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
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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
- Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes2yInteresting. Did they teach you how to market, contact clients, qualify buyers, work with lenders, present purchase & sale agreements, sell, comp properties, negotiate, do opens, deal with clients through the process, track leads, keep a database, do all they things a real estate investor does to buy and maintain properties?
Quote from @Samuel Coronado:
Quote from @Account Closed:
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?
I hadn't thought of it that way. Tho, I've read that 80% of real estate agents make it one year. Some make it two years.
Currently there are about 48,165 active agents in Maricopa County, AZ. Redfin says only 1,347 homes were sold in the last 30 days. That isn't very many homes. Some real estate agents aren't eating, just are not enough sales.
Let's assume there are two agents for each sale, one selling agent and one buying agent, that means 0.05593% or that's about 5 1/2 % of agents participated in a sale last month. That doesn't mean they will participate in a sale this month or next month.
One Facebook group of “would be” Creative Finance "investors" has about 115,000 people signed up. They do about a dozen deals a month all told. That's about 0.000104 % Some of those people purportedly pay $8,800 or more to be part of a "special group" where other people who also aren't doing deals are telling them how to do deals and making them "feel like part of a community".
So, your comment: "I bet its below 5%." I think that's very overly optimistic.The thing about it, the right personality with the right one on one training, makes a fortune.
Selling homes isn't the only reason people get a real estate license. I worked on it just to see what kind of training agents did. I never took the test because I didn't want to have to introduce myself as an agent during opening negotiations (a legal requirement in my state), but it was eye-opening to see what is emphasized and what isn't. I've known property managers to get licensed as agents instead of just managers as well for the extra perspective. My attorney did it just for the fun. My accountant did it just to get a little more perspective as well. My wife did it just to say she did. It is not a large time commitment and extremely low costs for the exam and classes. I don't the majority of people who get licensed are doing it with the intent of actually getting in the business of buying and selling homes as an agent. It's as easy as getting a PMP, EMT-B, SEC+, SFPC, etc except this requires no technical prerequisites of knowledge.
Probably not. What they probably taught you was law and regulations and how not to get sued representing clients. That's all well and good, but it doesn't have anything to do with being a real estate investor. - Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes2y
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?
This is why we need more resources around real estate, not just general resources, specific resources to help mentor people just getting in! For example im from Ohio, it took me 5 years to really understand what I was doing and start making serious money. The first 5 years was filled with a lot of wasted time, money and energy!
- 2yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
Quote from @Zach Strickland:
Like others have mentioned, I think it's hard to define success since everyone has a different answer to what an average lifestyle is.
My goal is to have the LEAST amount of properties that will get me between $200-$250k cashflow. I have taken a scalpel approach to meet this goal and it hasn't been extremely fast. The first property was a BRRRR that we left no money in and cashflows around $500 a month. I quickly understood that I would need about 10 properties like that completely paid off to get close to my goal. I pivoted and decided to build a STR in a premium location which came with its own challenges (interest rates, timeline, budget, etc...) This year that property will cashflow 6 figures after expenses.I'm now hunting for the next deal, but not in a hurry with the market uncertainty. I may only do 1 more deal and then focus on paying everything off which I know goes against all the guru's strategy of "LEVERAGE."
Great strategies and very well said. I like your simple approach. Leverage is not for everyone. We all have our different goals.
NETWORTH BUILDERS5236 Reviews - Investor · Dallas, TX · Member since 2021 · 36 posts · 16 votes2y
All it takes one eviction to destroy most people's metric of success. Replacing a roof wipes away years of gains if these issues are not factored when buying. Most people's definition of cash flow is also flawed. So, yeah being truly successful in real estate is no common just as it is not in stock markets, bitcoins, or anything else. Otherwise, country would be full of millionaires.
Another issue is survivorship bias. One will see thousands of "how I made X money in real estate" videos but does not see much "how I lost" videos, which makes an illusion among new investors.That said, with a good education and training, one can achieve success. And no, I do not mean paying thousands to self-proclaimed gurus, who just want to "help" other investors. Using your local library is a great place to learn more and make less mistakes. I personally avoided many mistakes using the knowledge I got from the books. It is the only place where you get tons of gain for free (well, almost free:))
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @Turgut Oz:
All it takes one eviction to destroy most people's metric of success. Replacing a roof wipes away years of gains if these issues are not factored when buying. Most people's definition of cash flow is also flawed. So, yeah being truly successful in real estate is no common just as it is not in stock markets, bitcoins, or anything else. Otherwise, country would be full of millionaires.
