real estate fastlane?

[snowbank]

Snowbank - I mean no offense. I think you are a smart guy but is any of this logic based on experience or are we talking pure theory here? How do you know it's 'long and grueling', unless you have done it? Even if you have done it, does that mean that someone else, with good management skills, is not capable of implementing such a solution?

You will rarely if ever find me talking from straight theory alone. That's actually one of my pet peeves because there are a lot of people who talk theory about what you should or shouldn't do, but 99% of those people aren't making money, and often the logic behind the theory is flawed anyways.

I have owned single family homes(still do), I have owned businesses(still do), and network with a lot of people who are business owners/investors, so yes, I have experience. I have had the opportunity to meet a lot of young business people making a killing. I have met plenty of 20 something business people making 5-6 figures/month. I have never met a single family home investor who was in their 20s making 6 figures/month from single family houses.(That'd be 666+ houses, compared to 1 business)

I never claimed it wasn't a plan that people wouldn't be capable of implementing. That wouldn't make any sense to say something like that. Anyone can implement a plan. It's just not a fast plan in comparison to other opportunities.

In regards to being long and grueling, again, it's all relative. It's probably not long and grueling at all in comparison to a 9-5. However, compared to other opportunities that's definitely long and grueling.

 

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[phlgirl]

Thanks for the conversation, Snowbank. +++

 

[andviv]

I am loving this conversation. Rep++ for both of you.

My current mindset with RE is that buy and hold is not optimal from my perspective, because all the risk and liability lies with the property owner.

Right now I am working on a buy-sell model that fits a need for two, sometimes three parties.

Why my decision? Because I am not finding an ideal number of property managers I can trust. If I had a great property manager then I'd be looking more at the buy-hold model.

Something lacking in this conversation is the amount of capital needed to get started in RE versus a business you start from scratch.

Depending on the business, you can turn your knowledge into cash with a minimal or very low funding capital.

Buy-hold SFHs (or any real estate, for that matter) usually requires a higher amount of capital.

Of course, I am talking here in a pretty general way, as I've heard stories of people making millions in RE in a couple of years starting with $0, but those sound more like a myth than reality. I'd love to hear about this type of success first hand from a successful RE investor.

Again, great conversation.

 

[kwerner]

Something lacking in this conversation is the amount of capital needed to get started in RE versus a business you start from scratch.

Depending on the business, you can turn your knowledge into cash with a minimal or very low funding capital.

Buy-hold SFHs (or any real estate, for that matter) usually requires a higher amount of capital.

Exactly. This statement hits the nail on the head.

For years I thought my plan was going to be to flip houses to build up capital for 2-5 years, then transfer into commercial RE for another 2-5 years to collect bigger cashflow.

Bill and MJ have officially ruined my plans

Thanks guys!

 

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[snowbank]

And this does not require a lot of work? Just comes together, presto? 4 hour work week?

Well, the 4 hour work week was obviously a title for marketing purposes. However, if properly structured after the launch of a business, plenty of businesses could be run on 4 hours/week.(also, within the 1st year) In business it's usually the hard work to get a company up and going, and then if automated correctly a lot of it just runs itself. You keep working the business if you want to keep scaling it, but if your goal was to just start a business that makes $10k+/month and then work very part time on it that is not incredibly hard to do within a year.

Have you executed any of these businesses which require little work and less that one year to provide 120k+ cash flow?

yes



I don't talk too much detail of my personal business strategy/information in public forums(I talk pretty openly at meetups- where you been?), but to give you an idea one business that I will launch later this year will take a total of about 2 months of work to launch, without a lot of work needed after launch, and should profit me 10+ houses/month cashflow almost immediately(and will keep growing after that obviously), and I'll be starting it for less than it'd cost me to put a downpayment on 1 house.

If instead I was doing 1 sfh every other month it would have taken 20-30 months to get that cashflow. I'll get it in 2 with the business, and the cashflow will keep growing as time goes on. After the 20-30 months of work if I was doing sfh's my cashflow would not keep growing; it would stay relatively the same- where with the business a year or two later it would not be strange at all to be making 10x+ cashflow.

 

[snowbank]

Something lacking in this conversation is the amount of capital needed to get started in RE versus a business you start from scratch.

Depending on the business, you can turn your knowledge into cash with a minimal or very low funding capital.

Ya, this is a big thing.

