Today, he enjoys a multi-million-dollar collection of income-producing The Millionaire Real Estate Investor by Gary Keller Paperback $ Investing in Apartment Buildings: Create a Reliable Stream of Income and Build Long-Term Paperback: pages; Publisher: McGraw-Hill Education; 1 edition (June 2, ).
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Please try again later. This book was written at the height of the housing bubble. The author made his million in equity from to by constantly increasing his leverage exponentially to ladder up. The book title - 2 Years to a Million - i. It differs from the common philosophy that appreciation is a bonus to generating immediate cash flow. Even the author himself states that cash flow is first and appreciation is second. The second problem I have is that the author recommends multi-family units e. Depending on the market you're in, this can be entirely impractical.
The book does contain good advice - everything from handling tenants to driving around looking for properties - but it's really more of a summary of each topic. If you buy this book, rip out the chapters about crazy bubble leveraging. Read the remaining chapters for an overview of finding properties, financing, attracting and retaining tenants.
Then go find more detailed books devoted to each of those topics. I should have known better than to buy a real estate book that was published in This book was obviously written right at the absolute peak of the real estate market and the author's experience and examples are from , which were arguably the best times in history to be in real estate. If you're picking up this book today, you'll immediately see a lot of advice that just doesn't make sense in today's economy and real estate market.
That isn't to say there isn't any good information in the book, because there is. Some of the advice surrounding being a property investor and landlord still apply today, and many of the basic tactics involved in analyzing markets and buying properties remain true. But aside from this information you're more or less reading about the experience of someone who made it big during the best boom years in real estate by using a lot of leverage and taking advantage of incredible short-term appreciation to amass his wealth.
If you tried to mimic everything in the book today, you'd be nowhere near as successful. This book is mainly trying to sell the dream. Just based on the title alone you can tell it was marketed toward people at the peak of the real estate boom and wanted to quit their job and get rich just buying up property. That's still the dream of many today, but this book won't give you all the answers to accomplish that in today's economy. I'd suggest a more recent book if you want to get a better idea of what it takes to make it in the business these days.
Although this book is interesting at times and it does contain some good content, there are also large portions of the book that are dangerously inaccurate. This book could have been much better if it went into more detail on the financial aspects of real estate investing, tips on choosing properties, etc. Instead, those parts were covered in relatively brief sections and there was much more detail on a the author's personal story and b rules and regulations. While the author's personal story was interesting, it's not representative of the "average" new investor and it took up far too much of the book.
Rather than using examples from his career to illustrate points, it read more like a tribute to himself. Unlike most of the people who will read this book, he had a high paying job and a healthy amount of home equity to get started, and his investments were made in one of the most profitable periods of time and when funding was relatively easy to come by. That's not to say the results couldn't be achieved in today's markets, but it would certainly take more skill to get started now.
Perhaps because this particular author had plenty of funds to get started, the sections on financing tactics were very weak, with little depth.
There are quite a few books out there that offer superior coverage on these topics - especially for individuals with less than perfect credit or few existing assets. The sections that discussed various laws and acceptable practices were dangerously inaccurate in some places. The author may have been citing the correct rules for his state, but I compared it against rules for the 2 states I've lived in, and there were significant differences. For example, he states that you can't charge more than 1 month's rent as a security deposit, but the state of California allows between 2 and 3.
He also states that the security deposit can be used as the last month's rent, but not every state allows that. Be careful and do your homework so you're compliant in the states where you intend to do business. If you enjoy reading books on real estate, you may still feel that this one is worth a read. See all reviews. Most recent customer reviews. Published 10 months ago. Published 1 year ago. Published on July 25, Published on May 14, Published on November 18, Published on April 15, Published on March 30, Published on February 24, Published on February 15, Amazon Giveaway allows you to run promotional giveaways in order to create buzz, reward your audience, and attract new followers and customers.
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Amazon Inspire Digital Educational Resources. Went to the beach and it waa 54 degrees! I wish I had the gusto to invest out of my area, Im in Cali and do have a rental here, but average costs keep me from doing as much as I want. Someone mentioned partnering in apartments, and that sounds good as at a certain door number scaling really works well. Lately I have just been investing in large apartment syndications. I am not seeing any good single unit deals coming up in any market. Hit me up if you find one you like!
This home features a newer roof, newer air conditioner, newer furnace, newer paint inside and out, newer carpeting, and newer flooring. Tenant pays all utilities. Reminds me of this post from bigger pockets:. The real problem with real estate is buying a property is no more difficult than buying a mutual fund. Management companies eat most of the profit, and dealing with tenants directly was way too much of a hassle for us.
That said, I know people who own properties — even self-managed — with a lot of both success and enjoyment. This is a fine and dandy plan if you are buying properties in Indiana where you can find a single family home for K. I agree that it is tougher to buy multiple properties when the ratio of property price to your income income is a lot higher. Ten years ago this month I went under contract on my first rental property, and I had this exact goal.
