Getting to $100M networth
Real Estate Professional · Las Vegas, NV · Member since 2013 · 225 posts · 74 votes
Okay, now for a ridiculous, hypothetical question.
What's away to theoretically get to 100 mil in net assets. Assume this is for a "young" person who has several decades to reap the rewards of salary, compounded returns, going back to school, take advantage of several boom/bust cycles etc.
I think it's very possible if one lives frugally, has a solid job and invests prudently to get enough passive income to live off of in 20 years. But buy and hold will only take you so far. You'll probably need outside money to get far. Plus buy commercial property, deal with non-conventional loans.
I've read the big money is made in appreciation.
What type of skillset would someone need to cultivate? Anyone can get a conventional 30 yr. But I'm sure with the more complex financial instruments, creative financing, etc. is going to require more people and presentation skills?
Again, this is a ridiculous, hypothetical question.
Thanks!
Your question spurred some thought.... So I ran some numbers.
If you have 50k disposable income/year (100-150k earnings?) and you buy one multi-family with that money and it nets 10k/year (25% rate of return)..Then every time your multi's accumulate 50k you buy another multi..and so on...You will be worth around 26 mil after 30 years. I assumed each property increases in value by 3% per year. You would have somewhere around 100 buildings (around 300 units with this calculation)..12 mil in earned income and 13 mil in equity.
I made a number of assumptions with these numbers (no inflation, fixed rents, etc) but the concept is the same.
I would say it is not possible to get to 100m with a fixed strategy that involves low risk and no partnering. If you want 100m you need to partner and take some risks.
One the flip side....If you have a dedicated strategy and stick to it in the long run, you can become a true 1%er simply by buying property. Isn't that our goal?
It would probably be near impossible to accumulate that much just investing your own money. You would need to create value with other people's money on a large scale to get the magnification needed to reach $100 million.
A way it might be possible with real estate is to be good at finding and improving distressed large commercial properties, such as 100+ unit apartments. You'd get investors together to buy the property and give yourself a cut for putting the deal together. Then improve the property, increasing it's value by millions or tens of millions of dollars. This would increase the equity for your cut by hundreds of thousands to millions with little to no of your own money invested. Now repeat a handful of times a year for many decades while reinvesting your earnings and you could probably hit $100 million.
There are a couple books you might be interested in, the first one is "Business Brilliant" which compares the thinking of middle class kids who stayed middle class vs middle class kids who grew up to become multi millionaires.
The other one is called "The Richest Man in Town" where the author interviews the top guy (or gal) in 100 different towns.
There was a story in the newspaper about 20-25 years ago about a lady that died at 89 with an estate of $88 million.
She had not inherited anything. She had earned a maximum income (apart from her investments) of less than $10,000 per year.
But she worked for an attorney that got her investing in stocks and apparently gave her good advice.
(the age and time frame and estate amount are as I remember them I think the paper was San Diego Union? But I have tried to find this story several times and have not been able to do so.) I hope someone can find it.
I think @bryanhancock is in the right direction running the proper numbers except for 1 major thing...he assumes that the individual never saves any money except for the 1st million dollars, which is not how it works for most people.
How about this:
$0 saved so far, $1m annual income, 40% savings rate, 35 years of saving (meaning 30-65 or 35-70)...
What rate do you need to get there?
9.7%
Not easy but doable. Granted, you will need to shift strategies multiple times to get to that number, for example, from residential to commercial to syndicate deals as an LP and then perhaps as a GP also receiving carried interest.
However, if you are someone that starts earning $1m annual income in your 30s, it's usually either as an entrepreneur, banker, or attorney - for the first two, income can easily grow from there at 10-50% per year until at least $5m per year (or more) and for the latter, maxes out at $2m or so. This makes it easier...although, as a general rule, the best way to get there is simply to create a scalable business and then grow it as fast as you can so you are not waiting until you are 70.
This is a very interesting post, and one in which I can relate.
The quick answer is an average young person with absolute dedication towards their goals can in fact create a fortune of $100MM or more in the span of the time frame referenced.
How do I know? I've seen it first hand, and was on my way (well, pushing 10% of it). Of course that's before the doctor severed my capital limbs (the doctor being the not so great recession).