Without even including the talk about capital, a good business venture is a much faster road to wealth than single family real estate. Once you throw capital in the conversation it's pretty much a blowout.

If I took a 20 something year old kid without much capital and told him exactly what to do to start a successful business he would have a chance of doing it that year. If a single family home guru told the same kid exactly how to buy 66+ single family homes, there's obviously pretty much no chance he can make that happen.

The scaling process in real estate is tougher because at the beginning you're more likely to be on a guaranteed slowlane plan, as your building some capital up.(yes, I understand there are creative ways to get financing, but a newbie without much capital quickly coming up with $1 million+ worth of down payments for 66+ houses isn't something that's likely to happen)

So at the beginning it's more likely that someone starting fresh is doing 1-2 houses/year maybe. Maybe by year 3-4 they are up to doing 1 every other month(note: I'm using example numbers obviously some people do more, some people do less) after they've built some capital up, but they are guaranteeing themselves to not be at $10k+/month for a while. Once they have their system down you can scale, but the system is going to take a lot longer to implement without capital.

Also, the speed at which you learn will be much slower with this plan as well, because your sample size will be very small. An investor who is doing 1-2 houses/year starting out isn't going to be a sfr expert for a long time, because his sample size is too small. He may be an expert at certain aspects, but you can't be a real estate investing expert if you buy a house or two. You may make buying mistakes that you won't know you made right away. Is he going to be learning- sure, over time. However, if you compare this to the business guy who is actively involved in the business on a day to day basis by the end of the year it's not surprising if he's an expert at whatever he's doing within a year or so. After he's an expert at it, it's very easy to repeat the same thing again- so the business guy who becomes an expert can keep repeating whatever it is that he did, while the real estate guy won't get that learning experience for a long time. When it does come, he's still going to need the capital to pull deals off.

 

[MJ DeMarco]

I have had the opportunity to meet a lot of young business people making a killing. I have met plenty of 20 something business people making 5-6 figures/month. I have never met a single family home investor who was in their 20s making 6 figures/month from single family houses

Jackpot. Find 100 self-made multi-millionaires under the age of 25. How many of them will be because of SF real estate? I'd guess < 2% and this is exclusive of the time frame (Today or the 1990's.) While years ago the sampling would have been mostly inventors, founders, and small biz owners, today the majority is internet. I don't think RE will never be in that classification. While this doesn't mean it isn't "Fastlane" (it does satisfy most of the commandments) , it isn't my preferred venue because it lacks scale and scale is the most important commandment. I know my rental home in Chandler AZ will never be worth $25 million dollars -- no matter how hard I try -- while, any business I start, might -- as long as it's mathematical equation supports it. Whenever you have to tinker with scale (the mathematical equation) you add work, difficulty, and time.

 

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[snowbank]

For years I thought my plan was going to be to flip houses to build up capital for 2-5 years, then transfer into commercial RE for another 2-5 years to collect bigger cashflow.

Something with this plan that never gets talked about, is that you're pretty much starting over in 2-5 years to some degree. What I mean by that is, if someone spends 2-5 years building capital in single family homes, when they are ready to start doing commercial deals they are still a commercial real estate newbie. Yes, they have real estate experience, but they don't have commercial real estate experience. So, they might be dealing with different lenders, different realtors, different evaluations, different issues they didn't have with single families, etc...

A similar situation in business would be if someone started tiny affiliate sites and got them making $100/month and did a bunch of them. If after a few years they wanted to get a big internet business going, they would be a newbie in that department, despite having had experience in internet businesses.

This is why I say take chances on doing bigger deals(maybe I haven't much on the forums I'm not sure- but the 2nd part of my presentation was on this) that you're interested in doing, because even if you fail you're learning how to do the bigger deals. A guy who takes a shot at 1-2 big internet businesses and fails probably knows a heck of a lot more about starting a big internet business than a guy who has never attempted to start a big one but has some small, successful affiliate sites. The 2nd or 3rd time he tries he's got a substantially better % of being rich than the successful mini-business guy trying it for his first time, assuming all else is equal.

On top of that, the guy who decides to stay doing smaller deals guarantees himself to take a much longer time to make real money, whereas the guy who takes a higher variance route will almost always get himself out of the rat race sooner.

In business it is very easy to skip the mini deals and jump straight to the "commercial"(larger) deals because you don't need as much capital or experience. In real estate with a sfr to commercial plan you are going from small deals to bigger deals strategically, so you're strategically setting yourself up to play a longer game.

