How do people become Billionaires in Real estate?

[Tick]

I've been heavily into the property investment scene for a while now and my wife and I started a property management company. When I bought my first four-plex, I thought: "Wow this is awesome! I'll just keep doing this and I'll get rich. One cashflow property after another!"

Here's the catch. (And those of you more educated feel free to chime in and correct me) When you start out you are probably using residential loans. ie: 1-4 units. These loans are based purely on YOU and whether the bank feels they can get their money out of YOU if you screw it up. These investments generate a small amount of cashflow and equity building. There are a few main problems with using this as a PRIMARY strategy and I"ve seen this happen over and over again with our clients, as well as personally.

1. After you burn your VA loan (if you're military) or your FHA loan (3.5% down), the banks are going to start wanting 20-25% down. This of course takes time because you are still working a job and not building a business. (Formerly guilty of this myself)

2. Eventually the bank essentially says "Wow dude, you've got a few million in loans and only so much work income to back it up. Yeah, you're cashflowing but we're getting worried about your ability to pay it back if something catastrophic happens." They will then stop lending you money.

3. Finally, (and yes I say this as someone who profits on property management), at a certain point you're trying to all the management yourself. You are probably niaive to the law, and because you don't do this everyday, you just aren't that great at property management. Your vacancies are long and often. Your repairs take forever because you're trying to do it all yourself. Every damn nail must be done by you because you're just so damn good at swinging a hammer and "Hell if I"m gonna pay some contractor to do something I"m perfectly capable of doing myself!" This sucks up your time and you make dumb decisions because you are only experienced at your couple properties. We currently manage 150+ (which is small time stuff) and yet I still have property owners who think they're better at this than me because they've got a whole 3 properties under their belt.

4. You'll want to live in your first property or the loan will require you to. This means that you had to find the best deal IN YOUR TOWN, not the best deals period. Already you've limited the potential unless you just happen to live somewhere that has a stellar climate for what you want to do ie: equity building, cashflow, or both

5. Because you are just starting out with little cash, when you screw something up and you will, it will hurt that much more because you don't have the resources to get recover quickly.

Then you maybe get a little smarter and learn about commercial loans. These loans are generally speaking less about you the borrower and more about the property and it's ability to perform if the bank has to take it from you. They are for properties of 5 units and above. These are generally much better investments but the bank will want to know you've got your feces co-located beforehand. They will most likely want to see management experience on your part as well as want you to hand it to a competent property manager. Here's the catch on these. One, you have to have some experience which takes time. You also need to have some cash, which will also take time because again, you are still working your job and not building a business. David Lindahl is a good resource for learning about getting into large commercial investments with others called "Syndication"

Ok, I'll wrap it the F up already. Here's the bottom line. Property investment is AWESOME and a great way to build equity, build cashflow, leverage other people's money, and have a lot of fun doing it. But, and this is a big BUT..... it takes cash or lots of time. What I have learned through trying it myself is that I need to build a business first to get the cash then use that cash to invest intelligently in real estate to secure and build what I started with my business. Don't be the DIY king. Use real estate agents, property managers, mortgage brokers and other investors to learn and keep yourself out of trouble. Be careful when people start talking about no money down or using credit cards to buy foreclosures. That's masters level stuff and easy to get in trouble.

Me, I'm concentrating on my business which just happens to be in the field of property investment. As I build the business I continue to learn more about how I'm going to use the cashflow once successful. And to prove I'm putting my money where my mouth is, I'm quitting my six figure job and selling my positive cashflow fourplex to use the cash to buy out another company. This is going to catapult me 2 years forward of my normal rate of growth.

Hope that helps and feel free to ask me anything else.

 

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[IceCreamKid]

Get yourself a bulk cash strategy and a cashflow strategy.

For example, my primary biz which isn't RE related generates the bulk cash.

I use that bulk cash to buy single family homes that I rent out for cashflow. I wouldn't recommend buying SFH's though, it's not fastlane. I only do SFH right now because I'm not sophisticated enough in RE to get into apartments right now. My ultimate goal is to end up buying distressed apartments that I re-stabilize. The time will come soon.

I like old school business models that are tried and true. No need to re-invent the wheel when there are so many proven models that you can follow.

 

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[DeletedUser394]

Real Estate is the flavor of the week now is it?

Two weeks ago you were building some kind of website.

 

[jon.a]

Shit this is getting old with you.
I think I remember that you have an auto sales background.
Go flip some cars.
Make some money.
Pay off your debt.
Lower your expenses.
Flip some more cars.
Build a nest egg.
Then, come back and post about your results.