Another issue is survivorship bias. One will see thousands of "how I made X money in real estate" videos but does not see much "how I lost" videos, which makes an illusion among new investors.That said, with a good education and training, one can achieve success. And no, I do not mean paying thousands to self-proclaimed gurus, who just want to "help" other investors. Using your local library is a great place to learn more and make less mistakes. I personally avoided many mistakes using the knowledge I got from the books. It is the only place where you get tons of gain for free (well, almost free:))
no question, you can sneeze the wrong way in this business and lose 10k. bottom line, mistakes cost money in real estate. and for most its not the kind of financial hits they can waistband.
no one has a zero to success story in real estate. all of us that are still standing have a horror story to tell of what it took to get their. i do believe most successful people share their bad times stories.
nooks are great to learn from. although i believe the real education comes when you have someone with you holding your hand throughout the process. every deal is different and unique.
thanks for contributing...
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @Steven Foster Wilson:
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?
This is why we need more resources around real estate, not just general resources, specific resources to help mentor people just getting in! For example im from Ohio, it took me 5 years to really understand what I was doing and start making serious money. The first 5 years was filled with a lot of wasted time, money and energy!
@Steven Foster Wilson your story sounds just like mine. it took me three years to get to zero. thats because I went backwards to a tune of almost $750k in the first several years. i think to do this business in a vacuum and all alone is nearly impossible and in the end may not be worth it. i dont think most people would put up with the hell I went through trying to build this myself...
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @Andrew Syrios:
It sort of depends on what we mean by "success." I suspect that 5% figure is true regarding wholesalers. I suspect flippers and buy and hold types are a decent amount higher. But those who do house hacking and slowly but surely build up a portfolio probably have a success rate much, much higher. I would bet over 50%.
The problem in many cases is that people want to make a quick buck with real estate but it doesn't work that way. It's a long game but a very lucrative one.
i cant believe in todays day and age people look at real estate as an overnight success. but you are right, many do. overnight in this business literally equals luck. and we all know that will run out sooner or latter.
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
this business needs more of people willing to do deals with their so called students. that in my opinion is the ultimate way to learn and grow.
- Homeowner · Member since 2023 · 11 posts · 4 votes2yGreat advises! #3 is a little tough for California, but probably doable with proper searching.
Quote from @Ryan Randall:
Quote from @Phillip Lebron:
@Ryan Randall who are some good sources for information? I see a lot of a REI content is very glamorous and over the top with drawn out success stories. I prefer the purely the educational platforms do you have any you could suggest?
After a certain point, accumulating more education/knowledge isn't really beneficial. You need to start taking action.
My recommendation would be to find a few folks on here who are successful but not trying to sell you something. Listen to them.
I've found it typically boils down to a few simple rules:
1. Buy in a good location. Think a location where you could see yourself/your family living.
2. Buy local. People will argue otherwise, but this will greatly simplify your life. I'd say a 20 mile radius.
3. Make sure it cash flows at least 10% COC. I typically shoot for 15%+ COC. Take all expenses into account, and don't under-estimate them to make a deal work.
4. Use leverage. When you're younger, the more the better. Use an FHA, VA, or conventional loan.
Do that, and the other pieces will start to fall into place. Eventually you'll start to branch off and learn more about the tenant vetting process, the legal process, how to find good contractors, etc. Don't become someone who has paralysis by analysis. You eat an elephant one bite at a time. Follow some simple guidelines, and take action. - Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @Jim K.:
It 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.@Jim K. lol....so I have been in the same shoes as your friend....and i think maybe i did mortgage everything I had:)
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @Mark Williams:
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!@Mark Williams brilliantly said. no question about it. biggest killer of dreams in real estate is peoples inability to move forward...its crazy to think about how many dreams and goals lay on the road to success of real estate investing. for those that have stood the test of time see many people simply give up and quit...
- Member since 2019 · 151 posts · 20 votes2y
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?
5% of who?
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @Shawn Krieger:
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?
5% of who?
those that try to achieve success. not just think about it, but actually put time and effort into it.
- Member since 2019 · 151 posts · 20 votes2y
Quote from @Peter Vekselman:
Quote from @Shawn Krieger:
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?