 

[phlgirl]

Snowbank, if you are able to produce new businesses, which bring in 120k of income in a year or less, requiring little effort, then I say rock on. Bravo!

I probably wouldn't bother with the real estate either (except, possibly, to create a tax shelter for all the income).

As for up-front capital, for us, the timing was extremely fortunate. On my first few (PHL) deals, when I was single, I saved & saved my corporate earnings for the down payments; however, when we moved to FL, specifically to purchase in mass, we did a 100% cash-out refi on every single property. In fact - in most cases, we took more than 100% and were able to put some money in our pockets as well. Clearly, the timing was ideal. I don't know when we will see that type of financing opportunity again (at least from a commercial banking standpoint).

The possibilities for extensive growth are absolutely on the side of a business - just not sure the odds of success are in your (or most people's) favor.

 

[LesG]

So, how did your friend do it?

The key I believe for him is.
1) the ability to find deals below market.
2) Intregrity. Intregrity, Intregrity.
3) Giving away 75%, yes 75% of the profit.


Hired 15+ employees and have them go there on behalf of his company and buy the properties? Then what? repair/rehab/fix them and then sell them? Wholesale them as-is?

Each person had a different function. Accounting 2 people. 2 Title researchers, 2 Comp evaluators, 2 Step buyers. etc. After purchase, yes rehab and fix or just sell asap. Had about 3-4 contracting crews going in his peak. They were not on payroll.


Did he use private money/hard money lenders to finance his deals?


Yes he did and he also uses investors money. This is all cash business.


I am looking for ways to escalate this model into a system that can do tens of thousands per month in profit...

It has been my limiting belief that SFHs were not a decent vehicle to accomplish this

There are more SFH then commercial. If you get good at anything you can make a model that will work.

 

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[snowbank]

The possibilities for extensive growth are absolutely on the side of a business - just not sure the odds of success are in your (or most people's) favor.

This is the part where a lot of people get EV confused with variance. Someone's EV(expected value) if their goal is to get rich is substantially higher in business than if the same person goes into single family homes trying to get rich. We'll pretend the average variance of single family real estate will be lower than that of business(which I don't even know if it would be). Even if the variance was higher on a case by case business, this doesn't mean that the EV would be lower. It means that the person may have to start another business, but the sfr investor is starting 66+ mini businesses. Some of those 66 will go well, some will not go as well, but overall since you know what you are doing they are +EV investments for you. The variance might be considered higher in business because there are longer time periods over shorter sample sizes. In other words, you can't start a big business every other month, but you could invest in a sfr every other month. So, if it takes the businessperson 3 tries to get a big business where he wants it to be, it doesn't mean he failed. His EV was still positive, he just experienced variance early on in the process of reaching his goal. If the sfr investor had their best deal on the 3rd try, that doesn't mean their first 2 were bad deals if they were +EV on the deal. They just might not have gone like they were supposed to over the long run. The business person after 3 deals would have spent more time than the sfr on 3 deals, however the 3rd deal gets them completely out of the rat race.

Example:

sfr: +150/m cashflow
sfr 2: +150/m cashflow
sfr 3: +150/m cashflow

business: -5k
business 2: -5k
business 3: +10k/month cashflow

The EV on the business side is substantially higher. The variance in this scenario would be considered higher, if we say that the sfr investments were zero risk, 150/m cashflow deals that couldn't possibly lose money, and the business investments were higher risk because he could lose 5k on each deal.

In sfr investments risks are hedged, thus, minimizing potential returns. In the business example risks are not hedged so much, but it doesn't change the odds of success or the EV, because we're not playing with a total investment try of 1 chance.

If we only had one chance we'd hedge our business investment down to where it was as sure of a thing as the sfr investment, cutting potential risk out and guaranteeing a return. That wouldn't be most +EV though, which is why you wouldn't do that.

Also, the telling stat is in this example- the $10k our pretend business guy lost isn't even as much as 1 downpayment on a property, so in this example we couldn't possibly argue that it's "riskier" to invest in the business, because this guy only risked $5k and isn't even responsible for any debt like a mortgage.

The odds of success whether someone is investing in real estate or business is the same.(barring the chance there are substantially more professional real estate investors than business investors or vice-versa in comparison to an equal quantity of people looking for each)

 

[Bilgefisher]

Great conversation from both you two. Its like listening two very intelligent scholars debate. All great arguments. Very entertaining read. (Sorry, I geek out a bit when two folks I respect get such an intelligent and respectful debate going.)