 

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[Ubermensch]

Yeah, basically. Without a TON of cash starting out it's hard to go from $0 to $1,000,000,000 in a lifetime.

Research and facts: The anti-dote to blurting nonsense.

Forbes Richest 400: The Latest List Reveals A Surprising New Wealth Strategy

Forbes Richest 400: The Latest List Reveals A Surprising New Wealth Strategy

by Dr. Mark Skousen, Advisory Panelist, Investment U

Friday, October 5, 2007: Issue [HASHTAG]#717[/HASHTAG]

As a former columnist for Forbes, I always look forward to the magazine's "400 Richest People in America" issue that comes out every fall. I own every copy since Forbes issued its first edition in 1982.

The lives of the rich (and usually famous) are a fascinating subject, and one can learn a lesson or two about wealth-building by studying them. But first, let's look at what goes into making the list.

The Characteristics of Forbes 400 Richest People

Here are some important facts of the current Forbes Richest 400:

• Inflation takes its toll: Minimum net worth to be on this year's list is $1.3 billion. For the first time ever, you aren't guaranteed to make the Forbes 400 just because you're a billionaire!
  
  
• Divorce doesn't pay: Despite several high-profile cases of triple divorces, the vast majority of Forbes 400 (68%) are married to their first spouses, with an average of more than three children. Only 11 (2.7%) have never been married.
  
  
• Wealth isn't inherited, it's earned: Only 74 (18.5%) members of the Forbes 400 inherited their entire fortune, and 56 (14%) inherited at least a portion of their fortune. A large majority (270, or 68%) were entirely self-made billionaires who started from little or nothing. The average net worth of the self-made Forbes 400 is $3.9 billion.
  
  
• Ivy League education isn't essential to making it big: Only 93 (23%) graduated from a top Ivy League school, such as Harvard, Stanford, Yale or Princeton. Many of the super-wealthy are self-made and self-educated.
  

Forbes 400 Richest People: The Most Shocking Change in 26 Years

In the 2007 edition, the magazine looks back on the past 26 years of Forbes 400 lists, and reveals a surprising fact.

For years, based on my research into this list, I made the point that financial independence is usually achieved by creating one's own business, not by steady saving and prudent investing. Wisely managing your money just didn't cut it compared to wisely managing your own business.

Here's what I said two years ago in Investment U [HASHTAG]#475[/HASHTAG] (October 6, 2005):

Every issue of the Forbes 400 repeats the same lesson over and over again: The best way to build financial independence is through your own business Of the Forbes 400, the vast majority (294) made it by working overtime and building great businesses in insurance, oil, technology, consumer products, entertainment and real estate. A larger number (around 40), inherited their wealth, but the inheritances came from successful businesses - David Rockefeller from Standard Oil, the Waltons from Wal-Mart, etc.

But now I'm changing my mind.

I see an unmistakable trend over the past 26 years: In 1982, oil and manufacturing fortunes ruled the first Forbes 400 list, and only 36 of the super-wealth made it in finance. But these days Wall Street is king. More than 100 of the Forbes 400 are from finance and investments!

Granted, many of the financial geniuses made the list by managing money. Forbes columnist Ken Fisher, whose firm now manages $42 billion, is an example. But there's no denying that a prudent investment strategy can grow extremely fast if you consistently beat the market. The Warren Buffett Way can be imitated!

There Are More Self-Made Billionaires In The Forbes 400 Than Ever Before

Over the past 30 years, the origin of the wealth of the richest people in the United States has shifted away from old, inherited money. Our new metric, the self-made scores developed for the Forbes 400, shows that increasingly we find self-made billionaires among the ranks of the richest people in the country. This has accompanied the incredible increase in wealth of the members of the Forbes 400, which has jumped 1,832% times since 1984, when the total net worth of our list was $125 billion, compared with $2.29 trillion today.


The figures show an unequivocal shift from inherited fortunes to self-made fortunes. In 1984, the first year for which we have crunched the numbers, we found that nearly one-fourth of the members of the Forbes 400 inherited their fortunes and weren’t doing anything to grow them. More specifically, 24.75% of the billionaires on our list were ranked as 1s (click here for a breakdown of how our rankings work).


At the same time, only 2.5% were ranked as 10s, or absolute bootstrappers. To qualify as a 10, a member of the Forbes 400 had to have been raised in a poor household, and have endured extreme duress. Oprah Winfrey, who endured sexual abuse, and George Soros, who survived both the Nazi and Communist occupations of Hungary, are great examples.


If we take a broader look, we can see that the percentage of inherited fortunes, including those that have grown substantially at the hands of later generations, represented the majority of the Forbes 400. Counting everyone with scores between 1 and 5, we find 57.25% of the members of the Forbes 400 in 1984, meaning 42.75% made it themselves to varying degrees (scores 6 through 10).


