Have you heard that 90% of millionaires & billionaires made their money in Real Estate...

19 Replies

Then you were mis-informed.  The following article from MSN lists the riches person in every state.  Nearly all did NOT become rich in real estate.  Familiar names like Warren Buffet, Bill Gates, Larry Ellison, Michael Bloomberg, Walton Family, etc.  Most founded or are CEOs of a large company like Fidelity Investments, and other well known companies. 

That does not mean that real estate is not a good investment especially for people starting out with no money and no experience, but the 90% figure is false, sorry.


Real Estate WAS a growth industry 100 years ago.  Tech, BioMed, and Services now are.  Maybe tides will be changing again?

@Sean T.  

Maybe, the captains of the day, Carnegie, Rockefeller, JP Morgan, Ford, Vanderbilt and others were focused primarily on industries like steel, oil, banking, cars, railroads, and true they did acquire real estate, but that wasn't their primary focus.

When Morgan bought Carnegie Steel, he made Carnegie the richest man in the US and maybe the world.

Totally agree with you @David Krulac , I've always felt real estate investments don't tend to cash flow well. We get excited about 20-30% COC returns when other industries are looking at 100-300% COC returns or even much much more. (of course in some ways that cash down is unsecured).

I've always felt RE is only one of many tools to be used if one wants to grow extremely wealthy. Nothing wrong with RE as an investment. Combined with other forms of cash flow, I think it becomes a very powerful tool.  

For every Bill Gates or Michael Bloomberg there is a Donald Trump or Donald Bren who have made their money in real estate, I personally love Donald Trumps story because he started his career doing one of the largest deals in NYC history with none of his own money and very little experiance. I guarantee that the gentlemen you are talking about do own multiple forms of real property because we all know the tax benefits of owning real estate, Trump has been know to buy cheap abandoned property just for the tax write offs and he says that they are in areas he feels are going to come back around someday but really it is just to lower his tax bill.

Just like anything there are multiple ways to make money and I would bet most of us don't care to be millionaires we just want to use real estate as a source to help grow our wealth to provide for our families, if you are looking to get rich quick you might want to try a different avenue this game is more for the long term wealth then the get rich quick.

Also Warren Buffet just made a deal prudential ealier this year to make them Berkshire Hathaway, he obviously sees potential in real estate as we all do. 

The rail roads cleaned house with real estate. They would get wide swaths of land to build their skinny tracks. No one thought to question as it was empty land and who cares how wide it was. Well these rail roads went thru and created nearly every major city in the country. I am fairly certain they made more on the real estate than they did on the trains eventually.

@Matt R.  

Here in the EAST, the swaths of land were not nearly as wide.  I've owned property along railroad tracks, and in some cases the RR didn't own the land only had an easement, so the RR didn't own the land.  In other cases the agreement between the original land owner and the RR was that if the tracks ever become inactive that the land reverts to the original owner/family.

And don't forget that Penn Central and many other RRs went bankrupt. 

@David Krulac   I would have to disagree with you the article is just stating the riches people in each state not the top 10%.  Not sure if you saw the video about "wealth inequality in America," look it up on youtube it talks about how the 1% hold most of the money in the country.  Those riches people in each state are those 1%.  Also being a millionaire now days doesnt mean much if its just on paper I can be a millionaire after buying couple houses in hawaii, but in actuality I'm broke and pinching pennies lol.  House rich, money poor.

Originally posted by @CK Hwang :

Totally agree with you @David Krulac , I've always felt real estate investments don't tend to cash flow well. We get excited about 20-30% COC returns when other industries are looking at 100-300% COC returns or even much much more. (of course in some ways that cash down is unsecured).

During the past few years I have shot for and achieved 100 to 300 percent annual returns.  Now that I have built up a sizable amount, I am looking for a considerably smaller amount.

We should not get excited over 20% annual returns during most stages of the cycle. 

@Steve Olafson  that is so amazing you can do 100% to 300% returns a year. I have no idea how to do so through real estate investing unfortunately, so need to look elsewhere and I'm still not sure how to grow it so fast safely. 