I was raised in an atypical blue collar family and community in So Cal. Always being entrepreneurial minded I left a management job in City Government to go to work as a commercial real estate agent at 27 y/o. By the time I was 35 I had bought several large commercial buildings, and embarked on starting a commercial development company.
My net worth was substantial, and cash flow allowed for a very comfortable lifestyle. By then I had moved my family to Newport Beach, CA where many of So Cal's large real estate companies and investors reside. My wife and I entrenched ourselves in the community and I got to know many, many of these real estate folks through involvement in our kids private schools, their community sports activities, and the non profit boards I sat on.
I heard how individuals on their own, brothers and sisters, cousins, families, and friends pooled together resources to start buying real estate. And those purchases continued over many years. Some of the real estate owners were benefactors of previous generations, but the vast majority were self made. In fact, my development company partner and I met on one of those same sports fields were I met many other real estate folks.
The development company didn't work out, but to give you a perspective of how you can get to the type of net worth that's the subject of this thread we had five projects across the state of California from San Diego to Palo Alto and each was at a minimum 18 acres. We had planned on building small business parks, and had the land in escrow or under contract. We even had Toshiba lined up for a 15 year build to suite lease, but it did't work out. We were to capital constrained, and when we needed capital the most the hedge fund Long Term Capital imploded and brought lending to its knees in commercial real estate for some two years.
But had we executed just a year earlier we would have probably gotten all of our deals funded. And the exit would have gotten my family closer to the subject net wroth as opposed to further away from it.
There have been many comments here that have mentioned luck. I don't believe that to be true. I instead believe that the harder I work, the more detailed I am in my processes, the more people I meet, and the more respect I extend to others the luckier I will become.
Build a plan, put your head down to execute, and then go do what needs to be done to get you to your goals. Happiness isn't delivered through the wealth, happiness is found in the process.
We are all stuck in a wind tunnel with money blowing around us. All we need to do is reach out and grab it.
Frank
Start with a billion and invest 905 of it in can't miss investments.
Go ask someone worth 100MM. Follow their(and others) model and don't reinvent the wheel. Take MASSIVE action to net 1 billion and if you fall short you will hit 100MM. Understand that only you can prevent yourself from making that money. Do what no one else will do (legally) to get the job done. Also find something sure and push all in. No diversification. Just some tips that I have received from people worth 100MM.
Thanks to everybody who took part in this thread. I enjoyed all the different advice and different prospectives. I've taken some notes and will use them in my business.
Much success to all of you!
Okay, now for a ridiculous, hypothetical question.
What's away to theoretically get to 100 mil in net assets. Assume this is for a "young" person who has several decades to reap the rewards of salary, compounded returns, going back to school, take advantage of several boom/bust cycles etc.
I think it's very possible if one lives frugally, has a solid job and invests prudently to get enough passive income to live off of in 20 years. But buy and hold will only take you so far. You'll probably need outside money to get far. Plus buy commercial property, deal with non-conventional loans.
I've read the big money is made in appreciation.
What type of skillset would someone need to cultivate? Anyone can get a conventional 30 yr. But I'm sure with the more complex financial instruments, creative financing, etc. is going to require more people and presentation skills?
Again, this is a ridiculous, hypothetical question.
Thanks!
Fun question, and someone has probably already said the same, but:
I would invest in people. Find out how you can be a value to them and they might do the same for you.
I think I have a better idea or at least more realistic one. It is simple. Make $10,000,000 and send your kids to great schools.
They should be able to turn it into $100,000,000.
Nearly everyone that has $100,000,000 had a little head start with family money and contacts.
It is also important to remember many (if not most) methods to make $1,000,000 do not simply scale up to $100,000,000 businesses.
Lets suspend all disbelieve for now.....
What about this, what if I co-wholesale a $10 Billion Hotel (or other commercial real estate property) and i happen to be able to do the leg work to find a buyer (or connect a seller to a buyer that is looking for such property) and earn 1% Fee? I just created $100 Million dollars in less than a year.
Lets suspend all disbelieve for now.....
