How are real estate millionaires really made?
Real estate is often heralded as the best path to becoming a millionaire, but how do the successful use real estate to achieve their seven figure goals?
There is more than one way to become a real estate millionaire…
1. Flipping Houses
Flipping houses can be the fastest way to get from where you are to where you want to be – a millionaire. Flipping houses can also be one of the most predictable ways to start banking large lump sums, thanks to locking in value and profit when you buy. In some parts of the US, RealtyTrac reports the average profit on flipping a house ranges from 60,000 dollars to 100,000 dollars. With just 10 homes you could be a millionaire. High end luxury home flippers can even make millions on individual deals. For some, this is through wholesaling properties. For others, it is rehabbing – fixing them up before reselling. Either way, this can be the fastest route to millionaire status.
2. Investing In Income Properties
Flipping houses isn’t for everyone. If your primary goal is to increase your income and to retire early without having to work, income producing properties can be a great choice. This can be either residential homes or commercial properties like apartment buildings, strip malls, or office buildings. If investors generate 100 grand a year in rental income and don’t use it, they’ll be millionaires in 10 years. When investors use loans to acquire more property, their tenants are also typically paying down debt and are adding to equity each month. If you’ve got 1M worth of property and a 10 year amortizing loan, you’ll have an additional 1M in equity or net worth at the end of the loan too.
3. Real Estate Lending
For those with money but who don’t want to go through the process of buying and managing physical real estate, there is always the option of putting that money to work in other professionals’ hands. Successful house flippers and buy and hold property operators are always happy to bring in more capital to expand their operations. They normally pay out very attractive returns. These may range from 5 percent to over 20 percent, depending on the structure; and most offer the security of a mortgage on a brick and mortar property. Consider that even on a loan with a 5 percent interest rate, borrowers may pay almost 100 percent interest over 30 years. Notes can also be sold for cash.
4. Start a Real Estate Business
There are many profitable opportunities to build money making machines in the real estate industry. Zillow, Airbnb, and Blackstone are just a few examples of billion dollar real estate businesses. Mortgage lending, construction, interior design, property management, real estate brokerages investment firms, and technology companies are just a few of the choices. Whatever you are passionate about, there is a way to turn that into a multi-million dollar real estate business. However, in order to hit the big numbers, real estate entrepreneurs must do their research, create great scalable models, recruit great talent, and build strong brands.
5. Currency Fluctuations
A few years ago, the Canadian and US dollar were equally valued. That meant a 1 million dollar property in Vancouver, Canada was worth the same as a 1 million dollar house in San Diego, California. The Canadian dollar recently began plummeting, and has dipped below 70 cents. Some analysts predict that could get closer to 50 cents. That would mean, if you had one US dollar, you’d get two Canadian dollars for it. Similarly, if you had a 500,000 US dollars you could buy a one million dollar home in Vancouver. When the balance is returned and the Canadian and US dollar is back on par, you could technically cash that property out and come back to America a millionaire. Unfortunately those already holding Canadian property may have recently found their million dollar homes losing 300k in value in a matter of months, just due to currency fluctuations. This may be speculative, but it is a game that sophisticated global investors play every day – and why US property has been and is so popular with foreign investors. Some overseas finance houses even offer multi-currency mortgages. Imagine you had a vacation property in Canada with a 1,000 dollar monthly mortgage payment. The recent change in exchange rates means you’d now only be paying 700 US dollars to cover your payment.
Summary
There are plenty of millionaires who prove that real estate is a great vehicle for income and wealth building. There is more than one way to make a million dollars in real estate too. Choose the path that best fits you and get going.
