I've known many who accumulated very substantial wealth this way. From perhaps 5 to 80 mil or more. They were consumate business people and entrepreneurs and not only had deep and broad "business" knowledge of all areas of R/E they were involved in, and more, but developed "excellent instincts" which can only happen with experience and so forth. They were all 24/7 business owners that did not "retire".I know that a lot of real estate deals don't pencil - especially primary residences. But I''ve made a lot of money on my personal residences - my current home is worth around $1m and is paid off. All possible by doing smart renovations, in the right neighborhoods, then downsizing and moving from HCOL to LCOL area - but it's not money that I have easy access to of course. People on here always say it's not an asset, but in my mind it is- it can eventually be sold and the proceeds used to pay for long term care, rent, whatever I need later on, on top of my other money. That $1m may do better in the market, but I have to live somewhere and I like having a nice house.
I have a good friend (40) who owns 35 rental houses. He had a traditional job until about 10 years ago. He "flipped" his first house, then kept moving up and had started flipping high end houses and would make $100k on each house, each of which took about 9 months to do. Then he got into building houses for high end clients and quit his job. He eventually started buying basic rental houses, now each of those bring in around $1500-1800 per month. He also has started doing commercial real estate like apartments, strip centers, and light industrial. He has stopped building for clients, as it was too stressful and not lucrative enough. We have discussed his finances, he said if everything was sold and all debt paid off he would be worth $10m. He said he has very little in cash/retirement savings because it's not a world he understands, he only understands real estate. His plan is to get a narrowed down portfolio of paid off real estate that pays his monthly expenses in order to retire.
When my own parents retired, they bought two beach condos to use as rentals. They made just enough to cover expenses, so they never really made money on them, but when they sold them after 20 years they had higher 6 figures in equity out of them. The rentals brought in income they wouldn't have normally had, even though it was a net zero since it was paying down debt, etc. Not sure how they could have built that addition to their net worth without that rental income. The rest of their money is typical BH - retirement accounts, brokerage account, conservative primary residence.
The "wealthiest" fellow drove a pickup truck and wore jeans and an aloha shirt all the time. (Sam Walton?) He owned a city block of apartment buildings and high rises. He started from nothing after WWII.
From several mentors that I have had:
If getting wealthy (millions) in R/E was easy, everyone would do it.
If being "smart" was all that was needed in accumulating substantial wealth (over 20 million), then all the "smart people" like University PhD's, scholars, bank executive employees, etc, would be doing so. (poor english translation of what was said by my (rags to riches) grandmother.
"Land is the basis of wealth" (meaning 20 mil plus) (from several R/E developer/investor "old timers").
Thanks for sharing the real life story.
It is a classic story from the book, "Millionaire Next Door".
worked out well for your friend "but not for everyone".
dis laimer:
zillions of opinions on things based on real life experience or none on many things and onions.
j
Statistics: Posted by Sandtrap — Thu Apr 25, 2024 7:54 am — Replies 111 — Views 14263