Today I own 7 rental units I sold 3 this past year. I quit buying rentals a few years ago though and started putting money into real estate partnerships as well once I hit accredited investor status. You never know though, which is why I diversified in the first place. Thanks for sharing your experience. This was very helpful. I was using a compound calculator to reach to the same conclusion: From what I have seen rental homes often require extensive involvement as delineated already by some of the other posts.
My preference is commercial properties which have a multitude of advantages. Unfortunately, you do need to buy them right so a novice could easily get burned. I was lucky to have connections to excellent commercial real estate brokers who made sure we bought the right properties at the right price. Making sure you set aside as much money as possible is probably the key to any successful early retirement as is evident from any perusal of the various blogs available. Often the slow but sure method works the best as I have also seen with most of my other investments.
I love the part about leveraging your expertise. One great thing about real estate is it is inefficient enough that your skill or lack thereof really does have an effect on your returns. Are you really going to be getting a 3. Is that going to stay steady over the next 10 years, let alone 20? And yes, I know, the stock market is also volatile. Investing in individual properties is a lot like investing in individual stocks. Obviously that situation is going to color my views on real estate a fair bit.
This includes the downturns. Those are only 2 other ways real estate investors are paid. That is great you are getting such good cash flows in HI, how long ago did you buy your properties there? Do you see cash flows like that now a days over there? Much much harder to find, but they are out there if you want to dig outside the MLS. I bought my properties on the MLS in , , , and Big fan of buying one property a year. Market and client emotions. I started with a goal of 10 duplexes in 10 years.
Hit that early and decided to continue with one property a year. One of my clients hit his ten property goal faster than me on a modest income in todays standards! Today, my day job takes on a whole new meaning since I only take on financial advisory clients that are the right fit. If you can bring your spouse on board, you may qualify as a real estate professional. This will enable you to offset your wages with the rental income losses as a result of depreciation and other write offs that are a normal part of living-cell phone, internet, computers, home office, etc.
Another angle is to work part time as a physician after you have built the real estate and then you can group the rentals together and declare yourself a real estate professional. Make sure you check with a CPA on this since you may have to elect to group the rentals in the beginning of your journey to the golden ticket of being classified as real estate pro for tax purposes.
You absolutely need a good accountant who works with lots of real estate investors to make this happen. It pays to find the right CPA. They may charge more, but will save you tens of thousands in taxes in the process. Over the years, the rent on these properties increased once I had them dialed in. Nice properties attract nice tenants.
Just make sure you screen them properly. Getting married is easy, getting divorced is hard. Same rule for renters. His advice is spot on. The key is one property a year. You should interview him. Your comment about qualifying as a Real Estate Professional was intriguing, so I did some more digging and found this BiggerPockets post that explains the benefit — Super cool, and my husband loves the idea. Glad I could help! The day my Cpa said i was getting a refund on my taxes due to real estate was a game changer for me.
I agree a CPA who specializes in real estate investors would be a great choice for someone doing the one property a year thing. This seems unrealistic for many. Not to mention an extra 30, per year for the domino effect. You are not showing real world calculations. Hopefully this helps clear things up a little. Very nice road map. I know of an Ob Gyn who did this for 30 years successfully, and now retired.
I wrote down a plan like this — first time in My wife and I did groundwork — we looked, and talked to a few people, including property managers. We never carried out this plan, and our other plan — passive indexing has worked out well so far. We do have REITs in there. This plan is doable, but will take a lot of time if you want to earn money.
You have to enjoy doing this work — looking for properties, buying process, loan approval process, finding renters, maintenance, and other things people have mentioned here, and the time it would take. Otherwise, you will be bleeding money. That Ob Gyn is still working, retired from medicine, but working to run this real estate business. One alternative is to become a realtor first- you get in the money business and get to pick what you want, and get to know the business well.
This obviously will take time. And focus more on business properties. It is a lot of work initially. However, once the team is in place and everything is set up, there is not much to do. Meadow describes this aspect of renting homes well. The owner might get an email to authorize a fix of the furnace, but an email back and you are done.
Just like there are vast differences in salary among a single medical specialty, there are vast differences in returns among markets. I was reluctant to enter this space. I had a bear of a time finding the right bulb, removing the top of the lamp, etc…Podcasts and audio books Brandon Turner are good places to start. The formula to my mind is simple. Assume you are only going to get 50 percent of the rent money due to all of the expenses.
It requires a lot of computer time and phone time to achieve a high gross yield, but there are deals out there. I would LOVE to have a thread on the forum discussing an offering memorandum on a syndicated deal. I am in year 9 of a some syndicated deals and have had a very positive experience. Jim, can you start a concurrent thread on a syndication deal? The idea would be to have your audience read the memorandum and we can discuss it—almost like a journal club in medicine.
That would be really fun. Go on over to the forum and start a thread then. Anyone can start a forum thread. But, what syndication are you currently studying? Are you allowed to say? My thought is to get that prospectus the one your are studying and start a discussion on that. If it is the Dr. Black Atlanta deal then I am good because I have that prospectus. That would not be very much fun. One way I look at rentals is to borrow at a rate lower than the cap rate of the property. If you can get a 5 percent fixed for 30 years, and a cap rate on a property of 9 percent, you are good to go.