The evolution of absolute self-made fortunes (10s) and inherited, but not growing (1s) in the Forbes 400 from 1984 to 2014

The trend began to break down in 1994, when we saw an equal number of inherited and self-made billionaires, but at the extreme, it was still totally skewed. Our percentage of 1s stood at 17.75%, compared to 3% for 10s (absolutely self-made).


The New Forbes 400 Self-Made Score: From Silver Spooners To Bootstrappers

Since the launch of The Forbes 400, first published in 1982, we’ve been keeping a close tab on the wealthiest people in the U.S. And while we can tell a whole lot about how their fortunes have evolved, this year, for the first time, we decided to delve deeper into one defining characteristic of these billionaires: How far did they climb to make their way to the top?

This year, we gave each member of The Forbes 400 a score on a scale from 1 to 10 — a 1 indicating the fortune was completely inherited, while a 10 was for a Horatio Alger-esque journey. We also did the analysis for every 10 years going back to 1984. Looking at the numbers over time, the data lead us to an interesting insight: in 1984, less than half of people on The Forbes 400 were self-made; today, 69% of the 400 created their own fortunes.

After extensive research and internal discussion, we came up with a set of parameters to determine whether someone was born with a silver spoon, or if he (or she) had to battle wrenching personal and family obstacles to win a spot on our list. At the most basic level, the scores denote who inherited some or all of their fortune (scores 1 through 5) and those who truly made it on their own (6 through 10).

We looked carefully at these billionaires’ upbringing, paying special attention to their parents and their socio-economic status. To merit a score of 10, a member of the Forbes 400 would have to have been born into poverty, or lower middle class, and had to overcome obstacles such as being left an orphan, forced to work low-paying jobs, or faced abuse or discrimination. Oprah Winfrey, who grew up dirt poor, raised alternately by her single mom and her grandmother, and was sexually abused by several male relatives, and George Soros, who survived the Nazi occupation of Budapest, fled Hungary under Communist rule and worked his way through the London School of Economics as a railway porter and a waiter, are prime examples of what a 10 represents.

A score of 1 represents a member of The Forbes 400 who has inherited a fortune and hasn’t actively worked to increase it. Two examples: Christy Walton, who inherited part of the Wal-Mart forune after her husband John (Sam Walton’s son) died; and Laurene Powell Jobs, a philanthropist and activist who has very publicly taken on causes like education reform and immigration policy but who is not working to make herself richer.

Below, see a breakdown of our scores, along with a representative member of The Forbes 400 for each score. In every member of the Forbes 400′s online profile page, you’ll be able to find their individual self-made score. These provide a good window from which to draw conclusions about the evolution of wealth in the U.S. Over the past 30 years, the number of Forbes 400 members who forges their own path, using entrepreneurial capitalism as a means to attain a vast fortune, has increased dramatically. This tells us many things, but one should stand taller than the rest: the American Dream, it seems, is alive and well.

1: Inherited fortune but not working to increase it: Laurene Powell Jobs

2: Inherited fortune and has a role managing it: Forrest Mars Jr.

3: Inherited fortune and helping to increase it marginally: Penny Pritzker

4: Inherited fortune and increasing it in a meaningful way: Henry Ross Perot Jr.

5: Inherited small or medium-size business and made it into a ten-digit fortune: Donald Trump

6: Hired or hands-off investor who didn’t create the business: Meg Whitman

7: Self-made who got a head start from wealthy parents and moneyed background: Rupert Murdoch

8: Self-made who came from a middle- or upper-middle-class background: Mark Zuckerberg

9: Self-made who came from a largely working-class background; rose from little to nothing: Eddie Lampert

10: Self-made who not only grew up poor but also overcame significant obstacles: Oprah Winfrey

 

[codo3500]

Through developments mainly. Building an apartment building = big money. These people aren't real estate geniuses, what they're actually brilliant at is raising money - that's the hardest part in all of this. Plus knowing the right people to get the right building permits - these people know how to sell themselves and their vision.

 

[IceCreamKid]

Apartments are way easier than sfh. David Limbaugh has some affordable training classes and books that can help you.

Thanks for your input, Kassandra. I've read so many books on apartments and spent thousands of dollars on training classes which sadly ended up being nothing more than an upsell to more expensive classes, I no longer see the point in reading more stuff unless I'm taking action at the same time.

