not be facts. Most likely, they have never held a hammer and will only confuse you if you listen to them for advice.

A few months ago, I was at a strip club and one of the dancers said “I’m also a real estate agent.”

I only deal with them because I have to.

I’m sure investors come in all shapes and sizes. Donald Trump is pretty flashy, as are the owners of other large firms. Some of them may be more humble. Wealthy real estate investors are intelligent people and can do whatever they want.

7
8

I know a lot or rich real estate investors and they all have 3 things in common, they don’t have college degrees, they never wear suits, and they have down scale cars. They almost all have upscale cars too but they all have down scale cars. These down scale cars are never raggedy usually a truck or something. First thing is we live in a capitalist country. That means either you have capital or you are capital. If you are capital (have a job) you have to wear the uniform of that job. Suites are for employees. It is the work uniform of a professional. If you own capital (own a business or real estate) you dress how you feel comfortable. Different circles dress differently. My circle tend to work out and wear Tommy Bahama and polo shirts as opposed to tee shirts and jeans but we never dress up unless our daughter if getting married or we attend a church that dresses up.

9

Good points.

My dad first opened a business, then scrimped to buy the commercial building the business was in. He was over 40 years old by then. But he didn’t finish high school, nor went to college. And my mom is a stay at home mom, common in the 1950’s, so no dual income.

I was involved in a corporate relocation some years ago. Sat down with my boss to go over my reimbursement and he’s a little envious I was only 32 at the time. My wife and I had the advantage of having graduate degrees. My boss mentioned he did night school at college and didn’t buy his house till he was in his 40’s.

So with college degrees and dual income, I beat these guys by 10 years.

Each individual and family has to work with its advantages. My dad did well with what he had to work with and so did my boss. For my dad, being a minority, he had even more to overcome and I really admire him for it. There is much more discrimination in the 1950’s, though my dad complained about peoples attitudes, not only did he not let it stop him, he took advantage of it. But, that’s another long story.

10

Hi,

I like wearing my jeans and a shirt, nothing fancy and since I spend a lot of time outdoors it works for me! I have nice suits, shirts, ties, shoes and accessories but I only wear them when required, quite frankly I kind of dislike chokers and feel comfortable in casual wear!

I have nice cars, trucks, motorcycles, etc. but I drive a full size pickup most of the time, it blends into the crowd and it’s comfortable!

Do you really want to know the secret to being successful in real estate? Have as little money as possible! That’s right have as little money as possible!

I say this because to have money means you contributed part of it to taxes as earned income or capital gains, you contributed to your state and our federal government. You put in 16% minimum to the federal government and 0 to 10% or more to your state!

If you want to make money the lean and mean way borrow money as a credit line (HELOC) on your property and reinvest it in real estate, put your cash flow back into real estate and live frugally. I take cash out to spend through loans, I try to expense and reinvest my capital gains and earned income back into my overall real estate businesses. I borrow cash as down payments to buy new property! I 1031 into new properties when I max out the tax base! I put everything into business and take the cash for something new, needed, desired or investable from credit line’s or refinances.

Your only required to make a minimum $1 (One Dollar) profit at the end of your 3rd year in business under IRS tax code! Take advantage of the rules, play fair and do exactly as they want you to do!

Spend taxable dollars on expenses for your business and use non taxable dollars borrowed to expand and grow your business!

I have friends who never intended to be landlords but find themselves with 10 or 12 or 15 homes over 25, 30 or 40 years. They bought a starter home, made it a rental, bought another up home and after 2+ years made it a rental and bought another home, etc!

Take advantage of owner occupied tax credits which provide exemptions from tax “If you live in your home at least 2 years out of the last 5 years” this provides up to $250,000 in tax exempt dollars for a single individual and up to $500,000 in tax exempt dollars for a married couple. Now it must be a sale but selling an owner occupied home every so many homes makes good financial sense.

Be smart and deliberate in what you do, make smart decisions but make them quickly! Don’t over analyze and don’t get carried away outside of your goals, remember your personal, LLC’s and corporations only pay taxes on 12 months worth of income and expense, grow your business with taxable dollars offset by what your needs are in expenses.

Borrowed money is not taxable and is spendable on a wide variety of professional and personal needs! Ultimately equity and borrowed capital are not taxable until a sale.

Good luck,

              GR
11

How much money do investors have?
How are their assets organized?
Do they diversify or is it mostly real estate?

How about this question…

What cash do investors keep laying around?
What percentage of their wealth is liquid?
Do they sell profitable rental units to cash up when they are running low?

Where is their cash coming from other then rent checks and flipping houses?

Are investors considered cash rich? Or just investment rich

Do real estate investors even use savings accounts anymore?

How much is in a real estate investors checking account?
When they are fixing up a house that needs $70 grand in repairs is that money just sitting in their checking?
Are they using credit cards to do repairs?
And then barely have enough cash on hand to buy lunch?