Originally posted by @CK Hwang :

@Steve Olafson that is so amazing you can do 100% to 300% returns a year. I have no idea how to do so through real estate investing unfortunately, so need to look elsewhere and I'm still not sure how to grow it so fast safely. 

Well, you answered yourself here...  You put the limitation right into the sentence.  In my opinion it is fear that is holding you back.  Otherwise the word safely would not have crept into your thoughts.

I bought **** that other people would not buy because of the high vacancy.  I knew that I would be able to fill the apartments up.  Some were less than 20% occupied on the day of closing. 

I can't even measure the return on one deal.  No money down and made several hundred thousand in less than 2 years.  You would have to consider the time put into this but it was not my only project going on.  My other projects were all making over 100% annually as well during this period.

Anybody could do this with practice and timing.  I'm certain that there are others on this forum doing the same thing with comparable or even better results. 

Take your self limiting thoughts away and come up with another strategy.

I stand corrected David. It was more a west of the Mississippi deal. They owned all the mineral rights too. They lease those lands to oil drillers today. Union Pacific and I think Sante Fe RR got a nice chunk too. 

@Steve Olafson  

We like to follow a similar strategy and are branching into yet another City with a small (5-unit) which is 80% vacant and in a C-, though turning around, neighbourhood. The banks has had this REO for almost 2-years - initially asking $150K (balance of mortgage), now down just under 100K. We threw a 40K offer at them a couple of weeks ago and they are seriously considering it.

Normally, we would not bother with one small 5-unit, however in the process of exploring the neighbourhood and speaking to the neighbouring owners, 5 of the nine buildings on that side of block are, or could be, "available".   I think we could secure control of them all for <400K out of pocket .... my new winter project ;-)

So what is the correct figure? The article doesn't address this.

If you reverse engineer how money is made in real estate, the essential benefits are revealed:

1) Use

2) Profits

3) Growth

4) Income

5) Management

6) Amortization

7) Tax benefits

Now, look at real estate from the satellite view and the effect of time:

Growth, speculation, cresting, decline, blight and ghost town.

Until people had a way to connect with others, they needed to be physically close to the employer that created the employment or the crops or industry that generate cashflow and profits. 

Besides the the ones who own the factories or natural resources, many who have made fortunes have been the people who "sold shovels to gold miners". In the last century, many fortunes were made by those who built large tracts of home for workers. I guess shelter is still popular fir most of us fortunate enough to afford a roof over our head.

I've never been inclined to become a billionaire in real estate. Or any other industry, either. One of my mentors was the founder of Fleetwood (manufactured housing, mobiles and motor homes). I observed that he required a security detail wherever he went. How cumbersome that seemed to me.

Consequently, I have the freedom to go where I want, do what I want and be around who I want without a ball-and-chain called 'bodyguards'.

I think the point @David Krulac  is trying to make is that the idea that 90% of the richest made their money in real estate is untrue. I agree.

However, you'll find more wealth is created and passed from generation to generation with real estate. As a trusts and estates guy, I've observed many thousands of estates change hands. The ones who sell their properties to liquidate and distribute spend all the the cash with 18 months. Usually less. That is the reverse of wealth-building.

Real Estate  I would say is a good tool for savings and build up for the future

If you are consistent and "lucky" you can become comfortable, if you extremely lucky maybe rich

I personally don't trust stocks, mutual funds, for me Real Estate in my unique option

You will be rich if you follow your passion.  You may not be the wealthiest but in terms of a level of economic comfort and enjoyment if your passion is real estate you will be rich.  When starting out money is the most important lure. (Maslow's hierarchy} After you are able to support yourself follow your passion.  What fun life becomes then.

It may be true for the ultra wealthy that RE was not their path to wealth, but for millionaires which is the new middle class RE is still a lion share of their paths to wealth.

I don't have the knowledge, passion, or desire to start a "traditional" business like Bill Gates or Billionaire X. 

But I do have passion, desire, and building the knowledge to make money in real estate.

Those factors cannot be ignored.

Furthermore, failure in all business is common, but if I had to guess, I'd say failure happens at a higher rate for "traditional" business ventures vs real estate ventures. I can't back that up though.

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