Personal Finance

Sorry, But Investing in Rentals Won’t Build Massive Wealth. THIS Will.

Expertise: Business Management, Landlording & Rental Properties, Personal Finance, Personal Development
65 Articles Written
Closeup fashion image of luxury watch worn by male in gray suit

You may remember an article I wrote a while back regarding what being a CPA has taught me about becoming a millionaire. I wrote that article because I am able to peer into the lives of financially successful men and women. In doing so, I've noticed trends in habits that these people possess and I wanted to share that with the world.

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Since writing that article, I have continued identifying similarities among my most financially successful clients. I do this by harnessing my natural curiosity and turning tax calls into wealth-building Q&As. (Yes, sometimes I get too excited and forget that the client is calling ME for advice and not the other way around.)

Regardless, I want to share with you a revelation I have identified that honestly is not surprising, shocking, or head-turning. But it does go against the grain of what is constantly preached on BiggerPockets.

Ready for it?

Investing in rental properties will not be what generates your massive wealth.

There it is. I said it. If you want to generate massive wealth—I’m talking Grant Cardone levels of wealth (OK, maybe not that much)—rental properties will not be your primary driver of such financial growth. Let me explain why.

Investing in Rental Properties to Build Wealth Is Too Slow

I can't tell you how many people come to me saying that they want to cash flow $10,000 per month. That's an awesome goal, and there's nothing wrong with it—except for the fact that you'll need to invest roughly $800,000 (that's equity, not market value) of cash to achieve that level of cash flow.

Yes, $800,000!

How long will it take you to save up $800,000? Years probably, maybe even a lifetime.

And that's the problem with rentals. They simply don't cash flow enough to generate massive wealth.

You may say that you can buy property at discounted rates, rehab, rent, refinance, and repeat. But we’re still looking at a long—very long, in fact—path to massive wealth generation.

The problem as I see it is scalability. You simply can’t scale a rental portfolio the way you can a business. It requires too much capital, too much planning and overhead, and too much time.

Sure, Rich Dad says that investing in rentals puts you in the correct “Cash Flow Quadrant,” but they don’t tell you that it’s going to take years—maybe even decades—of portfolio-building to create a solid stream of income that guarantees financial independence. They don’t tell you that you must painfully save to buy one rental property per year, which adds only $6,000 to your annual bottom line.

starting-real-estate-investing

No one talks about how darn slow investing in rental properties will build your wealth. People only talk about how awesome rental properties are, mainly because they have something to sell you. And that something requires you to buy rental properties.

Turnkey companies are one of the worst abusers of selling you the dream of owning rental property. There are great ones out there, but they aren't building a rental portfolio for themselves. They are building a business that sells the idea of owning rentals for long-term wealth to you!

If the companies claiming that rentals will build massive wealth for you aren’t buying rentals for themselves, what does that say about the product they are selling?

I feel sorry for the folks who have multi-million dollar net worth goals and think rentals will get them there quickly. It's just not going to happen.

But I Never Said It’s Bad to Invest in Rentals

Now, I never said to avoid investing in rentals. And yes, the prior paragraph was intended to stir emotions so that I have your attention for the rest of the article. What I really want to do is encourage you to change your mindset.

I originally thought that scaling a rental portfolio was my ticket out of the corporate world. So I bought a three-unit property and was super excited about adding another income stream to my life. After that purchase, I was making an additional $700 per month.

The only problem was that I had tapped out my savings. So, I needed to save another $30,000 to buy another three-unit to increase my income by another $700 per month. Assuming I could do this once per year, I calculated that I could leave my corporate job in roughly 10 years.

Related: A Look at the Rewards, Risks & Rules for Investing in Rural Rental Properties

Ten years?! That is way too long. True, it was a faster wealth-building formula than keeping my day job as my sole income stream, but it was just way too slow for me in terms of wealth-building.

I have since switched my mindset to growing my income and wealth in other ways. While I now own six units and want to continue to scale my portfolio, I decided that rental properties should act as a supplement to my primary wealth-building strategy.

Too many people think investing in rental properties will save their finances. They think that they can grow a portfolio and drastically increase their wealth in only a few short years. While it’s true that rentals are a fantastic source of additional income, don’t expect financial miracles.

To feel completely and utterly financially free will require a ton of work, a hard lesson about spending habits, and plenty of time. If you want to diversify your income streams, make yourself less susceptible to economic downturns and reap tax benefits, then rentals are still one of the best assets you can invest in.

But you need to understand what “investing” means. Investing is meant to be slow and deliberate—a steady increase to your overall net worth. Investing is not fast-paced, nor is it speculative.

Unfortunately, slow and steady rarely allows you to build massive wealth. That’s my overall point here. Investing in rentals is a great play, but it’s slow and deliberate. Anyone can attest to that.

What to Do Instead

If rentals aren’t the answer to generating massive wealth, what is?

After speaking with my wealthiest clients, all of whom own vast rental portfolios, it became obvious that none of them made the bulk of their wealth with rental properties. Literally zero of my wealthiest clients utilized rental real estate as a means to build their massive wealth.

hiring-virtual-assistant

Instead, they invest in rental real estate to diversify their income streams and continue building the wealth they already have at high rates. Investing in rentals came after, or was secondary to, building out a large net worth through other means.

Instead, here’s how they built their foundational wealth:

  1. They started, ran, and sold a business or multiple businesses.
  2. They were in a sales job that allowed them to quickly grow their income.
  3. They worked their way into a high-compensation job that always involved stock options.