Do real estate investors all have a seperate business account specifically for real estate investing income and expenses?
Should a newbie open a business account for that?
Should newbies start operating everything under an LLC or corporation of some kind?

When do new investors begin operating it like a real business?
Is it after their first home purchase or wholesale deal, or do they establish the business beforehand?

How do investors monitor and tabulate everything for tax reporting?
Are there specific rules for real estate investors compared to other small business’?

Are a lot of real estate investors at REIA groups millionaires?
What percentage of REIA members are multi-millionaires?
What percentage of members at local REIAs are totally sunk with bad debt?
Certainly some of them get into financial problems…

How do real estate investors move up from multi millionaire into billionaire status?
Are billionaire real estate investors just doing commercial industrial scale buildings?

About how long would it take to become a multi millionaire with real estate starting from scratch with very little money?

12

That’s too much to tackle for me, especially when 95% of the answers would be “It depends on the investor.”

Let me answer the last question, without trying to be absolute, or definitive about it, since “It depends on the investor.”

Hopefully, this isn’t too cute, but you can make your first million by finding one property that can be purchased for a million dollars less than what it’s potentially worth.

I made my first four hundred thousand dollars within 36 months of investing in an apartment building that was 90% vacant, full of drug dealers and deadbeats that had been taken back in a foreclosure. That was AFTER spending three years screwing around with ghetto houses. So, I was worth nearly a half million within seven years. I know others that made MUCH more off the starting line than me, but…

Meantime, the seller was an 81 year old motivated Jewish man whom financed me. I immediately brought in a partner to finance my rehab, and learned that partners are MUCH more expensive than private lenders, and partners should generally be avoided whenever possible.

EXTRA CREDIT:

I’ve discovered, that I’ll get whatever I decide to get. It’s a matter of setting the goal, establishing the deadline, and giving yourself no alternatives. And the deadline can be ridiculously short. Trust me. The only things that change are the ways to get there.

If all those are in place, the energy and resources to achieve the goal, will seem to come out of nowhere.

That said, I have found that most are not willing to commit to goals that way. Worse they will indulge in stress-relieving activities, when they should be investing in goal-achieving ones. Later they’re confused and defeated as to why they haven’t accomplished more.

I talked with a guy back in 2010 about partnering with me on a real estate-related project. We brought different strengths to the table. We agreed on everything, except the commitment to the goal.

I discovered that he ‘needed’ to go fishing every weekend. ??? Well, our most productive hours were on Saturdays, and he had this ‘other’ priority. Needless to say, he wasn’t committed to the outcome, and consequently failed to hold on to me as a partner, but he had good fishing stories to tell after that.

That’s it for me.

OK, someone else’s turn.

13

Yes, it depends on the individual, besides the investor.

When I say individual, I talking about attitude, and personality. Based on the posts I read here, if he meets people, goes to REIA meetings, its difficult to hide his negative vibes from others. Its can be toxic. People tend to sense that and react accordingly.

When I say investor, I mean as an investor what money he can or cannot bring to the table. I started off my career with a graduate degree, a wife with a graduate degree, so its a lot easier for us to invest with some money and credit. Also having a steady work history with people you can network with helps you financially, credit wise, and career wise.

Enough already with what people drive, what they wear, how much money they have in the bank. Get busy with what you have to do to reach your goals.

Some years back, my career hit its high gear when I was a project manager overseeing programmers. The salary was near six figures with bonus, and I’m able to save 15% in the company’s 401K with them matching 50 cents for every dollar I put in. The wife was doing better, had her own 401K, plus pension. Back in the mid 80’s, RE prices doubled in a few years, and I got myself a home equity loan for $120K.

So I would not manage or arrange my financial affairs like someone with a spotty work history, no cash, no credit etc. I can always draw on my home equity loan, or even borrow against my 401K. A note of caution here. I was going to put a down payment on a property from my equity line, a snotty loan officer said “no no, it has to come out of your savings”. Fortunately my wife helps her mom with her banking, they had a joint account with over $50K in it, so we showed them that account. Then they want to know how long we had the account. And, yep, the account was open over 10 years.

So if the question is, do you need a savings account?? The answer is, in this case, it helps shut them up. In fact, I can afford to have a little fun, be snarky and told the loan officers, “if you think our credit is bad, tell us, so we wont’ waste any more time with you”. When we closed on the deal, the money actually came from the equity line.

Having said all of this, if you plan to wholesale, you’ll have to work with bird dogs, rehabbers, so you’ll have to put on a happy face where ever you go, or partner up with someone who can. When I was a project manager, I worked at a Japanese company, and their managers always look sullen, absent any sense of humor. A consultant firm we used had a partner, a goofy guy, doing sales and liaison, who had these no humor guys in stitches laughing, just like the scenes in “Karate Kid”. But ask this guy anything technical, he would shake his head, refer you to someone else.

In conclusion, its not what you know, its what jokes you know.

14

There is so much positive advice here. It is truly appreciated.