I do tend to think it may be like arguing over the same shade of a green car. "Forest green or Pine green?" Its all in the eyes of the beholder.

I think it leaves out the most important question. Not the color of the car. Will it get you where your going and will you enjoy the rapid drive there?

 

[Cat Man Du]

I think it leaves out the most important question. Not the color of the car. Will it get you where your going and will you enjoy the rapid drive there?

That's the KEY......As I GO ALONG IN LIFE .............THIS IS WHAT MAKES MY DAY! Thanks Bilge!:coffee:

 

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[LagunaLauren]

Definitely to each his own. We each have our own ideas of an acceptable investment/return. Making $100-$200 a month on a house isn't worth it to me personally. I go for big returns (6-figures/yr.) on EACH property to yield 7-figures of passive income annually. I used to do SFHs, but why do that when I can buy an apt bldg for $3.5 Million that yields $399k NOI a year? or a $2.35 Million building that yields $229k NOI/yr.? If you're going to put time and effort an money into a deal, why not do bigger deals with bigger returns? I'd rather have 5 apt bldgs than 300 houses... and I can buy 5 apt bldgs in less than a year, where 300 houses would take years and years and years...

Like, why would you be a waitress at Applebees, where the average meal for a couple people is probably $25? IF you make a 20% tip there, you'd make $5. If you're a waitress at The Ritz Carlton, the average check might be $250. 20% of that as a tip would be $50. Same amount of time and effort for the waitress; make $5 or make $50?. Much greater returns at a higher-end restaurant. (?)

 

[MJ DeMarco]

Definitely to each his own. We each have our own ideas of an acceptable investment/return. Making $100-$200 a month on a house isn't worth it to me personally. I go for big returns (6-figures/yr.) on EACH property to yield 7-figures of passive income annually. I used to do SFHs, but why do that when I can buy an apt bldg for $3.5 Million that yields $399k NOI a year? or a $2.35 Million building that yields $229k NOI/yr.? If you're going to put time and effort an money into a deal, why not do bigger deals with bigger returns? I'd rather have 5 apt bldgs than 300 houses... and I can buy 5 apt bldgs in less than a year, where 300 houses would take years and years and years...

Like, why would you be a waitress at Applebees, where the average meal for a couple people is probably $25? IF you make a 20% tip there, you'd make $5. If you're a waitress at The Ritz Carlton, the average check might be $250. 20% of that as a tip would be $50. Same amount of time and effort for the waitress; make $5 or make $50?. Much greater returns at a higher-end restaurant. (?)

Excellent analogy! :smxG:

 

[RealOG]

Definitely to each his own. We each have our own ideas of an acceptable investment/return. Making $100-$200 a month on a house isn't worth it to me personally. I go for big returns (6-figures/yr.) on EACH property to yield 7-figures of passive income annually. I used to do SFHs, but why do that when I can buy an apt bldg for $3.5 Million that yields $399k NOI a year? or a $2.35 Million building that yields $229k NOI/yr.? If you're going to put time and effort an money into a deal, why not do bigger deals with bigger returns? I'd rather have 5 apt bldgs than 300 houses... and I can buy 5 apt bldgs in less than a year, where 300 houses would take years and years and years...

Like, why would you be a waitress at Applebees, where the average meal for a couple people is probably $25? IF you make a 20% tip there, you'd make $5. If you're a waitress at The Ritz Carlton, the average check might be $250. 20% of that as a tip would be $50. Same amount of time and effort for the waitress; make $5 or make $50?. Much greater returns at a higher-end restaurant. (?)

Barrier of entry.

 

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[Forza]

Definitely to each his own. We each have our own ideas of an acceptable investment/return. Making $100-$200 a month on a house isn't worth it to me personally. I go for big returns (6-figures/yr.) on EACH property to yield 7-figures of passive income annually. I used to do SFHs, but why do that when I can buy an apt bldg for $3.5 Million that yields $399k NOI a year? or a $2.35 Million building that yields $229k NOI/yr.? If you're going to put time and effort an money into a deal, why not do bigger deals with bigger returns? I'd rather have 5 apt bldgs than 300 houses... and I can buy 5 apt bldgs in less than a year, where 300 houses would take years and years and years...