True, there have been “investors” who used rental properties to build massive wealth. Some are even consistent contributors on BiggerPockets. But I’m arguing that they are building and scaling a business. They are raising capital, putting no money down, running multiple projects at once, hiring a team, and operating a full-scale business.

That is definitely not investing. Rentals are their product, and they are building a business around that product. That’s quite different than buying one or two rental properties per year.

Building a business will build wealth quickly. When you make a sale, not only do you get the cash flow from that sale, but your net worth also increases. Why? Businesses are valued in many different ways, commonly a multiple of gross revenues or net earnings.

CPA firms, for example, are often valued at 1.1 to 1.2 of gross revenues. So, if I add $10,000 in revenue to my business, not only do I keep 50 to 60 percent of that as hard cash flow, but I’ve also increased my net worth by $11,000 to $12,000, because I can theoretically sell that stream of revenue.

Anytime you read an article on BiggerPockets, ask yourself how the author is making money. Most of the authors here are running a business in the real estate industry. They are not taking a passive role by “investing” in real estate.

Look at BiggerPockets in general. They make money by providing a platform and resources for investors to talk about investing and building their net worth. Josh Dorkin, the founder, originally started BiggerPockets to ask questions about his own real estate investing. Once he realized the goldmine he was sitting on, do you think he really cared about aggressively building out his real estate investments? No!

And he would have been foolish if he had. He needed to spend his time and energy on growing a business, one that will generate massive foundational wealth. And he’s done a darn good job.

My point is that if you salivate (like I do) when you read articles or books about generating massive wealth and you are not running a business, you need a harsh reality check. I was there once, and I left one of the biggest accounting firms in the world to strike out on my own. I knew from a wealth-building perspective, it was more risky to stay in my “secure” Big 4 job than it was to build something on my own.

The great news is that building a business isn’t the only way to generate massive wealth. You can also do so via a sales or high-earning W-2 job. High earning, by the way, means $500K-plus. While a $250K salary is great, they are a dime a dozen among real estate investors.

The only problem with a sales or high-income job is that you cannot eventually sell your income stream. You have to focus on saving your net earnings or carefully exercising your stock options in order to build wealth. Compare that to the business owner who essentially “double dips” when they make a sale due to saving the cash flow and increasing the overall value of their business.

lender-negotiating

Related: 12 Reasons Why Rental Properties Are the Best Investment

What’s the Point of Telling You All of This?

Too many brilliant minds are sitting in dead-end jobs because they are too scared to take a leap.

Imagine if 100% of all the brilliant, or even halfway brilliant, people took a chance at striking it out on their own and creating something. What would our world look like? How fast would amazing innovations occur? These are questions I sadly ponder as I think about some of the friends I made during my corporate career—brilliant people who definitely have what it takes to start and run a business but are content with their bi-monthly paycheck and not-that-fulfilling job.

Content. That’s a scary word. The only word that is scarier is mediocre.

Literally every person reading this article has the capability to start and scale a business. How do I know? You’re clearly interested in building wealth and improving your situation. You have tapped into the drive that many fail to ever find. Otherwise, you wouldn’t be on this site.

Start a business. Create something that people value, and learn how to deliver more than their expectations. You will live a truly satisfying life and will build an amazing legacy for your children and their children.

Your business can even be real estate-related, such as a brokerage, development, or private equity firm. It can be a supplement to real estate, such as a CPA, law, cleaning, or other services firm. You can start the majority of these businesses with a minimal investment, and you can even run them on the side of your day job!

But you must start some sort of business that you can later sell if you want to achieve massive wealth.

If you don’t have business-building in you, then focus on investing in real estate. But do it with a business mindset. Refuse to be satisfied with a 12% IRR. Aim higher—much higher.

Get creative in your real estate investing, and soon you’ll find that you’re running a real estate business under the guise of investing. You’ll crush it and be surprised by how far you can go in so little time.

Building out a rental portfolio, in my opinion, is an excellent way to build wealth. But to achieve lofty goals of massive wealth and true financial freedom without waiting decades to "get there," you must build a business.

Summary

Investing in rental properties is a great way to build wealth, but it’s still relatively slow. Instead, start, scale, and sell a business to generate foundational wealth. That business can be real estate-related. Just tap into your current wealth of knowledge and get started.

My wealthiest clients made their wealth through high-income W-2 jobs, sales positions, or owning and selling a business. They then moved that wealth into real estate to create a consistent income stream and enjoy true financial freedom.

Many of these people live within their means and are not necessarily extravagant. You probably wouldn’t recognize that they are wealthy if you passed them on the street. But their wealth will outlast them and likely their next generation.

Investing in real estate should be slow and deliberate. It should be a focus but only a supplement to your source of wealth-building. Do not fall into the trap of thinking that investing in rentals will provide you with true financial freedom in a small number of years.

Do you agree with this assessment—or do you think rentals are a feasible way to build massive wealth relatively quickly?

Weigh in with your opinions below!

