Success Rate in Real Estate...Shockingly Low
Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes
Success Rate in Real Estate...Shockingly Low
Most Popular Reply
NH · Member since 2016 · 56 posts · 73 votes
2yGood real estate investing should be boring. You're not constantly dealing with problem tenants, talking about high COC returns, doing stupidly risky and time consuming flips, etc.
Buy in a good area, make sure it cash flows, put solid tenants in there, then sit and wait for 10+ years.
Sadly I think people overcomplicate or over glamorize real estate investing. Any time I see those or hear those folks, I assume they'll be one of the ones who fail.
I learned this lesson after chasing high COC returns in Akron OH. I got burnt, but I learned and pivoted at a young age. Now I buy locally in good areas, and I've seen my net worth go from 200k -> 1mil in a few years by the time I hit 30, w/ a portfolio of 8 solid cash flowing units. I just wish I listened to the successful real estate investors sooner, and didn't chase solely cash flow right out of the gate.
203 Replies
- Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes2y
Based on your parameters I will guess around 10%.
Of course, there are many of us in that category who also have other businesses (and although we could live off our real estate profits we also have other money coming in through other ventures = investing more in real estate and other things).
I think a good amount of people own 1-3 properties and are content and although they can't live solely off that profit I will still commend them as they're supplementing income and/or if not already they'll someday own a few properties free and clear that they can hold or later sell for a big payday.
- 2yScott TrenchPro MemberRental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
What is "success"? What is an "above average lifestyle"?
Who's happier? The investors making $1M per year, with a huge team, 1,000s of units, and a pile of investors? Or the investor with a paid off house hack, single paid off renal, small 401(k) and after-tax brokerage account?
Both may be happy. Both may be unhappy. One might jetset around the world, become instafamous. OR, they might feel levered to their eyeballs, swamped with problems, and sick to the pit of their stomach that they can't meet the expectations they set for their thousands of investors who trusted them.
The other might be completely content, walking their dog through the park at 2:00 PM on Tuesday at age 35, with the neighbors wondering what they heck they do all day, achieving fitness goals, and mastering meditation. Or they might be bored out of their minds, and can't stand the fact that they didn't pursue their maximum potential.
There's no right answer in this business. But, I will say, that for me personally, the "Small and Mighty" portfolio is really attractive. There is a growing appeal to declaring that whatever "enough" is from this business, that I have achieved it. Ignoring the math and simply focusing on deleveraging and creating increasing amounts of freedom.
As @Jim K. mentioned, this industry is dominated by investors with 10 or fewer properties. 60% of single family rentals are owned by investors with 1 or 2 properties outside of their primary. To declare that these folks are not a "success" when many of them may have created hundreds of thousands of dollars in wealth, or drive $10,000+ in cash flow from their properties, as part of a complete portfolio is too simplistic.
But, to acknowledge the truth of your post - there are also many investors who, starry eyed, want to become mega-millionaires, and can't or won't see the implications, risk, and secrets behind the social media success of many influencers. And there are also those who just compulsively can't stop trying to double the penny, who will never stop doubling down, and therefore ultimately go bust in the relentless pursuit of billions.
RE is a nuanced game. There are 17M+ investors. A lot more than 5% will call it "successful" for them. But yes, likely less than 5% of them will go on to purchase more than 10 properties, and of that cohort, some fraction will not actually achieve the wealth and freedom that they seek.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes2yIt just has to push the right psychological buttons.
Quote from @James Hamling:
So the ugly truth is the most successful approach in REI today is either the get-rich-slow program, or start selling the "secrets to success" and apparently it doesn't have to actually result in any real success to sell.
I still remember the 3-day seminar I went to with a friend. Beforehand, I told him flat-out, "Believe nothing you hear. They're trying to rip you off." The presenter of this seminar actually had to put up a disclaimer on his slide projector that included the statement, "In real estate investing, most people make nothing." every hour of the seminar or so.