My biggest issue with learning from training classes is that they often give you the "best case scenarios" that rarely exist in the real world. Ask me how I know this...lol

Just knowing that the majority of seller's statements are cooked up pro-formas helps a great deal. I have rarely found something an apartment seller sent me to be accurate. Nothing beats real-world experience and knowing how to roll the rocks over to see what critters are hiding under them.

then find a good group.

I think this is a very wise path to take. Just gotta make sure it's not a group whose only focus is to stay in the seminar circuit. Back when I was a young ice creamer, I would drive 40 minutes just to play that Cashflow 101 board game with a real estate group...I stopped when I realized that no one there actually had any intention to invest in the real world, they just wanted to play the board game.

 

[JustAskBenWhy]

OPM - Other People's Money leveraged...there's your answer

 

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[RHL]

How do people start with nothing and end up billionaires in real estate? ... It seems like you would need a massive amount of liquid cash to invest which these rags to riches examples just did not have. Is there other Real estate niches that I am missing?

Something to remember is that the housing bubble has come and gone. A lot of the people you meet today (or, at least, that I meet) who are worth 10+M got rich in houses at a time when anyone hard-dealing and willing to grind it out, with a lot of seed money or investor-grabbing skills, could do it. The market is not the same today. You can still get rich, but it's like building a website. A website can make you a millionaire, maybe even a billionaire. But it's not going to happen 15% of the time like it did in 1998. Same with housing-make sure that the advice you're getting is advice that works today, not 9 years ago.

 

[codo3500]

Thanks for the reply. How does someone even get started in the right direction with something like that.

They start small. My best friend buys large lots with one home on them, then buys a portable house, and puts it on the other half of the lot. It's training him in dealing with councils, while making him a good chunk of money. Once he has some of these under his belt, he'll do a small unit complex - and once you've pulled that off, you have a solid enough track record to attract the right kind of investment for an apartment building.

The other way, is to finance most of it with the apartments sold off-the-plan. I've seen guys sell 80% before starting development, totally covers costs. They need to acquire the land prior to doing this however, and it's normally prime real-estate. Solicitors bills and council approvals stack up too.

 

[vinylawesome]

Sam Zell and the Art of Motorcycle Maintenance
Real Estate Tycoon examines the Market's Past, Present and Future

"Sam Zell, the renegade equity management mogul who earned his BA and JD from U-M during the 1960s, returned to Ann Arbor last Thursday to share his insights on the real estate industry with a crowd of B-school students and local developers. The man ranked 96th on Forbes' list of the wealthiest Americans offered his version of the history of the U.S. real estate industry, his views on its future, and glimpses of the business philosophy that made him a near-billionaire. (Now a Billionaire).

Until the late `60s, according to Zell, the U.S. real estate industry was the domain of a small, exclusive club of entrepreneurs who used tremendous leverage and long-term, fixed-rate, non-recourse, self-amortizing debt to create massive amounts of wealth. As the value of this circle's real estate increased, the present value of their debt instrument decreased, resulting in extraordinary gains. In 1969, Wall Street tried to grab a piece of the pie by creating the Real Estate Investment Trust, which was designed to finance short-term mortgages. What ensued was a major building boom, as investors tried to replicate the early developers' success.

Zell, who had bought an apartment complex in Orlando, FL, found himself in the middle of the maelstrom. By 1973, a dozen competing apartment projects were erected in the neighborhood: occupancy in his building dropped from 100 percent to 68; revenues of $10,000 a month became losses of $10,000 a month. But rather than throwing in the towel, Zell turned the situation into an opportunity.

That year, Zell put his immediate property business on hold. "I spent nine months preparing for what I thought was the single greatest opportunity in history to buy real estate," he said. "What I saw was a scenario where the banks and the insurance companies would be very amenable to restructuring troubled deals." He and his partner, TK Lurie, set a goal of $50 million in five years -- and due in part to the inflation created during Jimmy Carter's presidency, they greatly exceeded their target.

Industry analysts called Zell and Lurie geniuses at picking real estate investments; Zell sees it differently. In effect, he explained, "we created a massive arbitrage. We went out and we bought $3 billion of real estate; we financed it by restructuring the existing debt with an average interest rate of 5 percent in an environment where inflation was 9 percent. So what we really accomplished was this 4 percent spread on $3 billion over an extended period of time." As a result, Zell's company came out of the `70s as one of the largest owners of property in America.

In 1980, Zell reevaluated the then-overpopulated real estate market and concluded it was time to move on. He and Lurie spent the next seven or eight years "doing corporate deals and watching the real estate market." What they witnessed was "an orgy of overdevelopment truly unparalleled at this time in our history." Zell identified three factors that caused the glut.