Brandon Hall is a CPA and owner of The Real Estate CPA. Brandon assists investors with Tax Strategy through customized planning and
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    Sam
    Replied over 2 years ago
    Finally an article on BP that is the truth. 100% spot on in his analysis.
    Tae Rose
    Replied about 2 months ago
    100% Agree! Thanks for highlighting this article again!
    Cesar Arturo Rental Property Investor from Naperville, IL
    Replied about 2 years ago
    Yes, completely agree with SAM – finally a close to reality article! Appreciate you taking the time to ‘clarify it’ – thanks
    Michael Bishop from Austin, TX
    Replied about 2 years ago
    I like your point on how people successfully building wealth by “investing in real estate” aren’t actually investing in real estate, but rather running a business by building a team, using OPM, etc. I think that a lot of these folks may not even realize that truth, which may be a reason why it’s talked about as “investing” more than it is running a business. I also like that you repeatedly (and deliberately, I assume) used the word “wealth,” as you can certainly make good money by investing in rental properties or even replace your W2 income (especially if it’s not that high), but WEALTH is a completely different ball game.
    Marshall Daniels from Medford, Massachusetts
    Replied about 2 years ago
    Great article. Considering the alternative, I would argue that being financially independent within 10 years is not too slow. There is no quick fix… for the average person (and that’s what most of us are)…. being able to invest and becoming wealthy enough to step away from a bi-weekly paycheck within a decade is what should be expected. This isn’t easy… it doesn’t happen overnight. Its a slow process. There are tough times. I think the article highlights a lot of things that are often overlooked when people talk about rental property ownership.
    Martin Rodriguez from San Bernardino, CA
    Replied about 2 years ago
    Loving the wealth of information coming from both the article and the comments, thanks for the contributions I’m learning a lot as some one brand new to investing
    Jason Roark Investor from Arkadelphia, Arkansas
    Replied almost 2 years ago
    What is your definition of massive wealth?
    Brian C. from STAFFORD, VA
    Replied over 1 year ago
    I was wondering the same thing. I know this article was written some time ago, but I came across it somehow… It sounds like the author’s definition of massive wealth is, in my opinion, a sum of money that is unnecessarily larger than required to live a comfortable life and retire early. If that’s the case, I don’t think there’s many people that think rental’s alone would lead to “massive” wealth; I don’t know any at least. If that’s you’re goal, great. However, I don’t think there’s very many people that would be able to obtain this “massive” wealth with any strategies, inside of 10 years. Sure, some can, but those would be exceptions. In addition, I think the huge amounts of capital required (800k) are a bit misleading… With the many strategies talked about here on BiggerPockets and elsewhere, there are many techniques to let your money go much further than a single down payment. I’ve obtain 4 homes this year and have only put down enough money for a down payment on a single home and have good equity in all of them. If I put 35k down on a home, get my money back out, put it down on another home and so on, I’ve only used 35k of capital.
    Dawn Matze Contractor from Carlsbad, CA
    Replied 7 months ago
    Brandon, Well, someone is now talking truthful! My husband and I are finally seeing eye to eye on this. RE is not a short term get rich quick thing. It takes a business to fund (or high income job)and then a keen and obsessed person to find, strategize and buy right! All while making sure your motivated to look within yourself and continually learn, assess your changing life circumstances, grow personally, professionally, take calculated risks and oh BTW enjoy your life too! Ha Ha Thank-you Brandon for your writings.....I enjoy your blogs. If you know of a hungry woman that loves RE please let me know.....I am looking for an accountability partner! Thanks Dawn
    Pete Abilla Investor from Salt Lake City, UT
    Replied 7 months ago
    Tons of comments here and all good points of view. Massive Wealth may not be the goal though; financial independence is a much closer target than massive wealth.
    James R. Copeland Investor from Port Hueneme, CA
    Replied 7 months ago
    Great article, definitely got me thinking. I'm up to 10 units now and can definitely confirm that the effort and time was significant enough to make me want to Branch out at times. Thanks!
    Justin Sellers Rental Property Investor from Jacksonville FL
    Replied 6 months ago
    I liked your article, and it reminds me of the saying to sell shovels during a gold rush. I've forever read and absorbed info from BP, and finally getting my RE license in Las Vegas- I'd love to apply this concept in my own space
    Sherwin Gonzales Rental Property Investor from San Francisco, CA
    Replied 6 months ago
    Very interesting article. I think most people are caught up with the idea of making passive cash flow to supplement or eventually replace their income because that's what most podcasts and articles talk about most of the time. Cash flow is King! Cash flow gives you financial freedom! There's nothing wrong with that. What's interesting about the article is the idea to change your mindset and figure out how to build Weath. True, starting a business and selling it can generate massive wealth, maybe faster than owning rental real estate. Funny you mention Grant Cardone because he inspired me to start my real estate syndication business. Once you change your mindset of replacing your monthly income to instead to replacing your salary and build wealth, you start looking at things differently. Now I look for ways to build Wealth. But with that comes patience. My team and I find commercial multifamily deals, increases the NOI, and sell at a high IRR. Based in California, it's more of an appreciation game here than a cash flow game like in other states. When done right, one sale can easily replace your salary(s). Now, this won't happen overnight or maybe in a year or two, but it is a way to build Wealth eventually. So yes, buying rentals can help build MASSIVE WEALTH.
    Bryan Hancock Investor from Round Rock, Texas
    Replied 6 months ago
    This article suffers from ascertainment bias issues. Additional growth and upside comes with additional risk. There is no free lunch in life. If you account for the literally tens of millions of small businesses plodding along and the heaps that go to zero every year it isn't that hard to see why being long-term greedy while selling your labor is the slow train to wealth. Growing your wealth at 20% ROE isn't that hard with real estate even if you take your time out of the calculation. Doubling your money every 3-4 years compounds pretty quickly and deferring taxes on earned income helps a great deal too. Catchy headline, but I ultimately think this article does more harm than good for those visiting BP and trying to learn.