Like, why would you be a waitress at Applebees, where the average meal for a couple people is probably $25? IF you make a 20% tip there, you'd make $5. If you're a waitress at The Ritz Carlton, the average check might be $250. 20% of that as a tip would be $50. Same amount of time and effort for the waitress; make $5 or make $50?. Much greater returns at a higher-end restaurant. (?)

But didn't you scale up to apartments, you didn't go straight to the big deals? It seems that lack of money would be a major factor between those who invest in SFHs (financing one at a time) and apartment buildings.

 

[LagunaLauren]

But didn't you scale up to apartments, you didn't go straight to the big deals? It seems that lack of money would be a major factor between those who invest in SFHs (financing one at a time) and apartment buildings.

I did start small with SFHs and then got into apartment buildings but I didn't have to. It was a mental preconception that I had. I've done 100% financing deals on houses and I can do 100% financing deals on apartments just as well. Same time and effort into shopping for and researching properties/deals. Better returns with apartment buildings.

For example, I was in Texas last week shopping for more apartment buildings. I saw a 120-unit bldg for $3.8 Million. Has a $2.2 Million assumable loan on it for a fixed 5.35%. Owner is willing to carry back the remainder with a balloon in 5 years. I can get into it with really none of my own money. It's a solid Class C bldg that cash-flows with more upside potential. (No realtor/broker either, so a win-win for both the seller and myself.)

Saw another building. 107 units. Current lender will finance 75% of purchase price for 2 years: 6% I/O for the 1st year, 8% I/O for the 2nd year with 2% loan origination fee. Current owner considering a carry-back on the remainder. (prime for developer demo in 1-2 years anyway for big cash-out).

Personally, I'm glad I did other investing before I got into apartments just to get my feet wet and get comfortable and familiar with investing. It's more about your belief of what you're capable of. You can do creative financing on houses or apartment buildings. Owner carry-back, hard money lenders, lease options, etc...

Whether you believe you can buy a $3 Million apartment building or whether you think you can't, either way, you're right.

 

[biophase]

I hadn't read this thread until now. So let me put in my 2 pennies.

When I first started looking for passive income, my avenue was SFH. I was happy putting down $16,000 on a condo and making $150/mo cashflow. And I was fine doing this for a while. I think one of the many reasons we are happy with this is that you are not only getting cashflow, but you are or should be getting equity in your properties.

In real estate, people will talk about the +$150 cashflow. But you must also realize that their is also appreciation and debt paydown. Would we be buying SFH if you knew that appreciation would be 0% and that you were paying interest only for 30yrs? Your renter is paying you $1000 a month, you shell out $850 to the bank, but within that $850, could be $100-$200 in principal paydown. On top of that, you may have your 5% appreciation per year.

So in reality, the $150 cashflow isn't the complete picture. A big part of the picture is owning your properties free and clear after a period of time AND appreciation. In 30 years, you should have a house worth let's say $100k and +$1000 cashflow. Multiply this by 66 houses and you have a decent nest egg.

Now, looking at short term, as Snowbank has mentioned and as I have experienced also, starting a business can get you immediate and large returns. I can easily create something that can make $150/mo cashflow with little or no money online. If I wanted $150/mo cashflow only, I would go this route rather than purchasing a SFH.

IMO if you spend $16,000 on development of a website, you should be expecting that site to make $100k a year or it's not worth it. BTW, I'm only throwing the amount $16k out there because that's how much I put down on my first rental property.

My outlook is very different now when it comes to REI and Internet businesses. When I first started on REI, the focus was on passive income, equity and appreciation. However, I now find it constricting in terms of it being location based and also liquidity. I like traveling alot more now than I did when I bought them.

That is why I favor online businesses. I want to be able to move around and also to be flexible and fast. I think that those of us who have tasted the online biz koolaid love the fact that you can take your laptop anywhere and run your business 100%.

I still do have my REI and they are doing fine. To me, they are just there. I haven't seen the inside of any of them in 4 years, I just collect the checks, I have no idea what they are worth. I know I have them, they cashflow and they will be there 25 years from now, hopefully free and clear and cashflowing alot!

 

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[imirza]

Its funny how if this question ' Is real estate fastlane ?' had come up 5 years back, 9 out of 10 people would have agreed. Now its almost the opposite.

I think whether something is fastlane or not doesn't depend on the industry or specific niche but rather the person. I would argue that even JOBS can be fastlane.