First, a slew of new players entered the real estate market hoping to capitalize on the seemingly inexorably increasing value of property. Pension funds, insurance companies, and S&Ls shifted huge amounts of capital into the market -- somewhere in the neighborhood of $100 billion a year. In the mid-80s, Japanese investors, buoyed by the resurgent yen, poured $200-300 billion more into the already bloated market. It was, according to Zell, "a classic case of oversupply, of much too much money chasing too few opportunities."

A second factor contributing to the oversupply was a new way of thinking about real estate development: Investors dreamt up the concept of "segmentation" in order to justify new construction in an already saturated market. Developers would build a non-smoking hotel, for instance, Zell said, in an area where existing hotels were struggling to maintain high enough occupancy rates to stay in business.

The third reason for the overdevelopment, Zell said, was the advent of the HP 12 -- "one of the most wicked instruments that has ever been created in the real estate world." The revolutionary new calculator allowed aspiring developers to "do projections, on pretty paper with pretty lines," Zell said. The machine created "a world full of MBAs in windowless rooms on Wall Street playing with their HP 12s and coming up with economic justifications for what they were suggesting somebody else do with somebody else's money. This was truly a disaster. (For those of you who don't know what an MBA is: an MBA is somebody who knows how to do the numbers but doesn't know what they mean.)"

What resulted was "the substitution of an understanding of real estate for a set of numbers," or, in other words, "the extraordinary commoditization of what is in itself a truly unique business," he added. "Every single piece of property is unique. Every single piece of property has individual characteristics. The key to understanding real estate is to understand that it is a local business. And that commoditization of real estate was another way of shoving risk under the table."

When the 1990s arrived, the real estate industry entered a "period of despair," Zell said. Unused properties were ubiquitous: Zell calculated that all the vacant real estate space in America had a value "larger than what [the country] had borrowed offshore that year to fund the deficit.... We as an industry had literally committed hundreds of billions of dollars to nonproductive usages. And we had done so because the promise was: build it today because it will cost more tomorrow... not because there's any economic justification."

The effects on the economy were devastating. The greatest losses occurred among the banking institutions. Every major lender in the U.S. was on the ropes in 1990; Citibank almost went broke, while Bank of New England and Bank of Boston went under.

"[The real estate industry] reached a secular top in 1980 or 1981," Zell said. "Since 1981, we have been, and will continue to be through the beginning of the next century, in a secular deflationary trend."

What does this mean for the future? The way Zell sees it, there will be a major shift away from wild speculation. "We have to go from building for future demand to building for pent-up demand," he explained. "I think we're going to see a reintroduction of discipline, of supply and demand really governing what's going on.

"I think we're going to see the real estate industry no longer being treated as non-correletary. And as a result, real estate is going to have to compete for capital with all other forms of investment," added Zell, whose Equity Financial and Management Company is the largest owner of office space in America. "Ultimately, real estate is a business that revolves around access to capital, and access to capital in the future is going to be much more disciplined.... The industry is likely to be more stable, have fewer players, have lower velocity, and look a lot more like commercial real estate everywhere else in the [world]."

The industry also promises to be less entrepreneurial. "I view myself as somewhat of a dinosaur," he said, "having been around at perhaps some of the most unique times, where enormous leverage was available on a non-recourse basis.... Those days are over and are unlikely to return."

There are opportunities available in the real estate market these days, Zell said, but they are "lower-leveraged opportunities, less on the building side and much more on intelligent management and figuring out ways that the owner of real estate could benefit, particularly from the telecommunications revolution that's going on.... Some of you out there will even be more creative in the future and find ways to develop auxiliary income and leverage the position of the owner."

"Real estate is a fascinating field; it's challenging intellectually, it's creative, and it's very fulfilling.... The future is bright," he said. "But it's a field that requires that everybody everyday recognizes the fact that they need to be afraid, they need to be concerned, they need to not believe what comes out of a computer."

As for the secret to his success, Zell said there was "no substitute for working your a$$ off, understanding risk, understanding reward, being honorable and consistent, which means that people always want to do a second transaction with you." He attributed some of the success to luck and good timing, and some to his natural ability "to understand and observe my circumstances and the world I live in relatively without emotions."

When asked the value of his U-M legal education, Zell said that although he "didn't remember shit from law school," the experience was "an extraordinary asset" because "it taught me to think, it taught me how to deal with problems."

Source: http://www.umich.edu/~msjrnl/backmsj/110695/zell.html

 

[Jakawan]

Thanks for the reply. How does someone even get started in the right direction with something like that.

One house at a time. And you CAN'T do it alone.
Whatever city you're in, there is most likely a real estate investor association. Go there, become known. Meet people. Eventually you will learn who the big players are, and who the groupies that just like to hang out and feel important are..