    Junho Jeong from Wroclaw
    Replied about 1 month ago
    I agree with you.
    Robert Biggerstaff Contractor from Pensacola, FL
    Replied 6 months ago
    Great perspective !
    Jerome Kaidor Investor from Hayward, California
    Replied 6 months ago
    Umm - I began investing in multifamily 1996 with a single property. In 2003, I got laid off. By that time, I had IIRC 73 units. I didn't even look for another job, and I haven't had a W2 job since then. True, my wife kept working till a few years ago, but she didn't really have to. So - in my case - 7 years from beginning to financial independence.
    Sonja Sevcik
    Replied 6 months ago
    I spent 18 years as a commercial banker ... covering everything from real estate investors to a plastic bag manufacturer - - at one point I was a bank analyst on Enron (the year they went BK) and a risk manager on Space X. I agree with you on one thing - - - all great wealth comes from investing in yourself and treating it like a business but the risk probability of failure or a major set-back increases significantly if you think wealth is going to come fast. The wealthiest clients I worked with typically had 20 to 30 years of their blood, sweat, tears, savings, investing, and improving into their business before they were worth more than 8 figures. The one exception to that is probably Elon Musk - - - but no one works like that man nor is anyone as smart ... but even he just plows his money back into his investments.
    Susan Maneck Investor from Jackson, Mississippi
    Replied 6 months ago
    I'm dubious of get rich schemes myself. I got into real estate when I saw houses going for 35K in my neighborhood renting for $800. It just didn't make sense not to invest. But I also max out my retirement something I can afford to do thanks to rental income. I would say half my wealth is in real estate and half in mutual funds. No, I don't have massive wealth but I do have a cool million worth of assets to retire on now.
    Myriam Mourani
    Replied about 2 months ago
    Very true, Susan. While there are a lot of ways to make money, real estate investing also offers some great tax advantages.
    Peter Nelson Residential Real Estate Broker from Seattle, Washington
    Replied about 2 months ago
    I made millions in rentals. He is right...it wasn't quick. I didn't want it or need it to be quick. But rentals DO work for building wealth. And the cool thing is those that I don't sell to spend in retirement I can bequeath to my heirs tax free!
    Account Closed
    Replied 6 months ago
    According to me buying a rental property is a long-term monthly income for a investor. It is a good idea if the rental value increases with the time.
    Daniel Hayes
    Replied 6 months ago
    This article is not true. If you buy enough rentals with the proper investment strategy, you can have a $25K per month income off them. It will be a full-fledged business. But then you can take that money and parlay it into whatever else you want.
    Joseph Jordan
    Replied about 2 months ago
    I think that was the authors argument. Most people who make $25k per month in real estate are really running a business. They aren't passively investing in properties.
    Marcela Karriker Investor from Charlotte NC
    Replied about 2 months ago
    What would you consider the right strategy?
    Jimmy Wang
    Replied 6 months ago
    The author is missing a fundamental scalability real estate strategy in this article. He fails to mention the ability to leverage the equity in the real estate portfolio. It's true you need to save up in order to buy your first, second and maybe third property. But thereafter, you should refinance the properties and use proceeds to buy more properties. This results in exponential growth.
    Robert Caudy
    Replied 6 months ago
    I feel a lot of comments seem to miss the point of the article. To me, it’s not at all about whether you can make $10,000 a month on $800,000, or any of the dozens of variables contained within this thread, or what market you’re in, or even the equity that is built up over time in the rentals. The author clearly and intentionally used the term “massive wealth,” and no matter what market you’re in or what it took to get those numbers, $10,000 a month is not massive wealth. To build “massive wealth,” the author explains, one should develop a scalable business which would, in essence, print money much faster than BRRRR ever could. A very valid point and one that is pretty courageous in this environment. I, for one, really appreciate the article because as much as I love the concept of BRRRR as a wonderful strategy, I would agree that the development of a global company that teaches “How to BRRRR” is a far better way to achieve “massive wealth,” and that is what the author bravely pointed out. Great and timely article for this reader. Thank you.
    Beth Ryan
    Replied about 2 months ago
    Agreed! And, thank you to the author for pointing out the truth!
    Tom O.
    Replied 5 months ago
    There's a lot here I don't agree with. It took me less than 2 years to hit the $10-K a month (gross, not net). And I did it with debt, 20-25 % down. Now, if I want to turn that gross into net I would just plow all the money into paying down the debt, which would probably take 10 years or so. But I'd rather use more debt and buy more doors and create a bigger portfolio. It seems like the whole article is qualified by saying you won't build "massive" wealth with RE rentals. Sure you can but what is "massive"? I mean, Kirshner and Trump's fathers built massive wealth with rentals only. Also, just because the ones with "massive wealth" that you have met did not do so does not mean there aren't many others who have and you just haven't met them.
    Harold Dougherty
    Replied 3 months ago