My friend spent the first day joking about my paranoia.
By the third day he was ready to mortgage his house if I went half-in with him to buy this program's Diamond level coaching. With absolutely no exaggeration, I literally saw this man's brain washed right in front of me.
We're not friends anymore. - Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes2yThanks so much for chiming in here, Scott.
Quote from @Scott Trench:
What is "success"? What is an "above average lifestyle"?
Who's happier? The investors making $1M per year, with a huge team, 1,000s of units, and a pile of investors? Or the investor with a paid off house hack, single paid off renal, small 401(k) and after-tax brokerage account?
Both may be happy. Both may be unhappy. One might jetset around the world, become instafamous. OR, they might feel levered to their eyeballs, swamped with problems, and sick to the pit of their stomach that they can't meet the expectations they set for their thousands of investors who trusted them.
The other might be completely content, walking their dog through the park at 2:00 PM on Tuesday at age 35, with the neighbors wondering what they heck they do all day, achieving fitness goals, and mastering meditation. Or they might be bored out of their minds, and can't stand the fact that they didn't pursue their maximum potential.
There's no right answer in this business. But, I will say, that for me personally, the "Small and Mighty" portfolio is really attractive. There is a growing appeal to declaring that whatever "enough" is from this business, that I have achieved it. Ignoring the math and simply focusing on deleveraging and creating increasing amounts of freedom.
As @Jim K. mentioned, this industry is dominated by investors with 10 or fewer properties. 60% of single family rentals are owned by investors with 1 or 2 properties outside of their primary. To declare that these folks are not a "success" when many of them may have created hundreds of thousands of dollars in wealth, or drive $10,000+ in cash flow from their properties, as part of a complete portfolio is too simplistic.
But, to acknowledge the truth of your post - there are also many investors who, starry eyed, want to become mega-millionaires, and can't or won't see the implications, risk, and secrets behind the social media success of many influencers. And there are also those who just compulsively can't stop trying to double the penny, who will never stop doubling down, and therefore ultimately go bust in the relentless pursuit of billions.
RE is a nuanced game. There are 17M+ investors. A lot more than 5% will call it "successful" for them. But yes, likely less than 5% of them will go on to purchase more than 10 properties, and of that cohort, some fraction will not actually achieve the wealth and freedom that they seek.
I think this is why it galls it so much when I say what I think are very reasonable things about not taking suicidal risks in this business and approaching what must be done with the right methodical mindset, and random BP posters accuse me of killing people's dreams.
I own more than 10 units. I'm very much in the five percent. I'm the last guy to discourage anyone from putting their money in real estate.
But if you're going to go into this thing, you go in it to win it, and only the hand of God should have the power to make you lie down and die. For the hundredth time in my posts:
“It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself in a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.”
Theodore Roosevelt, 1910 - 2yMark WilliamsPro MemberReal Estate Broker · Huntington Beach, CA · Member since 2010 · 63 posts · 35 votes
Quote from @Peter Vekselman:
If you had to guess, what is the success rate in real estate investing? Success being defined by someone being able to live above average lifestyle strictly based upon their earnings in real estate.
I bet its below 5%.
What do you think?
Hi Peter,
Absolutely, it's great that you're aware of the 5 percent statistic, but it's essential to remember that success in real estate, like in any field, is not solely determined by statistics. With determination, a property mindset, and a never-quit attitude, you can defy the odds and achieve your real estate goals. Statistics may provide a general overview, but your individual path is what truly matters. Stay focused on your goals, keep learning, adapt to challenges, and your chances of success will far exceed any statistical prediction.