Do you really need to be a billionaire? I used to chase cars and big houses... the older I get, the less important all those flashy items seem. Peace of mind and stress relief, happiness, gratitude and making others happy is much more fulfilling. Enjoying the little things in life like.. coffee, grilling, extra aged Dominican Rum, cruises, good company.. lol

Anyways... if you have a war chest, go talk to a small local bank. Ask to talk to a senior banker about investing in rental property.
Bring your financial statement and balance sheet and tell him you want to buy a rent house. Learn the process of leasing, tenant screening, etc so that you can teach it later. Once one is good and going paying on time, buy another, and another... my roommate spoke to a millionaire last week that told him he started with single family homes. He had to use hard money.. high interest crap to get loans at first and bought houses that weren't necessarily deals because he just wanted to get in the game so badly. He bought 7 houses his first year, 4 the next, and 4 the year after that... the 4th year EXPLODED... now he owns apartments, multi-units, over 100 houses.. flips several houses a month that make chunks he's of $10k-$30k each with the occasional $40k-$50k check... now banks call him asking for business.. He could get into commercial at this point, or keep going as what he's doing is providing a great life for him and his family....

I know another guy that owns over 1000 units in apartment complexes.. he started with one house. then another. Then another. Then another. Then he got a mentor and started partnering on apartment complexes. He is now selling his shares in apartments and moving into franchising a nationwide property management company. Fastlane, own nothing, control everything.

I know another guy that makes 6 figures flipping houses.. he wouldn't be able to do it without his private lenders and partners that basically give him a blank checkbook and trust him. But he had to become the person that people trust and believe in before that could happen.

Think of your end goal. where do you really want to be, and why. Is it really what you want? If so.. who can help you get there? Next.. who do you have to become? Get to work son.

 

[Envision]

My mentor and current employer own a holdings company that is worth tens of millions of dollars and it is 100% owned by them. Here is how you become a billionaire.

-They scaled a business (insurance) from nothing to tens of millions of dollars over the course of 20+ years. They were approached with a buyout offer and took it while still being employed by the company.

-They had already started buying large commercial properties in a unique niche while owning the company

-Then they self funded a holdings company to manage and grow the portfolio of large commercial properties. Essentially spending millions of dollars over the course of 5 years never seeing a dime while building infrastructure and acquiring assets that they calculated would one day turn a profit.

- 5 Years later (today) they own 8 of these commercial properties that are 100% in their control. The key to there growth was the sale of their company and starting in 2008.

- The idea of this is to build the portfolio to a level where the company can not only sustain itself (covering all costs), but it can grow itself (buy more assets) AND pay you.

-Then time and compounding kick in, once it can do those three things you have a system that support itself, can grow, and allow you to live an incredible life.

-30-50 years later - 150 commercial properties valued at $1B and there ya go.

Most people go wrong when they cyphen their money out of there real estate or business to live on for short term gains while crippling their business. In this case, they worked two jobs, spent millions of dollars on infrastructure and will continue to work until it can do the three things listed above. This is the time component.

The best thing about real estate is that it can be calculated and controlled. When you understand what it costs to acquire an asset, what your assets can produce in income then its a simple equation of getting your portfolio to a level where it can sustain and grow itself.

Let's break this down on a smaller scale:

I househacked a duplex, it cost me 155k and once I move out it will net me $300/month. I refinanced it to a 20% traditional loan and freed up my FHA loan. Now I can go out and house hack another duplex. (2016)

I know in my market that I can buy duplexs for $150-180k and they will cash flow $100-350/month net if the numbers are right.

Well my costs to purchase a duplex in that range (150-180k) with an FHA loan are about $15k. So I save and buy a second duplex . (2017)

Now, i cash flow $300/month on one property, ill make $3600 in that year. I work a job and Ill pull another $12k from that and ill buy a third duplex (2017/8).

Now I have two properties making $7200/year while im living for free. Ideally, I would have started a fastlane business for more income and still work my job to continue scaling the real estate. This is like trying to kickstart a machine and you are the main component until your machine is able to turn on its own.

And to be honest, to get to the level that some of these people are at they dont pay themselves, theyd rather see their net worth grow than there current income.

This is really practical, anyone can do it, and ideally it would compound. Rather than doing it with a bunch of duplex's you end up scaling into 4plexs or larger.

 

[jon.a]

With 50k cash how far do you think someone could go? High millions?

zero.

It's much more than just money.
You're still asking the wrong questions.

 

[Kid Money]

Kind of funny as I was searching the forum for and threads on "importing" and someone had mentioned it but this is a real estate thread. Coincidence as my brother just called me and just made some dough on a RE transaction. To answer this and not speculate. My brother is not a Billionaire but he is a Millionaire. Here is exactly what he did. He built a construction business that made him millions.