As for real estate, here is an example of a fastlane type deal done by a buddy of mine just last week. Keep in mind this guy is in his early 20s and has less than 2 yrs of real estate under his belt. He networks heavily in the local RE community and finds a guy selling a property for $100k that he has under contract for 90k. Upon research my friend discovers the property is worth $200k. Even 170k at worst case. He has to put up a $5k non refundable deposit the same day and close within 2 weeks. He puts $5k down, then sets of to find buyers. Sends out emails to his contacts , approaches all the 'we buy ugly homes' guys etc, and finds a buyer the next week for $135k. Deal closes and he pockets the difference - $35k. All this for maybe 20 hrs of work at most.

Now $35k may not sound like a lot for many of you here but one can always scale up this type of strategy. Find the $1 mil property worth $2 mil and flip it for $1.3 mil pocket $300k. Find the 10 mil property worth $20 mil and flip it for $13 mil and pocket $3 mil.

 

[snowbank]

I would argue that even JOBS can be fastlane.

I'd be interested in hearing your thoughts on this. Most jobs that have the potential to earn a lot of cash quickly, are still tied to working, meaning that although you have fast cash you are still in the rat race since you have to keep working to earn that income. Would like to hear which jobs you are referring to though.

As for real estate, here is an example of a fastlane type deal done by a buddy of mine just last week. Keep in mind this guy is in his early 20s and has less than 2 yrs of real estate under his belt. He networks heavily in the local RE community and finds a guy selling a property for $100k that he has under contract for 90k. Upon research my friend discovers the property is worth $200k. Even 170k at worst case. He has to put up a $5k non refundable deposit the same day and close within 2 weeks. He puts $5k down, then sets of to find buyers. Sends out emails to his contacts , approaches all the 'we buy ugly homes' guys etc, and finds a buyer the next week for $135k. Deal closes and he pockets the difference - $35k. All this for maybe 20 hrs of work at most.

Now $35k may not sound like a lot for many of you here but one can always scale up this type of strategy. Find the $1 mil property worth $2 mil and flip it for $1.3 mil pocket $300k. Find the 10 mil property worth $20 mil and flip it for $13 mil and pocket $3 mil.

good story.

I don't think anyone is arguing that real estate can be fastlane, and while I might agree depending on his plan that your friend could be on the route to being in the fastlane, flipping a deal like this doesn't get him out of the rat race so he's not necessarily in the fastlane after a deal like that.(his $35k would generate like $100/month in a bank) If people were going to use real estate to aquire wealth, if they didn't want to/couldn't start in commercial deals, flipping to build capital for those deals is a great way to go. He could do a number of these deals and then use $200k to get in a bigger deal and potentially be in the fastlane then.

In my opinion regardless of what business you're in, the road to wealth is:

1. build capital
2. have your capital generating enough income where you don't have to work anymore. the income comes each month without any effort on your part.

Occasionally step one can be skipped over if for example you create an online website that you build yourself, that generates a substantial income each month, or you partner your skills with other people's money.

If someones goal is to escape the rat race as quickly as possible, their focus should be on getting 1 out of the way fast and/or find an alternate route to where they wouldn't need to accomplish 1 to get to 2. This way they win the game quickly. If someone focuses solely on 2 without hitting 1, chances are the game will be a much longer one.

 

[biophase]

I'd be interested in hearing your thoughts on this. Most jobs that have the potential to earn a lot of cash quickly, are still tied to working, meaning that although you have fast cash you are still in the rat race since you have to keep working to earn that income. Would like to hear which jobs you are referring to though.

I believe Kiyosaki touched on this also. If you are a pro-athlete or movie star or have a job that makes millions a year, you shouldn't be looking to get out of it to get into something passive. You should be accummulating money as much as possible as fast as possible while the job is available.

There is a point where trading time for dollars is worth it. While many of us would continue trying to get passive income vs. $50/hour, I would tend to think that we could be swayed into working a 40hr a week job for $1000/hr or even $500/hr.

 

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[snowbank]

I believe Kiyosaki touched on this also. If you are a pro-athlete or movie star or have a job that makes millions a year, you shouldn't be looking to get out of it to get into something passive. You should be accummulating money as much as possible as fast as possible while the job is available.

There is a point where trading time for dollars is worth it. While many of us would continue trying to get passive income vs. $50/hour, I would tend to think that we could be swayed into working a 40hr a week job for $1000/hr or even $500/hr.

Ya, I agree, I wouldn't recommend someone making $1k/hr to leave a job to try and find a quicker way to make a few mil.