5% of who?
those that try to achieve success. not just think about it, but actually put time and effort into it.
i have a deal at 1.4 where the seller agreed tentatively to seller finance downpayment at 350k do you have access to any equity partners who'd be interested in coming in for the purchase? - 2yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votesI fully leverage so I’m only 20% into a house. Between principal pay down on my mortgage, monthly cash flow and appreciation, I’m making an internal rate of return around 80-120% on most of my properties off my small 20% down payments. And it’s all tax free. I don’t invest in condos due to HOA and special assessments fees. Sounds like you have too much money into yours. I put minimal down them recycle the equity to generate more cash flow. I’ve paid myself back every penny I put into RE. So it’s all infinite returns from here on out. Cash flow is about 13k/month net now for me. My 401k isn’t making that and will be taxed when I pull it out. So I’m bullish on RE over time. But I’ve only been doing this for 8 years buying and holding.
Quote from @K S.:
Quote from @John Morgan:
I’d say 50% if someone is willing to give themselves 10 years slowly buying and holding. Most people need to hit home runs with no work. Those who are willing to do the work and slowly grow over time will crush it if they give themselves 10 years.
I have been slowly buying and holding for 15 years and for the most part, the theory doesn't hold up. Sure a few properties doubled in value but at about the same pace as inflation which is less than the stock market plus, the cash they return has not changed in 15 years as the increase in rent is negated by the increase in property taxes, hoa and maintenance on an aging house. I just sold a condo because the HOA has increased faster than rents can keep up and I'm selling a home because its age is becoming a liabilbity despite being paid off. They don't teach you that in the books. I'm beginning to think nobody making these comments has owned a house for 15 years or really crunched the numbers and compared it to the stock market or 20 years of maxing out a 401k with employer matching.
I know someone who go a late start in his 401k and also purchased a house during the lowest point in the recession. His house has tripled but his 401k has around the same amount as his house has equity. Tell me you can do that today at these prices and rates?
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @K S.:
....If you're investing for appreciation only, then realize that housing has only appreciated around the rate of inflation of ~3%.....
Well if 2+2=1, you'd be correct, but it doesn't, and your math is equally as wrong.
Cash-Flow is how one hold's property, APPRECIATION is how one get's WEALTHY from property. And yes, via an averaged 3% annual appreciation. How you say, MATH my dear Whatson, math.
See, you conveniently left out the entire part about LEVERAGE. For example, a $100k property appreciates at 3% annual, making for $3k on appreciation alone that year. And it was acquired via 20% down, $20k. So let's look at what that capital appreciation is in reality, that is 15%, not 3%.
Your argument is wildly incorrect, because your arguing it via removing all the power-points of Real Estate Investing. The first, leverage, or OPM. The fact that we get to make a profit, on other peoples $, namely the banks $.
We only had $20k, but yet we are allowed to keep 100% of the profits, from $100k.....
Not to mention, not only did we get to shazam a 3% appreciation into 15% simply by waving the magic wand of leverage, but every year, it becomes an ever more powerful spell thanks to the next magic trick COMPOUNDING RATE OF RETURNS.
What was $100k becomes 103k, 106.900, 109.273,112.550 etc etc etc.. It grows at a compounding rate, thus compounding the rate of capital appreciation over time. Does a bond do any of this????
And let's not even get down the rabbit hole of depreciating an appreciating asset, tenant paydown on principle, tax strategies etc etc etc.....
Your math Sir, was as correct as 2+2=1. - Member since 2021 · 401 posts · 254 votes2yHerein lies the rub with me, you do consulting and you're an agent. Many of these comments are sellers of something. I'm just trying to be realistic with my actual experience. The reason why real estate has become unaffordable for the middle class is because we have too many consultants, books, seminars, videos, websites like this etc. It's almost no different than pumping up a stock. We probably don't need more resources
- Member since 2021 · 401 posts · 254 votes2y
Quote from @James Hamling:
Quote from @K S.:
....If you're investing for appreciation only, then realize that housing has only appreciated around the rate of inflation of ~3%.....
Well if 2+2=1, you'd be correct, but it doesn't, and your math is equally as wrong.
Cash-Flow is how one hold's property, APPRECIATION is how one get's WEALTHY from property. And yes, via an averaged 3% annual appreciation. How you say, MATH my dear Whatson, math.
See, you conveniently left out the entire part about LEVERAGE. For example, a $100k property appreciates at 3% annual, making for $3k on appreciation alone that year. And it was acquired via 20% down, $20k.All I had to do was stop at 20% down to cripple this argument. This isn't 2005 when I bought my first 100k house/condo that rented for 1% of that and could break even with 20% down.
That same house/condo is 300/400k but the rent has only doubled while the price has nearly quadrupled making the rents only .5% of the price. This means because of the extra property tax, hoa, maitnance and 8% interest rate, you'll need well over 50% down payment just to break even, maybe 80%. Real life example here. That's why I'm saying you need to be high earner to make it work but there are better investment vehicles today for the average 9-5 investor type.
