Real Estate Agent · Cleveland, OH · Member since 2020 · 280 posts · 365 votes
If you were advising a new investor starting out, what would you say would be the fastest way to make a million dollars investing in real estate? When I say fast, I don't mean get rich quick. I mean the most direct route from A to B.
This is going to come down to the individual and their gameplan, current financial situation, risk appetite, and so many other factors. If I was advising a new investor, I wouldn't tell them to worry about how to get to $1M...yet. First focus on understanding the RE landscape, get your feet wet either through investing, brokering, renovating, managing, etc. in the field either directly or through other investors. Then just jump into something you like and see potential with, and try to become an expert at it. The fastest way to your target financial goal will be being an expert within a particular niche and driving it hard.
You can get to $1M in an infinite number of ways, and just because "X" did it in 1 year by using a certain RE strategy doesn't mean that "Y" will see the same results in the same time. Just like a fitness plan, everyone is very different with so many external variables that will play into the outcome. I used to own a gym, and my personal trainers would always tell our clients to focus on what works for them, and create a custom plan based on their current state, limitations, strengths, weaknesses, goals, etc.
I first started investing in C (some people might call them D) neighborhoods in Detroit. I put my life savings into a tiny commercial building, and snowballed my RE business in the city. I was very naive, putting myself at risk every time I went to the buildings as there was a lot of violence around us and even on our block. But this was my specialty; I knew the area, the types of properties I was purchasing, how to genuinely take care of my tenants, how to find good deals, what was a good vs. a bad purchase, etc. What initially gravitated me towards this was the low purchase price and high cash flow, which as a 22 year was all I took into consideration. I slowly divested and have gone away from this strategy recently, but it did more than 5x (cash flow + appreciation) my investment within a few short years.
So if you asked me a few years ago as I was starting out, I'd say that investing in C neighborhoods is the fastest way (which I really believed then). Today, in a different financial state, I will be considering a different route (apartment complexes, hotels, motels, mobile home parks, etc.) in slightly better neighborhoods. Tomorrow, when I have a wife, kids, etc. there will be other variables that will come into play based on the situation at the time that will definitely alter my investing strategy.
I can't speak to fastest, but I'll speak to how I got to my first million in real estate
I'm Canadian and started investing in the 90s. I started with the stock market. I looked for companies that had valuable assets on the balance sheets that were trading for asset value. My first was King World Productions. They syndicated TV shows of the day including Oprah Winfrey, Jeopardy, Wheel of Fortune and Hollywood Squares. Net profit was $100m a year. They also had $1 billion in cash on their balance sheet. Cash. The business was selling for $1.5 billion on the stock market. That meant that the business would pay for itself in 5 years. King World Productions was sold to CBS and then to Viacom. That's how my grubstake began
I did this a few times. Sunglass maker Oakley was another one. Solid profits. Cash on the balance sheet. And Founder Jim Jannard owned 70% of the company. They were bought by Luxottica etc.
The boom ended with the tech crash. I wasn't impacted because I was buying these weird asset plays and didn't touch anything in tech.
The dot com bust dropped the price for everything. Good or bad. I moved my cash into Berkshire Hathaway class B as their shares went from $2700 (before the 30-to-1 reverse split) to $1400. I picked up a bunch. They were selling for 1x book. My first million happened shortly after the recovery in 2003-ish
Things were quiet for a long time after 2002. As the new bull market got hotter, I became less interested in investing. I just let stuff compound and started stockpiling cash. I made another million just from compounding
The Great Recession woke me up in 2009 and I saw B class properties in B class locations in Phoenix down by as much as 70%. Gross rental yields were above 20% for properties across from nice golf courses. I bought a few and made another million in Phoenix
In short, I made my first million in real estate by buying rentals in Phoenix in 2009. It's not the fastest nor the most efficient, but it was probably the safest. I ran 0 risk of going bust because I never used leverage
@Jim Chuong I think you have touched one of the not so secret secrets to this whole thing- the fastest way to $1 Million may not actually be "fast" relatively speaking. But if you are watching the market and paying attention and you understand the numbers, opportunities do present themselves. Then you have to be patient and wait for the seeds you plant to mature. Sometimes that does happen quickly. Sometimes not. But playing the long game is not a bad idea. My mom is not the only wise one I see :)
1- Education yourself as much as possible (find out the best books etc to read and read them.
2- Condition your mind to always think of money. Question every purchase. Put every dollar into action.
3- Build a network of experts and assets.
4- Envision your goal and how it will feel to be there and use that as your guard to ward off temptations.
5- Let people know what you're trying to do. Most people feel compelled to help others and this will help you enlist a team of people who will be looking for ways to help you accomplish your goals.
6- Write down your goals and review often.
7- Start today. If you delay getting started your mind will convince your soul that you just aren't that serious.
Growing passive income is a process. You might start slow on your first one or two but as you keep the ball rolling, you will notice the compound effect.
This is different for everyone pertaining to the capital in each deal. All depends on what your investment vehicle of choice is and how much you choose to invest in each opportunity.
@Glen Mitchell where to save would have to be a part of that, right? Certainly you could save it and stuff it in the mattress. But that could take a lifetime.
@Erin Dorsey Robinson probably the best way to explain my answer is to reference books like "the Millionaire next door" or "rich dad poor dad" there are a lot of people out there that look rich but they really aren't because they don't know how to save. Skimmed an interesting article today about airbnb owners who were buying one property after another because they could make $8,000 a month. now all their visitors are canceling and they have expenses and cant ride out for even a couple months. that wasn't proper budgeting/saving. At face value to all their friend they looked successful but that may change fast. The good news is that once you figure out how to make a million if you lose it, in general, its easier for you to figure out how to do it again.
@Glen Mitchell I understand exactly what you're getting at. I have some examples of these methods in action very close to home. I think my response was meant to be more of a "yes, and...". IF one could figure out how to save it AND save it in smart places, all the better and all the more money your money makes.
@Erin Dorsey Robinson I'm going to double down on finding good REIT's if you had invested about 3,500 dollars into cell tower REIT's back in 2002 you would be a millionaire right now.
@Erin Dorsey Robinson I'm going to double down on finding good REIT's if you had invested about 3,500 dollars into cell tower REIT's back in 2002 you would be a millionaire right now.
That's a good one! The thing I love about where this thread went is how many ideas there are for investors to think through. I thought it would be beneficial for new people, but a lot of these I'm sure are food for thought even for more experienced investors.