As Winston Churchill once said, "Success is not final, failure is not fatal: It is the courage to continue that counts." Keep moving forward with courage and determination! - Member since 2023 · 1 post · 1 vote2y
Whats a good way to get into real estate if you got some spare change saved up i havent got a degree no qualifications but am willing to go that extra mile
- Member since 2023 · 1 post · 1 vote2y
As an insurance agent, I have a good amount of clients that invest in real estate not to become full time investors, but to supplement their retirement assets in the stock market. I would agree that not many real estate investors end up earning 100% of their income from their portfolio for an above average lifestyle, but I see it regularly that investors have a small portfolio for cash flow or to grow their net worth outside of the stock market. I've seen a handful of clients sell their small portfolio to buy a business or to simply sell for cash to put with their financial advisor to compliment their retirement assets. I'd still call that successful to have the ROI they get from their small portfolio, but agree that it's probably less than 5% that have an above "average" lifestyle just from real estate, especially before traditional retirement age.
- Member since 2021 · 401 posts · 254 votes2y
Advice from my own experience to the casual buyer with their own 9-5 job. Success is low because everyone listens to these books that say you just need to
1) Buy a house with near zero down
2) Cashflow.This is not true especially at 8% rates. You need at least 50% down in states like CA, Austin or Tampa just to break even. These books don't tell you that they're investing in the ghetto and need to collect rent with a shotgun just to cash flow. Even if it appreciates and you sell, you're paying 10% off the top in fees, then another 28% federal and 13.3% state tax rate if you're in Cali. You can 1031 exchange but you're never realizing those gains and you can't draw from it in retirement unless you do a reverse mortgage which is reserved for elderly retirees that won't outlive their equity. Additionally, the casual buyer buying debt will not cash flow for 30 years and even then it may not cashflow because a turd doesn't get better with time because any rent appreciation is negated by the aging house maintenance and property taxes such as Texas or HOA fees like some condos which saw HOA fees go up faster than rents even 10 years later.
If you're not being biased, you will realize that only a small percentage of people will have enough properties paid off by retirement age to actually retire on its passive income alone and even then, you're constantly managing these properties, selling old troubled ones for new ones possibly taking on new higher rate mortgages in the process. Even 10 properties is a headache trying to streamline everything and reduce risk. A tree in a storm almost crushed my tenants cars and could have killed someone and taxes are a pain at the end of the year trying to find my deleted bookmarks and what the HOA changed their management company to or mortgage that was sold off without telling me thus nearly destroying my credit.
Put it this way, If the average person started in real estate 20 years ago, those properties may have tripled in value, but the S&P 500 has gone up like 1000%. I did the math and the S&P would have put me in retirement much faster with zero hasle. Just something to think about. The exception here is a huge salary that can afford the down payments that will allow them to at least break even which only the top 5% of the population has and if you're lucky, know the area and nothing changes over the decades.
What I always recommend is this, buy your own house to live if you're married and having kids, then later, buy just 1 low maintenance investment condo that you can eventually sell after retirement for play money and projects. My fathers house tripled and is paid off but he can't just rent it or sell it because he wouldn't have anywhere to live so the equity is forever unrealized and might as well be fake. You're much better off maxing out a401k employer matching + Roth ira for 20 years and retire early. My father started late, in his 50s and just over 10 years later has grown to around half a million. Imagine starting in your 20s instead of struggling to pay for that mortgage that will keep you in debt for 30 years.
- Investor · Lakeland, FL · Member since 2015 · 344 posts · 606 votes2y
As to real estate investing, I would say it was less than 5%, based strictly on consistent action alone.
I say consistent action, because everyone took action in some way, by either purchasing the course, watching the YouTube vids, going to the seminars, even the next stages of setting up the LLC, business cards, etc…
The key is consistent.
There’s an old saying, “a journey of a thousand miles begins with a single step.”
Well that is true, but there’s more to the story.
A journey of a thousand miles does indeed begin with a single step, but if you don’t take the next step and the next, and the next, you will never get to your destination.
It’s the same thing with this business. Most people think that their initial step will have enough momentum to get them to the finish line. However, they must maintain action day by day or they will never get to their destination.
The other part that I believe is, this is one business that should not be attempted alone.
In the old days, most businesses were learned by a relationship between tradesman and apprentice. This should be no different.