I was more curious if he was thinking of jobs that you'd actually pursue as a fastlane vehicle. Since top paying lawyers/doctors jobs take extra years of school, and often years building up to the big income levels, and something like a trader people often spend years being promoted up the ranks before they earn the monopoly type money, and many burn out from 80+ hours/week before then. Wanted to see what type of things he was recommending to pursue as a fastlane path for a job, if that's what he meant.

People like Lebron I'm sure are fine with their jobs.(people like that are also doing what is their passion, so they aren't forcing themselves to work for the money)

 

[imirza]

Snowbank - I was referring to wall street types - i- bankers, hedge fund guys, traders etc. Lots of these guys amass so much money in so short a period of time they can retire in their 20s and 30s and a lot do. Its a tough life but hey 5- 10 yrs of slavery and you are set for life.
Getting a job at promising start up companies is another way. Amass stock options and once the company goes public you make a ton. I know a guy who was one of the first 20 employees at Yahoo. He had a low level JOB but was a millionaire before 25. (he did cash it in). I know GOOGLE has 1000 plus employees who are worth over $5 million from stock options. So IMO anyone working in google prior to it going public was in a 'fastlane' JOB. And there are tons of other start ups out there that will create 1000s of employee millionaires in the coming decade. Why start a business when you get a fastlane job ?

 

[biophase]

Snowbank - I was referring to wall street types - i- bankers, hedge fund guys, traders etc. Lots of these guys amass so much money in so short a period of time they can retire in their 20s and 30s and a lot do. Its a tough life but hey 5- 10 yrs of slavery and you are set for life.

Getting a job at promising start up companies is another way. Amass stock options and once the company goes public you make a ton. I know a guy who was one of the first 20 employees at Yahoo. He had a low level JOB but was a millionaire before 25. (he did cash it in). I know GOOGLE has 1000 plus employees who are worth over $5 million from stock options. So IMO anyone working in google prior to it going public was in a 'fastlane' JOB. And there are tons of other start ups out there that will create 1000s of employee millionaires in the coming decade. Why start a business when you get a fastlane job ?

I see your point, but that is more of a crapshoot than saying that you're getting a fastlane job. I worked during the dot com boom. I remember sending my resume to Google to get in before they blew up. The reality is that once a company looks like it might blow up, it's generally too late to become one of "those" lucky first in employees.

I remember being employee number 31 and getting 5000 options at $1.00 and then getting an additional 20,000 options at $2.50. If we had only gone public!!! That's a huge if. I think I may still have that document.

 

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[snowbank]

Snowbank - I was referring to wall street types - i- bankers, hedge fund guys, traders etc. Lots of these guys amass so much money in so short a period of time they can retire in their 20s and 30s and a lot do. Its a tough life but hey 5- 10 yrs of slavery and you are set for life.

If it was as simple as working 5-10 years and being set for life, that wouldn't be so bad of a strategy, but like Kenric said what you are suggesting is a crapshoot. People don't agree to work on wall street 5-10 years in exchange for being set for life after that time period. I don't know a lot about this market, but I did look into the possibility of switching over from poker to do this, because of the low ceiling of poker compared to trading. From the feedback I received, very few guys made the kind of money that could retire them in 5-10 years. Is it possible, sure- they knew of people making that kind of money.

Getting a job at promising start up companies is another way. Amass stock options and once the company goes public you make a ton. I know a guy who was one of the first 20 employees at Yahoo. He had a low level JOB but was a millionaire before 25. (he did cash it in). I know GOOGLE has 1000 plus employees who are worth over $5 million from stock options. So IMO anyone working in google prior to it going public was in a 'fastlane' JOB.

This is like a crapshoot x1000.

If someone is smart enough to pick the next google, they are smart enough to start their own company and make a LOT of money.

 

[MJ DeMarco]

All of these scenarios involve one common thread: MATHEMATICS and PROBABILITY. When you start digging into the mathematical equations of all said "roads to wealth", you really uncover what is improbable versus probable. As far as I'm concerned, I want to be on the side of probable which stems from the only true law of the universe ... MATH. Winning the lottery is possible, yet, it is improbable based on the mathematics that govern its road.

 

[Rem]

Great thread and finally got around to read it. I know you guys do this for a living and I DON'T so I am sure you know better than I do.

