7 Reasons the Rich Get Richer Through Real Estate

7 Reasons the Rich Get Richer Through Real Estate

2 min read
Sterling White

Sterling White is a multifamily investor, specializing in value-add apartments in Indianapolis and other Midwestern markets. With just under a decade of experience in the real estate industry, Sterling was involved with the management of over $10MM in capital, which is deployed across a $18.9MM real estate portfolio made up of multifamily apartments. Through the company he founded, Sonder Investment Group, he owns just under 400 units.

Experience
Sterling is a seasoned real estate investor, philanthropist, speaker, host, mentor, and former world record attemptee, who was born and raised in Indianapolis. He is the author of the renowned book From Zero to 400 Units and the host of a phenomenal podcast, which hit the No. 1 spot on The Real Estate Experience Podcast‘s list of best shows in the investing category.

Living and breathing real estate since 2009, Sterling currently owns multiple businesses related to real estate, including Sterling White Enterprises, Sonder Investment Group, and other investment partnerships. Throughout the span of a decade, he has contributed to helping others become successful in the real estate industry. In addition, he has been directly involved with both buying and selling over 100 single family homes.

Sterling’s primary specialities include sales, marketing, crowdfunding, buy and hold investing, investment properties, and many more.

He was featured on the BiggerPockets Podcast episode #308 and has been contributing content to BiggerPockets since 2014, with over 200 posts on topics ranging from single family investing and apartment investing to mindset and scaling a business online. He has been featured on multiple other podcasts, too.

When he isn’t immersed in the real world, Sterling likes reading motivational books, including Maverick Mindset by Doug Hall, As a Man Thinketh by James Allen, and Sell or Be Sold by Grant Cardone.

As a thrill-seeker with an evident fear of heights, he somehow managed to jump off of a 65-foot cliff into deep water without flinching. (Okay, maybe a little bit…) Sterling is also an avid kale-eating traveller, but nothing is more important to him than family. His unusual habit is bird-watching, which he discovered he truly enjoyed during an Ornithology class from his college days.

Education
Sterling attended the University of Indianapolis.

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What is it about real estate that helps the rich to keep on getting richer?

Check out Forbes’ billionaires list and you’ll find the vast majority of members either made their money in real estate in some way or are now preserving and growing their wealth in real estate. That’s true of Warren Buffett, Richard Branson, and Larry Ellison. What is it about this asset class that helps them to keep on getting richer and richer, while others work so hard just to avoid drowning amongst the bills that cover the basics?

Billion Dollar Tax Benefits

We recently saw a lot of media noise about our current president and his almost $1B tax break. He certainly isn’t the only one. Owning your own real estate business and investing in property can provide massive tax benefits. Some of the biggest earners can use these advantages to make millions each year — and pay less in tax than the average worker making $60,000 a year.

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Related: Why the Wealthy Put Their Money Into Multifamily & Commercial Real Estate

Tax-Free Growth

Not only are there big tax breaks that help you keep more of your money, but 1031 exchanges and self-directed IRAs help investors make more money on that money tax deferred or tax-free.

The Power of Compounding

The wealthiest just put their capital into real estate and let it work. That builds returns on top of returns on top of returns. Did you know that investing just $5,000 can turn into millions if you give it time and let the power of compounding go to work for you? Try out the free compound interest calculator to see how it can work for you.

Passive Income

Income earned from real estate investing is considered passive income. That means your properties are working to make you money in your sleep. If you have 10 rentals, that means you actually have 10 households working their 40 to 100 hours a week to make you wealthier, even if you don’t get out of bed. Even better — this income is often taxed at a much lower rate than on earned income from a salaried or hourly job.

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Preserving Wealth

One of the best advantages of real estate is being a hard, tangible asset. It protects wealth. If you have stocks, those can be completely wiped out. The Lehman collapse is a prime example of average Americans losing their life savings in the market. With real estate, the foundation and land will always be there — and that’s where most of the value is. The key to getting wealthy often isn’t how lucky you get in generating big returns, but not losing what you make.

Related: Why a 30-Year (NOT 15-Year) Mortgage Gives You a Better Shot at Building Wealth

Inflation Protection

Real estate typically appreciates and grows in value ahead of inflation. Assets that don’t will constantly devalue. For example, cash. You can hide all the money you want in the bank, but often the fees will just eat it up. Put it under your mattress and it will probably just keep going down too. Look at how much a dollar was worth 20 years ago versus today.

Yield

Real estate not only appreciates in value, but throws off cash dividends too. The wealthy love this because it means they don’t have to dig into and spend their nest egg. They can live on the yields. If they don’t need the money, they just reinvest it and add it back to their pot.

Any other reasons you’d add to this list?

Let’s discuss below.