Even the realtor process requires a salesperson(apprentice) to fulfill 2 years under a broker(trademan) before they can venture out on their own.
I believe this would reduce quite a bit of trial and error and failure in general if this process was truly available to the investor community.
I am a huge advocate for a mentor/mentee relationships.
- Member since 2021 · 401 posts · 254 votes2y
Quote from @David Dey:
I say consistent action, because everyone took action in some way, by either purchasing the course, watching the YouTube vids, going to the seminars, even the next stages of setting up the LLC, business cards, etc…
The key is consistent.
There’s an old saying, “a journey of a thousand miles begins with a single step.”
Just curious if you're the <5% that is able to retire off your real estate investments alone? Because this is the typical motivational speech you get from every book out there i.e you can do it, consistency, one foot in front of the other and sprinkle in some Chinese proverbs and you're better off selling DVDs and books for a living instead because it's more lucrative than Real Estate.
I don't think people are understanding the question. The question is why don't people make it in real estate. The people who never started real estate is not included in the <5%. It's the people with multiple properties that are a liability, take up all your time when you could have just invested in the stock market 20 years ago with employer 401k matching that would have got you that early retirement.
- 2yRay WilliamsBusiness MemberLender · Denver, CO · Member since 2017 · 152 posts · 68 votes
I guess i have add'l questions. What is an above avg lifestyle? At this stage for me, no. If I sold everything could I retire, and live comfortably yes. What is needed, what is comfort? As for now, I am beginning to value time more than money, so to have more time to do what lifts me up would be comfortable. Great question!
- Investor · Lakeland, FL · Member since 2015 · 344 posts · 606 votes2yI disagree. I believe that the <5% includes the ones who have done a few properties and the ones who haven’t. They may have gotten a contract or two because they offered too much and can’t dispo it . Those are the ones that can not only improperly skew the offer market and can give the ones who are making genuine offers a bad rap.
Quote from @K S.:
Quote from @David Dey:
I say consistent action, because everyone took action in some way, by either purchasing the course, watching the YouTube vids, going to the seminars, even the next stages of setting up the LLC, business cards, etc…
The key is consistent.
There’s an old saying, “a journey of a thousand miles begins with a single step.”
Just curious if you're the <5% that is able to retire off your real estate investments alone? Because this is the typical motivational speech you get from every book out there i.e you can do it, consistency, one foot in front of the other and sprinkle in some Chinese proverbs and you're better off selling DVDs and books for a living instead because it's more lucrative than Real Estate.
I don't think people are understanding the question. The question is why don't people make it in real estate. The people who never started real estate is not included in the <5%. It's the people with multiple properties that are a liability, take up all your time when you could have just invested in the stock market 20 years ago with employer 401k matching that would have got you that early retirement.
Also, I don’t have anything to sell. These are principles I have learned studying this game over the last 25 years plus having been a part of over 2000 deals. (And yes I have lived exclusively off of my earnings in REI for the last 25 years)
Just because a “guru” may have said it doesn’t make it false, just like you condescending it doesn’t make it false.
That being said, when I say “mentor/mentee” I most certainly do not mean some national “guru.”
I mean an actual person who is succeeding in the apprentice’s local market. Someone who can give him/her the guidance they need.
At the risk of being accused with plague is in another “ancient Chinese proverb,” I can honestly say that every level in this business I have achieved, I can absolutely correlate with a relationship that I have acquired. (Not always a mentor, however someone who added something to me and my knowledge or experience) - Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Love it....You are exactly the individual that famous book we all read or heard about referenced....
"The millionaire next door"
Great job! Keep being you....
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
All valid points. I will take it a step further. You really need majority of these things to happen for you to start achieving success as a real estate investor. And its one thing to start achieving it, as you know, keeping it is the real skill set.