Going larger is definitely a good idea. 5 apartments putting in the same time and getting the same percentage is better than 300. But there are 2 things:

1) Some people may not have the initial investment money to go large. It takes time to build. For someone who can get into real estate and buy a few apartments can build trust and a credit line with the banks. This in turn will allow you to eventually go bigger.

2) The larger the money the larger the risk. Of course it means larger the rewards. But it could also mean that there is fear involved and are not willing to take such a large first leap into the swimming pool without dipping the toe in and checking the temperature and the depth of the pool.

 

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[imirza]

If it was as simple as working 5-10 years and being set for life, that wouldn't be so bad of a strategy, but like Kenric said what you are suggesting is a crapshoot. People don't agree to work on wall street 5-10 years in exchange for being set for life after that time period. I don't know a lot about this market, but I did look into the possibility of switching over from poker to do this, because of the low ceiling of poker compared to trading. From the feedback I received, very few guys made the kind of money that could retire them in 5-10 years. Is it possible, sure- they knew of people making that kind of money.

Right 9 out of 10 people won't make that kind of money on wallstreet. Like wise 9 out of 10 people will fail at business. Same odds.

I see your point, but that is more of a crapshoot than saying that you're getting a fastlane job. I worked during the dot com boom. I remember sending my resume to Google to get in before they blew up. The reality is that once a company looks like it might blow up, it's generally too late to become one of "those" lucky first in employees.

This is like a crapshoot x1000.

If someone is smart enough to pick the next google, they are smart enough to start their own company and make a LOT of money.

Not a crap shoot if you do your DD. Most successful tech companies are founded or funded by guys who have already enjoyed success with other big companies. So many successful tech companies have been founded by ex google, yahoo, sun, microsoft, paypal (insert other big tech company name here) employees. Its not a coincidence. These guys know exactly what is required to start a company and take it to the next level. It could make more sense to ride along with them rather than start your own company via trial and error. I could argue starting your own business is a crapshoot ( i know its not).

If you get a JOB at a start up, since its small you know everything you need to know about your company and what metrics are used to judge the success and growth of the company. If you join a company where the metric of success is judged by number of new members i.e. facebook and things head in the wrong direction, you can leave. Its like starting your own business. If things don't work out you try a different approach and do this over and over again till you get it right. You can do the same with start ups. Jump from one start up to another till you find one that will go big. You join a start up where there is excellent leadership, motivated employees, a board of advisors made up of successful industry execs and backing from successful VCs, there is an excellent chance this company will go places.

You should all read Ken Fishers The 10 Roads to Riches . Starting your own Business FYI is only one of them.

I conclude by saying, I am not arguing against starting your own business. Starting or acquiring a business is an excellent way to the fastlane but is not the only fastlane route and not necessarily the best fastlane route. It ultimately depends on the person. Some people can get to the fastlane a lot easier via a job while others are best suited to starting their own business. Different strokes for different folks is the way I see it.

 

[Russ H]

Great thread and finally got around to read it. I know you guys do this for a living and I DON'T so I am sure you know better than I do.

Going larger is definitely a good idea. 5 apartments putting in the same time and getting the same percentage is better than 300. But there are 2 things:

1) Some people may not have the initial investment money to go large. It takes time to build. For someone who can get into real estate and buy a few apartments can build trust and a credit line with the banks. This in turn will allow you to eventually go bigger.

2) The larger the money the larger the risk. Of course it means larger the rewards. But it could also mean that there is fear involved and are not willing to take such a large first leap into the swimming pool without dipping the toe in and checking the temperature and the depth of the pool.

Actually, this is a misconception.

A lot of first time investors think smaller props require less capital investment than the larger ones.

That's not always true.

In fact, smaller multi-family units (like duplexes, triplexes, quads, etc) essentially are sold based on the credit rating/worthiness of the buyer.

Larger apt buildings are sold based on their ability to generate revenue/pay the bills. So if you locate an underperforming property (say, an apt bldg w/30-40% vacancy in a decent part of town), you can go to the bank w/a plan to increase the occupancy/bring in more revenue. In fact, if you've already done it on a prior property, this makes for a VERY strong argument (if the economy is OK).

Also, on the larger props, the owner may offer to carry all or part of the loan-- again making it much more feasible.

So if the numbers are right, it may actually be *easier* to get a million dollar apt building than a $200K duplex. And it may take the same amount of down for either, esp if the owner of the apt building is willing to carry some of the paper.

-Russ H.