People have been a very large obsticle for me with the local real estate people but I am persisting and making my way at my own pace. I think initially when I arrived on the scene and I was entirely green, it basically attracted all of the nastiest and pettiest people in the groups. I do not understand why but they lash out. It is just cliques. They blatantly made it well known they are more important then me and I am to be excluded. However, their hazing process (which is still occurring) at least gave me an early education about which people to totally avoid.

Hey the other day at a REIA meeting a young slim attractive girl sat down next to me. Younger folks are the minority at these meetings and that includes me. It was her first meeting and probably my 100th. The organizer guy came over and gave her a free book and he was all touchy feely and talking all nurturing and giving her the warmest and more cordial welcoming of all time. That is the same stooge who purposely would not even acknowledge me for the first year I attended meetings. Then the secretary came over and gave her a membership form. All I get from the secretary is a scowl and she does whatever it takes to divert me from being part of the club. Oh well.

I really do not think my vibe is negative. Its probably overly positive and too outgoing. It is just natural some group members, no matter what their titles are, they do not play well in the sandbox with others. Oh well. I just continue networking with other people instead. Personally I do not want to do business with continually mean people.

Btw I am the one who is now dating the young hottie Realtor.

About your high paying careers and resources you had: consider yourselves extraordinarily blessed. It is like Kiyosaki says in his books, the generation before mine was blessed with “unpresidented economic prosperity”. For me, the Great Recession has done a number on me. Just wow. It has been severely vicious…

15

First, congrats on dating the hottie Realtor. It makes up for the scowling secretary.

Second, I graduated college in 1971, in engineering, the country was in the middle of a recession that started around 1968. This was followed by a period of the largest inflationary spirals since the end of WWII.

With the moon landing in 1969, there no jobs for engineers, and job agencies tell me not even for engineers with 10 years experience. I read your “Mancession” posts in the other forum, blaming women for taking jobs. Back in 1971, just about all blacks engineers got job offers since companies started to address the race problems. You bet the rest of us were irritated.

I decided to take a graduate degree in Finance. People asked me why and I said “not every company need engineers, but they all need finance guys”. When I graduated, I found jobs but starting salaries were only 60% of what they were pre-1971.

Fast forward to 1982, IBM came out with the PC. I wanted to get one, though they cost almost $2,000.00 when they first came out. The wife objected, told me $2,000.00 is too much to spend on a toy.

Then in 1984, I started work in a company that sorely needed computers. They got a mini computer, costing $200,000 and $100,000 programming it. The project was a total failure, so they reverted back to manual bookkeeping.

I suggested PC’s to management, and they told me they’re not going to buy me a toy, same thing my wife said. Then, I remember, I got a friend of mine, bought a PC, didn’t know what to do with it. Got software called Lotus, Dbase III, didn’t know what to do with it either. So I made a deal with him, that for $10.00/week, I rent his PC on the weekends.

So I proceeded to put the company’s AR system on the PC to start. I started to print reports from the PC. The were more up to date and accurate than what they ever had. Top management noticed, and wanted to know where the accounting reports came from.

My boss, who attended a meeting with the president of the company, was asked where these new reports we’re using come from. Was told that it came from a PC in my basement, which is the story I told them. President wanted to know why its a PC in my basement. My boss told him “because we said no, we told him we’re not getting him a $2,000 toy”.

The story I heard from my boss was the president then pounded his desk, shouted, “you better go get this man a PC today”. He was laughing telling me this.

I proceeded to implement a PC based system, most of the programming I did. This is the days before they came out with PC accounting systems. In a few years, I moved on a bigger companies that paid very well for project management. A six figure salary is about average for a project manager, and that was over 20 years ago.

You mentioned that some of us are blessed, and fortunate enough to be blessed with “unprecedented economic recovery”. Not in my case. I found that from my experience, I had to keep my eye out with what going on. Yes, I did well with the PC revolution, and so did Bill Gates and many others.

Unfortunately, some friends of mine who graduated with me did not do well, moaning that good engineering jobs disappeared, and they’re giving it to minorities. How sad.

16
I read your "Mancession" posts in the other forum, blaming women for taking jobs.

I never blamed any women for anything. All I stated was that things have changed greatly. They are all valid points its just that political correctness does not allow anyone to discuss these things openly yet without being accused of being some women-hater. Bla bla bla, whatever

Women outnumber men in college now. Women get way more scholarships. More younger women live on their own compared to men. Women are the breadwinners today. A women may become our next president. My past five places of employment were all owned by women. It goes on and on.

17

Did you know prostitutes can make over $150,000/year?

That’s better than many, if not most, female doctors and lawyers.

18

Look buddy my topic was sort of derailed and I would like to knock off the talk about women. Thanks

19

So whats the answer to the question?

20

The answer was that it is different for each investor. My original thought was that real estate investors (keyword: investors) are typically not cash-rich. They could be cash rich, if they sold off one of their investments. But no. As investors we generally want to constantly squirrel away our money right back into new investments.

Real estate investors tend to be Cash-poor/investment-rich

?