    We purchased a very low income rental house in a small town (30K population) outside of a major Texas city starting in 2010. We payed off all consumer debt and never used financing. Yes, it was difficult, very difficult to save the first 26K to buy a fixer-upper from a wholesaler. We renovated the house for 14K and started renting this house for $600 a month. About that time federal regulations tightened the qualifications for loans and cash was once again KING. It's been about 10 years since we purchased that home. I learned that little town like the back of my hand. When we didn't have enough money to buy a house we drove around and learned and dreamed. We would spend weekend driving around and really enjoyed the process. I'm not a CPA or PHD so this is just our experience. That 26K house has generated $70,200 in gross income. We have experienced 55% net income on average. So that first little house generated enough to purchase a 35K house (yes, we usually bought in the 25-45K range, if anyone is interested I can explain more why we chose this approach). The current appraised value of that house is now $83K which is terrible as that has increased our tax liability but rent is now $775 a month with a current CAP RATE of 13% (average CAP RATE about 15%). We currently have 22 units paid off with 7% vacancy (I can share more on why we have such low vacancy in a segment that typically has higher vacancy rates). I am 50 and my wife is 47 and this week I turned in my resignation and will semi-retire before the end of the year. We will concentrate on buying approximately another 12-14 units in 2021 if the right deals come along (I think there will be many opportunities). We have less than 100K in the stock market (lost everything in 2009, not touching that stove again). I won't disclose portfolio valuation at 8% CAP RATE but I think most American's would consider it a reasonable amount of "wealth". I don't sell anything or have an axe to grind; I'm just sharing my experience.
    Amy Pfaffman
    Replied 10 days ago
    Thanks for sharing your story. Mine isn't too much different. In 2016 I used a $200K inheritance and $100K in the stock market to buy six houses over a year and a half. After that, I could live on my rental income. There are a few other parts of the story, but that's the gist of it. Now I can build that portfolio slowly while having the financial freedom of not having to work a job. My only issue is being able to qualify for a loan since my tax returns show a low income because of all my deductions. I know not many folks have $300K to spend at once, but it's way less than $800K and gave me the freedom I wanted while I continue to increase my income over time. While I agree with the author to some extent, you can have financial freedom in most places for less than $10K per month.
    Justin Dietrich Contractor from Maui, HI
    Replied about 2 months ago
    Great article, definitely something that I needed to read!
    Terry Garrett New to Real Estate from Charlotte, NC
    Replied about 2 months ago
    Great post. I'm beginning to learn about wholesaling real estate to have a better financial future for my son. Currently I work as a mail carrier but I dont won't to work check to check anymore. You got me thinking on a whole different level of building generation al wealth and I thank you for your words of wisdom!
    Sam Stabler
    Replied about 2 months ago
    This was such a great article. Like you said, I've been on the slow and steady rental portfolio grind and have two 2-units on my hand both in very good locations with high market appreciation that now cash flow. But like you said, the capital that I have invested in generating these passive rental income properties has been a lot. They have depleted a large chunk of my savings. I don't regret it, but I also don't think it's the answer because it would take me too long to get to my goals since it requires a significant amount of cash, and my 9-to-5 job does not pay me enough to get there.
    Bart H. Currently work as a Computer Security Officer from Savannah, Georgia
    Replied about 2 months ago
    I agree wholeheartedly, however, locating a W-2 job paying over $250k and $500k is hard to come by, especially if you don't have the qualifications. And if you get one, don't count on a life outside of work because your employers will the mindset that since they pay you that much, we own you. Drop whatever you are doing and attend to this! Your odds are better starting a business that 1) solves a problem, and 2) brings value for your customers to the point they frequent your business to use your services/products again. Also, there is a business which you can go into but cannot sell, this is the solopreneur business like day trading, but if you had a business where you employ several day traders, then that can be sold.
    Bob Ferrari from Bartlett, Tennessee
    Replied about 2 months ago
    Yes, I agree. Thanks for the bigger perspective on wealth building!
    Michael Temple Rental Property Investor from Toledo, OH
    Replied about 2 months ago
    On the whole, I see the author's points. It is true, "massive wealth" is probably something you need to generate in a business, but that business could be in real estate. Also, there are some hybrid strategies that I would say hover in-between business and investment that works as well. One of my mentors is Chad Carson or commonly referred to as Coach Carson. He talks a lot about how to invest in properties and use hybrid models to generate chunks of cash to pay off the "keeper" properties and get your portfolio of properties free and clear quicker. He also talks about calculating how much cash flow you need to live and working a variety of models in real estate to get there, which is probably different than creating "massive wealth". I am personally using a combination of strategies. I have a business, real estate investments, stock market investments, etc. to reach my goals and I don't feel the necessity to get there "fast" as I love what I do, so that is something to conisder as well. Do you like what you do for a living? I do so the investing is truly about retirement in the future.
    Steve Hodgdon Investor from Novato, California
    Replied about 2 months ago
    I've done this twice in 30 years. Working on my 3rd time because I made stupid real estate investing decisions. That said, I sure like seller financing. :)
    Theresa Minifield Investor from Las Vegas, Nevada
    Replied about 2 months ago
    @Michael Temple. I completely agree with you. I own a home health business, rental properties, and stocks, and added government pensions to that three years ago. Most importantly, I love what I do in my business which is making a difference in the lives of some of the most vulnerable people. To me, massive wealth will not compensate for that. Actor George Burns used to say, "If you love what you do, you are not working a day in your life." That man worked till he was almost 100. I am at the stage where I don't feel like I'm working at all. Even in this pandemic, I am creating jobs and that is a great feeling!!!
    Marcela Karriker Investor from Charlotte NC
    Replied about 2 months ago
    What is a home health business? And do you need to have a license for that? What if the liability?
    Mary C. Real Estate Broker from Bellevue, WA
    Replied about 2 months ago
    There is no true or false. There are many ways to build wealth! the importance is to get your first bucket first so u can have something to invest with! yet, focus and diversify!
    Sam Sala Rental Property Investor
    Replied about 2 months ago
    Great article! Point is keep your day job and aim to make lots of money to put into RE
    Marcela Karriker Investor from Charlotte NC