- Member since 2021 · 401 posts · 254 votes2yThis should be put into context. When someone says 120% returns what does that mean? Well if you purchased a 10k house in the ghetto for 2k down payment and collect rents with a shotgun, then all you need is for the house to increase to 12k and you just made 100% return so in perspective that's not good as HVAC alone can wipe out a years worth of profits, plus you must I'm going to assume you're managing them yourself. Not something most people with a 9-5 can do.
Quote from @John Morgan:
I fully leverage so I’m only 20% into a house. Between principal pay down on my mortgage, monthly cash flow and appreciation, I’m making an internal rate of return around 80-120% on most of my properties off my small 20% down payments. AQuote from @K S.:
Quote from @John Morgan:
I’d say 50% if someone is willing to give themselves 10 years slowly buying and holding. Most people need to hit home runs with no work. Those who are willing to do the work and slowly grow over time will crush it if they give themselves 10 years.
I have been slowly buying and holding for 15 years and for the most part, the theory doesn't hold up. Sure a few properties doubled in value but at about the same pace as inflation which is less than the stock market plus, the cash they return has not changed in 15 years as the increase in rent is negated by the increase in property taxes, hoa and maintenance on an aging house. I just sold a condo because the HOA has increased faster than rents can keep up and I'm selling a home because its age is becoming a liabilbity despite being paid off. They don't teach you that in the books. I'm beginning to think nobody making these comments has owned a house for 15 years or really crunched the numbers and compared it to the stock market or 20 years of maxing out a 401k with employer matching.
I know someone who go a late start in his 401k and also purchased a house during the lowest point in the recession. His house has tripled but his 401k has around the same amount as his house has equity. Tell me you can do that today at these prices and rates?
You'll be taxed very little if you retire with no 1099 income and a roth is tax free. I'd imagine most people have both. - Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @K S.:
Herein lies the rub with me, you do consulting and you're an agent. Many of these comments are sellers of something. I'm just trying to be realistic with my actual experience. The reason why real estate has become unaffordable for the middle class is because we have too many consultants, books, seminars, videos, websites like this etc. It's almost no different than pumping up a stock. We probably don't need more resourcesIm confused. Are you saying that a reason real estate has gone up in value is investors know too much. and we need to dumb this industry down? i dont understand...
- Member since 2021 · 401 posts · 254 votes2y
Quote from @Peter Vekselman:
Quote from @K S.:
Herein lies the rub with me, you do consulting and you're an agent. Many of these comments are sellers of something. I'm just trying to be realistic with my actual experience. The reason why real estate has become unaffordable for the middle class is because we have too many consultants, books, seminars, videos, websites like this etc. It's almost no different than pumping up a stock. We probably don't need more resourcesIm confused. Are you saying that a reason real estate has gone up in value is investors know too much. and we need to dumb this industry down? i dont understand...
I never mentioned what needs to happen but yes, in the mid 2000s homes were affordable but now investing in a single family home has become a trillion dollar industry that started with the explosion of books, siminars, DVDs and websites and in effect we had small investors buy up homes but now even Blackrock, vanguard and wall street are all in playing the game like it's a stock which is partly to blame for the explosion in prices. Soon, homes will only be owned via generational wealth passed down from heirs and everyone else will rent from an institution who might have a monopoly on rent control. But maybe that problem is not as bad as I make it out to sound although I counted 8% of open door owned homes alone in one zip code I searched for. Opened up zillow and took all the listings and filtered open door. Makes you think that maybe resources aren't a problem.
- Real Estate Professional · Atlanta GA · Member since 2015 · 615 posts · 225 votes2y
Quote from @K S.:
Quote from @Peter Vekselman:
I see exactly what you are saying, but not sure I understand the point. Bottom line, during the same time from pretty much everything has gone up in prices. Food, cars, etc... Don't think just because there are more people getting educated in real estate, that in itself has anything to do with prices going up.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes2y
Quote from @K S.:
Quote from @Peter Vekselman:
Quote from @K S.:
Herein lies the rub with me, you do consulting and you're an agent. Many of these comments are sellers of something. I'm just trying to be realistic with my actual experience. The reason why real estate has become unaffordable for the middle class is because we have too many consultants, books, seminars, videos, websites like this etc. It's almost no different than pumping up a stock. We probably don't need more resourcesIm confused. Are you saying that a reason real estate has gone up in value is investors know too much. and we need to dumb this industry down? i dont understand...