- New to Real Estate · NJ · Member since 2023 · 71 posts · 20 votes2y
Quote from @Doug Smith:
I was just talking to an architect about this. The vast majority of people that talk about getting into investing never pull the trigger. It's been that way for my entire career. I think your probably right about the 5%...but that's because few actually act...most just talk about doing it.
This could not be more real Doug,
Analysis Paralysis is such a real thing. For many it becomes a hobby to learn, but pulling that trigger is a difficult thing for many to overcome.
I look forward to getting my first deal soon, so I can finally be proud for myself getting out of that stage.
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Point well taken. The definition does vary. Having said that, i bet as much as most definitions change, if you ask the typical person in this business, less then 5% would meet their standards and definitions of success.
- New to Real Estate · NJ · Member since 2023 · 71 posts · 20 votes2y
Peter, I would also say you are about right.
It is difficult for many to overcome the final step into getting started (I find myself their currently) It is most definitely a huge roadblock for many.
But the ones who are truly motivated and have a "reason" to be. Whatever that may be. Will be the ones to be successful.
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @David Dey:
As to real estate investing, I would say it was less than 5%, based strictly on consistent action alone.
I say consistent action, because everyone took action in some way, by either purchasing the course, watching the YouTube vids, going to the seminars, even the next stages of setting up the LLC, business cards, etc…
The key is consistent.
There’s an old saying, “a journey of a thousand miles begins with a single step.”
Well that is true, but there’s more to the story.
A journey of a thousand miles does indeed begin with a single step, but if you don’t take the next step and the next, and the next, you will never get to your destination.
It’s the same thing with this business. Most people think that their initial step will have enough momentum to get them to the finish line. However, they must maintain action day by day or they will never get to their destination.
The other part that I believe is, this is one business that should not be attempted alone.
In the old days, most businesses were learned by a relationship between tradesman and apprentice. This should be no different.
Even the realtor process requires a salesperson(apprentice) to fulfill 2 years under a broker(trademan) before they can venture out on their own.
I believe this would reduce quite a bit of trial and error and failure in general if this process was truly available to the investor community.
I am a huge advocate for a mentor/mentee relationships.
I especially subscribe to your second point. And I call it the biggest pillar of Success. ALIGNMENT!!!
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @Bob S.:
Quote from @Peter Vekselman:
If you had to guess, what is the success rate in real estate investing? Success being defined by someone being able to live above average lifestyle strictly based upon their earnings in real estate.
I bet its below 5%.
What do you think?
IMO it's because so many read books, watch tapes and think they are ready, when books and tapes are not reality So many try and go it alone and get crushed. All they need to do is connect with those doing deals and learn from them its not rocket science. I knew zero 10 years or so ago. Well, my 1st month I flipped a contract for 19k, well 500, yes about 500 deals later nothing I have not done. All while never reading one book on RE. So many make it more complicated, it's just numbers. Not really sure about the %. However, all my colleagues are hugely successful.
All the best
congrats! you are a rare one in this business. i would say you are a natural. most would not be able to duplicate the way you have done it.
and you very much remind me of myself. after 25 years in the business, i still have not read one real estate manual or training book:)
lets keep that to ourselves:)
- Investor · Lakeland, FL · Member since 2015 · 344 posts · 606 votes2yI truly believe it. As I mentioned in another response, every level of success I have achieved has correlated to a relationship developed.
Quote from @Peter Vekselman:
Quote from @David Dey:
As to real estate investing, I would say it was less than 5%, based strictly on consistent action alone.
I say consistent action, because everyone took action in some way, by either purchasing the course, watching the YouTube vids, going to the seminars, even the next stages of setting up the LLC, business cards, etc…
The key is consistent.
There’s an old saying, “a journey of a thousand miles begins with a single step.”
Well that is true, but there’s more to the story.
A journey of a thousand miles does indeed begin with a single step, but if you don’t take the next step and the next, and the next, you will never get to your destination.
It’s the same thing with this business. Most people think that their initial step will have enough momentum to get them to the finish line. However, they must maintain action day by day or they will never get to their destination.