    Replied about 2 months ago
    What is conciser massive wealth? And not all business end up selling for value this technique can also take many years right?
    Blake Carter Investor from Austin
    Replied about 2 months ago
    Yeah this is 100% facts man
    Wenda Kennedy JD from Nikiski, Alaska
    Replied about 2 months ago
    I agree. I use a combination of different things to build wealth. Yes, I have rentals, a couple of side businesses and other investments. Everything I have is small or passive enough to make it manageable -- although I must say that I'm at my limit on rentals... Now, for fun, I look for "pie-in-the-sky" investments. I look for deals where I invest a small enough amount where I can afford to loose it. And the up side must be a huge return. Even though I research them well, I usually lose my nut. But, when I win, I win BIG. I bought a common stock during the last 3 1/2 years -- in groups. It a stock in a local project I'm following -- in mining which is part of the real estate family of businesses. I know a couple guys who the company hired to do their leg work. So, it will be viable -- if they can get it built. That stock has been up and down during the first 3 years. For the recent time period, it's gone up. I stuck with it and rode the price roller-coaster just to see where it would go. I've almost doubled my investment already and they haven't issued the final E.I.S.. That will come sometime in the next month or two and then the Federal permits will be issued. By the time the project is actually constructed, I figure my little shares of stock will be worth several times what I paid for them. Yes, I can still loose my investment nut, but my odds of winning are getting better everyday. My real estate and business expertise can be extended in many directions.
    Stuart Fox Investor from Salt Lake City, Utah
    Replied about 2 months ago
    Love this. I have rentals in Cleveland and Spokane. To be honest, I don't like rentals. But they are a necessary evil to erase taxes from my "business" - flipping homes around the country. Do I want to build up to $100,000 a month in gross rents? Of course I do. What investor doesn't? But in reality I focus on my business and need to scale that to $100,000 a month in profit. That's the focus. The rentals are a by product.
    Jesse Watson New to Real Estate from Lynnwood, WA
    Replied about 2 months ago
    I agree with some of the points made, but would just caution people (based on personal experience) to question your own motivations before you launch your own business. Is your primary motivation massive wealth, or do you have a deeper purpose / mission? Starting a business is a tremendous amount of work and risk and an emotional roller coaster over a long time frame, and it is not for everyone. If you have a vision and the drive to create something, then great, go for it -- but money is not going to work as the primary / sole motivation to start a business over the long haul. Money alone as a motivator won't last you through the long nights, the 80 hour work weeks, and the the multi-year ups and downs required to create a successful business. Anyone starting with "massive wealth" as their primary motivation (or even just looking for "comfortable lifestyle leading to early retirement"), would do better to climb the corporate ladder at a Fortune 500 than to try to start their own business. It's a lot less work and risk, and offers stable income and benefits. You can leverage the income from a good job to generate capital, and then still do REI on the side, or switch over full time at some point in the future, provided you have a good team.
    Raquel Rigby from Spanish Fork, Utah
    Replied about 2 months ago
    This sounds like an echo of "The 10X Rule" book I've been reading today. Who doesn't want Grant Cardone wealth?! Am I right? You are correct about being average, it isn't going to build you massive wealth and neither is passive real estate. Only being extraordinary and shooting for goals that are beyond your probable expectations, will you achieve massive success. Thanks for pointing out that we have to focus on building businesses in order to build wealth. Massive wealth cannot be built passively. I do believe that the BP podcast does make it clear when people are creating businesses, that it requires processes and systems to be in place in order to create that flow of deals, investments and income generation. That's what I love about the BP community is no one makes it sound like its just easy to do, but we all encourage each other to work smarter in order to maximize our efforts and work together to create the most out of our opportunities by thinking out of the box.
    Forrest J Green from Katy, Texas
    Replied about 2 months ago
    Most businesses fail so I feel like these are hollow words and the other is just dumping on rentals unnecessarily. Sorry but investing to me is like watching paint dry. Slowly and surely doesn’t bother me one bit. Better than losing my shirt in a business.
    Jeff Piscioniere Investor from Shelton, Connecticut
    Replied about 2 months ago
    Well said and I completely agree! This blog post was just a bunch of fluffy platitudes.
    Bill Wilson from Longview, Texas
    Replied about 2 months ago
    The only people I knew that made big money off real estate owned very profitable businesses and bought cheap undeveloped land outside the city limits of growing cities then made a killing after it was surrounded by urban sprawl years later. That's when their $300 per acre land was now worth $30,000 to $100,000 depending on their location. They studied topographical maps to determine where the main roads would run and the best locations for housing.
    Randall W. Appraiser from Clovis, CA
    Replied about 2 months ago
    Yep, savy farmers have done that for generations. They farm marginal farm ground just outside the city sphere of influence and then cash in a decade or two later when it is time to plant houses.
    Dustin Henegar Investor from Roanoke, VA
    Replied about 2 months ago
    There’s a lot of truth to the article but I disagree with how long it can take. In under 12 months I’ve scaled to 77 units. Prior to those twelve months I was a house flipper for a 2-3 Years. Flipped a total of 11 During that time. Used that money to get the rentals started. Been an investor for under four years and on track to break a 100 units this year (first year as a landlord).
    Kelsey Low from Champaign, Illinois
    Replied about 1 month ago
    Thanks for posting! Hoping to do exactly this. Did you continue to flip when you started renting to earn additional income, or were you able to live off the rental income relatively quickly?
    Michael Haynes Investor from Tampa, Florida
    Replied about 2 months ago