I never mentioned what needs to happen but yes, in the mid 2000s homes were affordable but now investing in a single family home has become a trillion dollar industry that started with the explosion of books, siminars, DVDs and websites and in effect we had small investors buy up homes but now even Blackrock, vanguard and wall street are all in playing the game like it's a stock which is partly to blame for the explosion in prices. Soon, homes will only be owned via generational wealth passed down from heirs and everyone else will rent from an institution who might have a monopoly on rent control. But maybe that problem is not as bad as I make it out to sound although I counted 8% of open door owned homes alone in one zip code I searched for. Opened up zillow and took all the listings and filtered open door. Makes you think that maybe resources aren't a problem.
LOL, owned via generational wealth and by professional handymen and contracting outfits who can bring aging properties back to functionality at a fraction of the cost of the hands-off out-of-area investor.
In the land of the blind, the one-eyed man is king. - 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
i'm late to this thread but, based on my research...
1. as far as I can tell, wall street / institutional investors haven't had much of an impact on prices. they still only own 2-5% of single family rentals, depending on your source. now with that said, there are definitely certain NEIGHBORHOODS where they have had a bigger impact. but there are also entire states where they own 0 properties.
2. homeownership has been pretty constant. it was about 65% in the 90s... went up... went down... and is back to 65%. so... about the same percentage of the population owns as did 30+ years ago. we aren't becoming a "nation of renters." although that's a fun phrase.
thoughts?
- 2yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votesMy properties are affordable that average 250-300k in the Dallas area with these 80-120% returns on my 20% down payments between principal pay down, 5% appreciation and monthly cash flow. I can’t make nearly that kind of return in the stock market with my Roth IRAs and 401k like you suggest. I pull out my equity in 3-5 years on some to buy more real estate with zero money out of pocket for the new purchases. I’m happy with making 15% in the stock market. But I’m really happy with an internal rate of return of around 100% on my SFR. Some of my internal rates exceed 200% off my down payments. But most in the 80-120% range which I’m really happy with.
Quote from @K S.:
This should be put into context. When someone says 120% returns what does that mean? Well if you purchased a 10k house in the ghetto for 2k down payment and collect rents with a shotgun, then all you need is for the house to increase to 12k and you just made 100% return so in perspective that's not good as HVAC alone can wipe out a years worth of profits, plus you must I'm going to assume you're managing them yourself. Not something most people with a 9-5 can do.Quote from @John Morgan:
I fully leverage so I’m only 20% into a house. Between principal pay down on my mortgage, monthly cash flow and appreciation, I’m making an internal rate of return around 80-120% on most of my properties off my small 20% down payments. AQuote from @K S.:
Quote from @John Morgan:
I’d say 50% if someone is willing to give themselves 10 years slowly buying and holding. Most people need to hit home runs with no work. Those who are willing to do the work and slowly grow over time will crush it if they give themselves 10 years.
I have been slowly buying and holding for 15 years and for the most part, the theory doesn't hold up. Sure a few properties doubled in value but at about the same pace as inflation which is less than the stock market plus, the cash they return has not changed in 15 years as the increase in rent is negated by the increase in property taxes, hoa and maintenance on an aging house. I just sold a condo because the HOA has increased faster than rents can keep up and I'm selling a home because its age is becoming a liabilbity despite being paid off. They don't teach you that in the books. I'm beginning to think nobody making these comments has owned a house for 15 years or really crunched the numbers and compared it to the stock market or 20 years of maxing out a 401k with employer matching.
I know someone who go a late start in his 401k and also purchased a house during the lowest point in the recession. His house has tripled but his 401k has around the same amount as his house has equity. Tell me you can do that today at these prices and rates?
You'll be taxed very little if you retire with no 1099 income and a roth is tax free. I'd imagine most people have both.
I took out a 401k loan on one of them for 50k to buy a fixer upper 5 years ago. It rents for $1550/month and I paid back my 401k loan with the profits. Then did a cash out refi on it to buy 3 more houses a year ago. Between all 4 of these houses I got for basically only 50k from my 401k loan, they net me $3300/month after all my expenses. I’ve paid my 401k loan off and have infinite cash flow of $3300/month plus my tenants are paying off my mortgages and they’re appreciating about 5%/year (50-60k/year). So this is about a 220% return I’m getting off my initial investment of 50k which I paid initial 401k loan back a couple years ago when you calculate principal pay down, monthly cash flow and 5% appreciation. Numbers don’t lie.
So real estate can do as good or even better than the stock market when you calculate your numbers over time with leverage. Those who pay cash obviously won’t do nearly as well. But those who are smart and leverage their way to wealth will crush it over time and create generational wealth.
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