The other part that I believe is, this is one business that should not be attempted alone.
In the old days, most businesses were learned by a relationship between tradesman and apprentice. This should be no different.
Even the realtor process requires a salesperson(apprentice) to fulfill 2 years under a broker(trademan) before they can venture out on their own.
I believe this would reduce quite a bit of trial and error and failure in general if this process was truly available to the investor community.
I am a huge advocate for a mentor/mentee relationships.
I especially subscribe to your second point. And I call it the biggest pillar of Success. ALIGNMENT!!!
(not necessarily a mentor each time, but someone who added to me and my experience) - Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @Amin Kamaly:
Whats a good way to get into real estate if you got some spare change saved up i havent got a degree no qualifications but am willing to go that extra mile
that last one maybe your key to success. but it will take a lot more then just one extra mile. be prepared to do as many miles as it takes.
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @Daniel McDonald:
I would guess fairly low too. The majority of people know real estate investing is a vehicle for wealth but most are afraid to take the leap. Those who do usually don't reach Brandon Turner level but I think success isn't black/white enough to measure across the board. Some people may buy an investment property just to be able to subsidize their parent's living expenses, take a great vacation every year, or retire early. Success is different to everyone.
Agreed. But even by those standards I bet very few people achieve whatever their own personal definition of success is.
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @Konstantin Ginzburg:
I think the success rate has a lot to do with the time frame you are measuring against and the strategy you are using. For example, fix and slippers are greatly affected by shifting interest rates and are often targeting short term profits per project so success rate is likely lower due to this short time window. On the opposite side, a buy and hold strategy is more likely to have a higher success rate since the target time window is much larger and due to appreciation, real estate and rent prices have historically gone up consistently. If you buy a property, and hold it for ten years while keeping it consistently rented, the success rate of that project is likely to be high. Most likely, if you are in a financial position to acquire investment properties; you likely are already enjoying an above average lifestyle; so the additional cash flow from real estate investing is likely just going to add onto that. I believe that both time frame and financial education is the key to achieve success in real estate. The more of both you have, the higher the success rate.
well said. when you run out of time, and you dont know what to do, you are simply out and done...
- Lender · Riverside, CA · Member since 2017 · 248 posts · 98 votes2y
I think the reality is, too, that most people have a hard time figuring out how to scale. Earning $200-$300 per door after expenses makes it seem like a big mountain to climb for that to fully replace a w-2. But understanding strategies both in theory AND practice for growth like BRRR, flipping, the art of the value-add... and understanding how to pick a market and value a deal requires an investment in yourself. You actually have to do it. It's like learning a sport by watching youtube videos.... can it be done, maybe. But the bigger and better education comes from making mistakes.... and decisions. It also involves saying no to other things. So much of my time is not spent watching Netflix, but on learning and networking.
- Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes2y
Quote from @Peter Vekselman:
Quote from @Bob S.:
Quote from @Peter Vekselman:
If you had to guess, what is the success rate in real estate investing? Success being defined by someone being able to live above average lifestyle strictly based upon their earnings in real estate.
I bet its below 5%.
What do you think?
IMO it's because so many read books, watch tapes and think they are ready, when books and tapes are not reality So many try and go it alone and get crushed. All they need to do is connect with those doing deals and learn from them its not rocket science. I knew zero 10 years or so ago. Well, my 1st month I flipped a contract for 19k, well 500, yes about 500 deals later nothing I have not done. All while never reading one book on RE. So many make it more complicated, it's just numbers. Not really sure about the %. However, all my colleagues are hugely successful.
All the best
congrats! you are a rare one in this business. i would say you are a natural. most would not be able to duplicate the way you have done it.
and you very much remind me of myself. after 25 years in the business, i still have not read one real estate manual or training book:)
lets keep that to ourselves:)
Keep keeping it simple, and crushing it!!
Join the conversationCreate a free account to reply, vote on answers and follow this thread.