    Hello BP. The thing I see with almost all the blogs and articles and R.E. Gurus is that there is a Big Picture involved to make it all work. We are shown the details involved with trying to "Make a Million in Five or Ten Years with Rental Properties." But, did you know that there is a Real Estate Cycle that is much more important that lasts 7 to 9 years, just like with the Stock Market when we say "A High Tide Floats All Boats?" There is a Business Cycle. When planting orange trees or raising cattle you depend on the Market Cycle and the Weather and the Price of Labor. Worldwide people know that there are Weather Cycles that we call "The Seven Years of Fat Cow or Lean Cow," in Brazil. The ranchers know that the price of cattle is down and this year it will be better to plant sugarcane. The Birds made a song about this, "Turn, Turn, Turn." Ecclesiasties 3. 1-13. I tried to take an Accounting course in College and everything went in one ear and out the other. I could not see a Bigger Picture. The Councelor asked me what I wanted to go to College for? I told her that I wanted to learn how to Make Money. She said that this is not what you go to School for and I quit. Now, I have studied with Harry S. Dent. I started 20 years ago with Mutual Funds and Stocks and then Options on Stocks. I trade Futures each day on my laptop. I know the Cycles of the Market and Dents Demographics studies make perfect sense to me when displayed on a chart. The Real Estate Cycle could be in a flat Zone for three or four years right now. So, Robert Kiyosaki recommends that you count on your Rental Income and not the Appreciation for the time being. I am selling my last two Rentals in Tampa and moving to another City where it will be quiet. I have an Off Market house with a pool to fix up and Rent with All Cash from my current Sales. The Flippers have been squeezed for the last four or five years and are now trying to Gentrify the War Zones in Tampa as the values of everything has gone up. That's the importance of finding A Mentor. The litmus test is, "Would you take any advice from someone who has not made a Million?" It's like, "You can Practice anything, but, it is Perfect Practice that makes you Wealthy." What does the Mentor see that you don't? They can see the 360 degree, Full Cycle involved in the method that you are wanting to use to Create Wealth.
    Jeff Piscioniere Investor from Shelton, Connecticut
    Replied about 2 months ago
    So I think I understand things now. Go start a business and make $500k annually while being frugal. I’ll get right to work on that realistic goal tomorrow morning (rolling my eyes so hard in sarcasm I’m getting a headache).
    Aaron Smith from Deer Park, WA
    Replied about 1 month ago
    It's just so simple! Go be a doctor, lawyer, dentist, high-salary salesperson, or a super successful entrepreneur. Then get super rich. I don't know why I didn't think of doing this sooner.
    Yogev Finegoz
    Replied about 2 months ago
    What is massive wealth exactly? Who guarantees success in any other business and growth? Also, you're calculation of the years it takes is wrong, recycle cash flow and every year that goes by you have more and more money to buy properties. If you do things right, you'll be rich with a moderate rate of investment. Nobody really needs a billion dollars in their bank account to have a great life and be financially free.
    Arayik Khachikyan from Glendale, California
    Replied about 2 months ago
    This article has some truths and some glaring gaps in truths. Starting a business is often too difficult. People work on a business for years before they generate any income. Then you pay something like %40 taxes on your income, and you have to deal with employees, hiring and firing and salaries and insurance. And if you own a business it usually means you have no time to study and get into real estate. I got into real estate when I closed my business of 10 years and for the first time I realized what it really meant to be profitable and successful. This article is ok except the author has tunnel vision. People can get into investing in real estate directly, by using creative seller financing and other methods. As Warren Buffet said, You can put all your eggs in one basket if you know what the basket is, and not allow other distracting businesses occupy your busy and investment focused mind. I know someone who works in high tech and makes lots of money and he ended up buying 4 houses for about $750k to a million $ each, with CASH. He has no time to study real estate investing or go to seminars so he ended up doing really stupid things. I also know someone else who is not in high tech and had a humble job, and he went out and started making offers on houses and used creative seller financing and in 2 years he owns 7 properties each worth $500k to $700k. Businessmen often have their brains fried up badly so that they make real bad investment decisions once they fall into the hands of sharks in the property investment world.
    Jody Sperling from Omaha, NE
    Replied about 2 months ago
    I've been sitting on the article since I read it last night. It definitely got me thinking, brooding is more like it. The fact that you dropped the quote, "$10,000 a month" hit a nerve, because that's been my goal with rentals. If I can't get there faster than a decade, I'm going to cry, but that just tells me I have to commit to buying more than one property a year. Thank you for planting the seeds of doubt. It got me digging to find the number. How many single/multifamily homes do I have to purchase per year to hit 10k in five years? That's the question I'll be working to solve. Great read!
    Claire-Marie Cyprien
    Replied about 2 months ago
    I always knew it. I own my clinic and supplement with my real estate investment. Where my real estate portfolio helps is in legally shifting my tax burden from my primary business into the depreciation of my real estate. For that, one needs to establish REPS(minimum 750 hours/year or 51% or more of total work time); working PT in one’s primary field or be a realtor. Many of my higher income Colleagues then do really well with real estate. The ROI is therefore astronomical
    Sam Hageman
    Replied about 2 months ago
    I think you are correct in that it is hard to be worth $5 million by going from a SFR to a duplex to a fourplex, etc. However, if your goals are to be worth over a $1 million (net worth), then you would invest in real estate. I always tell people if you want to be worth greater than a $1 million; buy a house every year and rent it out. After ten years, you will most likely have (assume a $100-$120K house purchase) a portfolio worth between $1.2 to $1.3 million (assumption is 65% leverage) and monthly gross cash flow will be approximately $11,000 ($1100 x 10). IF you do the above and are worth $1.5-$1.7 million you will in the Top 10% of US Households in terms of net worth. I bought a five-plex in West Philadelphia in 2002 for $365K, I sold it last year for $725k. I never refinanced over those 17 years, I just paid down debt so at close, I took $400,000 of the table. Am I renting a jet, no! But I do have the financial flexibility that many crave because I kept investing in assets and put in the hard work up front, chop chop! Sam