What about this, what if I co-wholesale a $10 Billion Hotel (or other commercial real estate property) and i happen to be able to do the leg work to find a buyer (or connect a seller to a buyer that is looking for such property) and earn 1% Fee? I just created $100 Million dollars in less than a year.
I don't believe there is any single privately owned property worth anywhere near $10B...
I think I recently heard that One World Trade is the most valuable building in the world, and worth about $4-5B.
100m...
1. Learn to Option property in the path of development w/little cash down (Option money) rezone and sell the property on a "simultaneous" closing. (you can get the CD series from Rich Dad Poor Dad called "Rich Dad Advisers" series).
2. Real Estate Option(s) is the most powerful way to get you there assuming you are starting with no money. (read "Deal Maker" by Jerry Wallace Career Press Books on this).
3. Are you watching the debates? Hear the part about Hedge Funds paying less taxes as a percentage, than a secretary? That's "carried interest" at work. Don't take a "salary" forget that, you pay too much in ordinary income tax...derive your income from "carried Interest" where you can and develop what Hedge Funds managers use...if you keep your gain rolling tax deferred, you can do it. That's how Warren Buffett did and others. Also, you should study 1031 exchanges, if you hold your properties for more than one year---roll into another and pay no tax (now).
4. Understanding taxes, since you mentioned compounding interest - that means you can't have "tax leakage" in anything you do, nothing, its a way of life, do it now so you don't get spoiled...
Google "John Malone" and go to the Video of him giving a lecture at Stanford. This is the smartest guy in the US...and he discusses "tax leakage" which is a curse...because what this means is that you "do the most efficient tax leakage avoidance all the time" not much fun, but you set the 100mm goal.
Work hard and always be doing deals. 100m is very possible and very attainable today. With the RE market improving, I believe you can do it. You have to believe you can do it.
Read, study, do... Good luck.
-dr
I hate being the necroposter, but there's lots of inaccurate advice on here. Could be because most of it's coming from RE backgrounds, but I'll give my input here.
I'm 20 years old and run a company thats going to do over $9M in revenue this year, and likely north of $20M next year with my acquisition pipeline and organic growth prospects. The 'secret' of my growth lies in acquisitions. I'm buying 'small' ($2-$5M revenue) service companies with existing cashflow in a healthcare niche for 2-4x of annual net earnings. Leverage is 10:1 with an SBA loan (10% down) and I've been rolling cashflow over for more acquisitions.
Getting to $100M will ultimately require two things.
1) Lots of work
2) Being an equity principal with your own company.
People don't get to $100M without #1, and it takes forever to get there without #2. Build a company, sell it, cash out the proceeds to the tune of 30-50M, reinvest in RE, plus whatever cashflow/dividends you pull from your business along the way. I suggest not trying to reinvent the wheel much like SV is doing, but finding a fragmented business sector where people are already paying for services and the competitive landscape has lots of small companies. Buy several, merge them together, build it up over a few years and then you can cash out. Taking the "Harvard MBA/Wall Street" route for a nice cushy salary, even if you reinvest a lot of your earnings will still not be able to get you to 100M for a LONG time.
Sorry to rain on the parade of previous advice, but there's a repeatable process on how to get to $100M, it just requires following the "Carnegie' roll-up model. Buy small companies, build a large one, sell it to someone else, and there, congrats, you're rich.
I wish I had copied my last response to a similar post. Get your education, work for a syndicate in commercial REI, learn the ropes, start your own company, find other partners that complete the team and have skills you don't have (raising capital, finding deals, managing and creating value in the asset, etc). Use bank leverage, OPM (investors capital for the down), you carve out a GP position and as one of the key principles get 10% of the entire deal. You can syndicate anything but say you do MF apts. You get successful at that and start buying value add apartments getting 1/2 to 1/3 of the 30% GP split. Do 4 - 6 deals per year w/an average of $10m to $30m deal. It won't take you long to get there. I'm working w/partners who are doing this. I don't recommend going to other intl markets as the previous post mentions. The U.S. offers some of the best legal and tax structures in place that are the envy of the world. You don't need to mess w/higher risks of currency, changing legal, tax laws, etc.