He then bought properties, a flip home, and a 4000 SF house all cash. These properties were all almost diamonds in the ruff. Every single property that he bought was worth mega more than he paid. He paid $345,000 CASH for the big house (was not on the market and had weeds above the windows) and lived in it. He did not get comfy and say "Ahhh, I made it. It is time to be comfy and never get off my a$$ again". That big house that he bought- Lady is putting in an offer for $700,000 tomorrow. It is on 10 acres but she is only buying 5 with the house. He is 100% buying a Lamborghini in March when the weather gets better. He is keeping the other 5 acres and can sell it or build another on it. Listen, my brother is an all time hustling/grinding MF. It took him almost 8 years of living in a tiny house, failing miserably,etc. EIGHT YEARS of never giving up.

We are construction by trade so can do everything ourselves. My dad built his own 3500 SF house with his own hands from the basement to the drywall to the roof. Basically the moral of the story is- if you are using your own money. Go search for those deals. Cash is KING. I do not know an billionaire in RE but I do know a billionaire. He pulled his family around in a cargo trailer from oil site to oil site for the first year and eventually sold his company which is one of the biggest to ever be created in the oil/energy services. Everything starts from nothing. Figure out how to get cash, invest wisely, pivot and tweak as needed, scale to the moon.

-KM

 

[InLikeFlint]

I actually don't feel like I have heard many stories at all of people making billions from nothing in RE. I think it is more common to hear of a successful individual using money they made elsewhere to invest in RE and then making a lot from that. But the key to that is a large initial investment.

Honestly you could pick a billionaire in any industry and say that you will do what they did to become wealthy, but if it was that easy wouldn't the world be full of thousands of Apples/Microsofts/Johnson&Johnson/Hewlett Packards?

Based on your previous threads I think you need to pick something and stick with it for more than a couple days.

Quit trying to exploit someone else's path to success and burn your own trail. The satisfaction will be far greater.

 

[JustAskBenWhy]

Ben,

Welcome! I read your posts on BiggerPockets!

hahah - Thanks indeed!

It's like BP is the primary residence, and Fastlane is quickly becoming the often visited lake house

 

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[ArthurDayne]

I'm not an expert in real estate but I am very knowledgeable about paper assets.

The thing that sets real estate apart from paper assets is the much greater ability to use leverage. Leverage, as you've mentioned, is the answer. This is the reason why you've read about so many real estate tycoons having gone bankrupt in the past.

Another thing about real estate that makes it more able to create billionaires is its lack of transparency. Knowing people pays off in this business more than the liquid (and relatively fair) currency and equity markets. So experience and a history of deals tends to compound on itself as you build relationships and get more and more access to exclusive deals. Building permits is a perfect example of this at work.

 

[D11FYY]

Read Manny Khoshbins book and Rich Dad Poor Dad these are not Bibles but will give you a better understanding.

I recommend Chris that you find something and stick with it for more than a month I know its hard but try focus on one at a time. Is the old saying he who chases two rabbits ends up with none?
I would however recommend if you do have a good bit of cash to invest in a few propertys.

 

[vinylawesome]

http://www.forbes.com/sites/erincar...sch-the-billionaire-king-of-high-yield-reits/

This guy did it through leverage, scale, and OPM.

"Schorsch has long been driven to succeed. At high school in Philadelphia, his senior project was revamping a division of his father’s metals fabrication business with his older brother Peter, then 21. Schorsch ran the plants; Peter was the front man in charge of marketing and business development. Schorsch dropped out of college but continued to read voraciously about business. By 23 he was on to another company, Thermal Reduction. It made 16 kinds of protective anodes when Schorsch started out. When he sold it a decade later in 1994 for just over $10 million, Thermal Reduction made 1,200 different anodes."

"His big-league break came in 2002, when he met Lew Ranieri, the former Salomon Bros. trader made famous in Michael Lewis’ Liar’s Poker for inventing the mortgage-backed securities business. The men agreed to turn Schorsch’s bank-branch real estate into a REIT and take it public. With Ranieri’s connections, they raised about $400 million from private investors in 2002 and another $804 million from the REIT’s IPO on the New York Stock Exchange in June 2003. American Financial Realty Trust (ticker: AFR) was soon a prominent, $2 billion market cap specialty REIT and the only one focused exclusively on real estate for financial institutions."

 

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[DeletedUser394]

In your case, I wouldn't do real estate. I'd start an import business.

Yeah, but how long until I can get to 10 million doing importing?