    Wave Taylor from Baltimore, MD
    Replied about 2 months ago
    Informative article. All of the comments, for and against, gives food for thought.
    Damien Hart Investor from Atlanta, Georgia
    Replied about 2 months ago
    Very very true...Love this article
    Al Bigonia Investor from Farmington, New Hampshire
    Replied about 2 months ago
    OUTSTANDING Brandon! It's about time someone said this "out loud". Looks like a lot of comments are from 2 years ago. Wish I hadn't missed it then. I just told my property manager last January (2020) that I realized to make any real money I had to get big or get out. Told him to sell my properties. I made some Money, but the vast majority of it was from Appreciation. I'm investing in Notes now!
    Timur Abdullin
    Replied about 2 months ago
    We are at the peak of appreciation in REI now so selling is ideal. Where is your market, Al? How is the virus affecting your sales right now?
    Kevin Holmes Investor from Jamaica, NY
    Replied about 2 months ago
    Great article really enjoy it. I just retired at age 52 from NYC as a Electrian a month ago My portfolio consists of Rental properties 457 from my job and Local 3 annuity that I can touch at age 59.5. I started my handyman company last year which I'm doing now.
    Daniel Peavey from Atlanta, GA
    Replied about 2 months ago
    Great, great article. I’m surprised BP allowed this. They could care less about RE!! Maybe, in the beginning !! But they soon realized selling books, raising money, creating syndications was the path This guy Brandon, a novice in RE, because of his platform, becomes a million dollar author!! It’s all about building the business and RE is the hook to attract the masses. Thank you!!
    Daly Vaughn Investor from University Heights, Ohio
    Replied about 2 months ago
    Great article Brandon. Couldn't agree more. You have an awesome window through your business to see what works and learn from very successful high net worth clients. Real estate investing is wonderful for what it is and what it can do. This should be required reading for new investors to set realistic expectations and offers a very balanced lens by which to think about it as an investment vehicle.
    Wes Salous Investor from Oklahoma city
    Replied about 2 months ago
    Agree 100%. Spot on. Having a business is the way to go building wealth faster. It took me 12+ years saving money from my restaurant business to buy rental homes gradually.
    Ian Cruse
    Replied about 2 months ago
    Great read. I agree with the author's POV. Easy to get caught up in the hype of real estate as a massive wealth generator. Don't expect that $10K a month by year's end.
    Junho Jeong from Wroclaw
    Replied about 1 month ago
    I am a beginner. So I don't know about real estate investing well. But being regardless of it, let me say what I felt by reading what he said. First, I am not optimistic that investing and making rental will be smooth and easy. There will be many troubles and difficulties. However, there can be also many creative ways and strategies for overcoming this hard race. But I feel impressions like he makes many various strategies to enlarge wealth bigger through rental properties narrow by only his perspective. Maybe for someone, his article might seem a reality. But I feel sorry because he seems to apply his views to ALL other investors. I don't know well about this race. Maybe after time, I will realize his opinions were right or wrong. Just it was what I felt now.
    Martin Pelletier
    Replied about 1 month ago
    100% agree, thanks for the article. The truth is even if you just buy rental you will be stuck very fast if you don't have some kind of buisness, banks at least here in canada will not give you loans after maybe 2 or 3 duplex/triplex for most of people. I have friends who own rental but cannot have mortgages have more because of their salary. they need to pay cash or go to private lenders who wants more interest and want you to give a bigger cashdown so you can't developp easly. Im telling my experience It might be different elsewhere or for other poeple but the fact is with a buisness running the buisness give you much more power.
    Roy N. Rental Property Investor from Fredericton, New Brunswick
    Replied about 1 month ago
    Martin: I have had as many as 8 residential mortgages in my name ... or in the company name with me as guarantor. It does become more of a challenge after the first 5 (or so), but can be done. Another path would be to move from residential to commercial properties.
    Sierra Sonenrs
    Replied about 1 month ago
    Love this article! It really put a great perspective on real estate investing.
    Aaron Smith from Deer Park, WA
    Replied about 1 month ago
    This article is definitely insightful and perhaps a hard reality check for some, but ultimately incomplete. It doesn't address the fact that the $800K required to reach $10K/monthly profit can be achieved through equity, not just by saving money from your regular job. Also, so many high earners are living paycheck to paycheck. They might pull down $500K/year, but they're spending $500K/year, too. The answer isn't necessarily to get a higher-paying job or start a more profitable business, it's to find great deals and manage your personal and business finances correctly. By funneling profits into further investments, refinancing to pull out equity, or using a HELOC, you can multiply your out-of-pocket investment into more properties without taking it out of your checking account. I'm at the beginning of my REI restart, and this article was a wet blanket on my motivation for a couple of days. Once I worked through the logic I realized that there's no reason to switch tracks. RE is an asset that will not bottom out like stocks. I will focus on generating profit, building equity, and finding great deals. Call it a business instead of REI, that doesn't bother me as long as I'm making forward progress.
    Brian Tootle Rental Property Investor from Columbus, OH
    Replied 30 days ago
    This is the basic message in The Millionaire Fastlane (MJ DeMarco). Great book.
    Gilbert Mendoza New to Real Estate from Sacramento, CA
    Replied 28 days ago
    Love this article, had to read it again!
    Michael Lewis Lee Real Estate Broker from Coppell, Texas
    Replied 24 days ago
    That is a good article and contains interesting knowledge.
    Tyler Kragerud from Gresham, OR
    Replied 20 days ago
    Solid article which truly speaks to the heart of investing.
    Thanh Tran
    Replied 2 days ago
    This article is a gem, it speaks the truth about profiting from rentals (is usually a *slow* way to build wealth for *most* people).