 

[DreamsCameTrue]

There's some books on real estate development you could check out. It talks about all the steps. It's really not rocket science. I have made some money in RE, but not in development. Still I will pass along a few things I know-

It's all about building huge buildings or housing developments. 100+ unit apartment buildings, commercial buildings, office buildings, etc. It's not about buying SFRs, flipping, or building one or two homes. Those strategies are smaller safer plays. They won't make billions.

The kinds of financers that get into this are called "institutional lenders." Basically it's stuff like retirement funds etc. Thousands of folks who have pooled their retirement funds get into multipple investments, sometimes including RE development.

There's tons of paperwork, permitting, politicking, and networking involved. You've got to develop a track record (not sure how). And you might need to know city council type people. You also have to satisfy NIMBY people who don't want the construction noise.

Overall I think it's a great play if you're willing to do the work.

 

[TG_Hawk]

Like most folks have stated, the quickest way up is through leverage. Raising money is the most essential ingredient to becoming a real estate behemoth. Also, you'll never get there in residential real estate, you have to be in commercial. You can syndicate deals and earn an equity stake with none of your own money in the deal. Obviously, that won't happen on your first deal as it is a byproduct of a proven track record an money partners who trust you.

Here's how Stan Kroenke did it. Simple but not easy...

"He partnered with Missouri real estate developer Raul Walter to build out more than a dozen malls in the Midwest. They implemented what would become Kroenke’s basic, and wildly successful, business model: Buy huge parcels of relatively cheap land, build an anchor store, then watch the surrounding real estate exponentially increase in value.”

Today he's worth over $7B, is the 7th largest landowner in the United States, and owns 5 professional sports teams.

https://www.washingtonpost.com/news...oenke-besides-the-most-hated-man-in-st-louis/

 

[Ninjakid]

Read about a real estate billionaire, and you'll did that they own multiple hotels, skyscrapers, apartment buildings and other buildings like that which has a lot of people constantly going through the doors, and a lot of people renting.

McDonalds could also be considered a real estate business, and one could say that Ray Kroc made his fortune off real estate. Their business model dictates that they make their money via franchising.

Someone mentioned earlier on this thread that it's about owning a bunch of stuff, not flipping.

But anyways, real estate is tough as it is. To become a billionaire is going require a lot of big investments, risks, stress, hair pulling out etc etc. I think it's more about being bold though, and not as much about intelligence; although both definitely help.

Source: I have no experience in real estate, I just know from what I've read, and what I've seen, but I hope my comment helped

 

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[jazb]

Build skyscrapers. Even if you knew how to get one built, you need the huge financial backing. you would need a killer track record (like a decade of ever expanding projects). and the ability to sell ice to the Eskimos.

 

[jon.a]

I have no debt.
I have a nest egg.
And my expenses are low.
I already do flip cars... It is a hustle, not a business or wealth building vehicle.

In your case, I wouldn't do real estate. I'd start an import business.

 

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[KassandraTB]

Get yourself a bulk cash strategy and a cashflow strategy.

For example, my primary biz which isn't RE related generates the bulk cash.

I use that bulk cash to buy single family homes that I rent out for cashflow. I wouldn't recommend buying SFH's though, it's not fastlane. I only do SFH right now because I'm not sophisticated enough in RE to get into apartments right now. My ultimate goal is to end up buying distressed apartments that I re-stabilize. The time will come soon.

I like old school business models that are tried and true. No need to re-invent the wheel when there are so many proven models that you can follow.

Apartments are way easier than sfh. David Limbaugh has some affordable training classes and books that can help you. also just do a lot of Google searches on apartment syndication. then find a good group. Because I'm a business owner I like to invest in apartments cause I no longer have to do the work. I just wait for my quarterly check.

Sent from my HTC One_M8 using Tapatalk

 

[KassandraTB]

Oh yes! Similar cash flow stories. you have to understand the people. All about relationships. If we can't do that, the it is stock and paper assets. Also gotta match everything to the goals. A lot of my clients miss that point.

Sent from my HTC One_M8 using Tapatalk

 

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[KassandraTB]

It boils down to just starting something, gain momentum, and diversify in things that do returns with little time taken. This allows you the time to make it keep growing to hit the mark. But you have to start something to gain momentum. I do real estate and a property management business. As it hits so much cash I put it in real estate or hard money it out. Now I have a good nest egg and live on the cash flow. My next step is to skyrocket!

 

[MoneyDoc]

My uncle deals in real estate in a big way, tens of millions. He owns several hotels, commercial office buildings, and condos around Toronto. He did not start in real estate, however. He started with an Import & Export company and used the funds for real estate.

 

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