Why would I be currently studying a syndication? That seems odd to me. The higher your cap rate and the lower your interest rate the better. I just sent over the Dr. Black deal to you by email. He is the ED doc that retired and set up a syndication business. The Atlanta deal is one of his syndications. I sent you the basic brochure, but the main document is a prospectus that you get later on. The prospectus is typically very well written and tells you everything that can go wrong with the investment. The key is getting a talented manager that is honest. It is a truly passive investment.
Not rocket science, just common sense. Lots of nice colors.
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They all look the same. Then what do I get? I think the most interesting comparison to be made is to go back to a deal you looked at 4 or 5 years ago and compare what you got to the original pro-forma. I have done a version of this and it works beautifully. I am retired early because of this concept, not from saving in my retirement accounts.
I only bought 5 apartments, about one a year. After 5 years my wife made me stop buying more and put the money into paying off the mortgages we already had, because we already owned enough property to produce way more income than we needed. It has now been almost 17 years since the first purchase and the cash flow is more than we need. My purchases were no money down. We have never sold an investment property as we are long term property investors not property speculators. So, financially this example understates the results by a big margin. It was interesting to read the comments.
Be careful about whose advice you take. In general, if you want to do something well, ask someone who has done it well what to do. They can usually help you succeed. There is usually no shortage of people who have never done something who are quick to give you advice. Under those circumstances, it would be surprising if they had a positive experience to tell you. Be careful about whose advice you. Once you get a property dialed in, it is not much work. I self manage units and could easily dial down to hours a week if I outsourced more of the work. This is in addition to my day job. Real estate is simple if you know what you are doing, create systems and let the magic of tenant mortgage paydown and cash flow work for you.
When I managed my 64 units I was a full time general surgeon and I would say it took me hours a month to manage. I have stated my own experience with owning real estate, and how the numbers shake out. I have done this on this forum, and on bogleheads as well.
As I recall, I was able to complete a radiology residency, do very well at it, have an active social and dating life, travel x internationally per year, and invest in real estate managing my own rentals, all at the same time. I did my monthly investing this month in a few minutes- basically just following my written plan and putting some money in index funds. It takes much more effort than that to do real estate well. Maybe not a full time job, but certainly a part time one. It is usually the pessimistic folk or non-action takers that dismiss it. I think we tend to gravitate towards what we enjoy.
I have spent more hours in Dec. I love hearing about your success and how you did it. I certainly have had a rough experience as a landlord, but will agree that perhaps I need to pick different properties and submit that others will succeed with the right skillset. Add to this local pricing is above pre-crash levels….
Have looked into commercial and apartment properties, but all-cash deals are scooping faster thanks, CA. Thats funny that you mentioned that.
How Grant Cardone built a $350M real estate empire
I was a lifelong introvert. Forcing myself into real eatate investing, as well as into decidedly uncomfortable social situations, has turned me into a somewhat extroverted introvert. Lets hope for a correction soon, then we can jump in like a pack of hyenas on a gazelle carcass!
I think this comment is exactly correct. I know you mentioned you wanted to get 20 percent of your portfolio in real estate. But, may I gently say that the time required to become an expert in it would be much better used for the WCI? It would likely be more remunerative as well. Even a syndication will require a tremendous amount of due diligence initially. The only disadvantage of this idea is that you do miss out on some of the fun, but the WCI is fun and probably more remunerative than real estate for you.
How much due diligence you put into a syndication depends on how much money you put into it. If doing individual properties like this, it is very local and you need to make sure that the market is favourable. Yes, you can always find deals, but just like stocks, a rising market makes it easier. The environment down there in the US seems more favourable than up here in Canada for this type of investment at present.
We side stepped the major housing correction that you folks had and our house prices have continued to increase with low interest rates to nosebleed levels detached from fundamentals. Everyone and their uncle around here, from all walks of life, talks about their unrealized huge house equity and their multiple investment properties. Some Canadians may come out of the woodwork to say how much they have made with real estate here — it has made an exceptional run and has almost become like a religion. Our govenments here have also been generating laws at a rapid rate to try and pop what they see as an affordability bubble.
I would not want to stand in their way. I have been a landlord and got out of it a few years ago for the above reasons. I currently prefer REITs for my real estate exposure at present. One reason is the above, with REITs moving differently from the individual housing market here. Capital gains are taxed at half your marginal rate here which is the good part and where you make the good after-tax money, but you need a good entry point for that.
I am actually a bit jealous of you because I did enjoy the real estate investment process and am actually pretty handy with the renos and repairs. You paint an attractive picture. Realizing this, I am no longer pursuing new investment properties. When she re-located to PA in with me we tried renting it without success through a realtor. The property sat, and sat, and sat. Merely through dumb luck I learned a lot about owning real estate without losing my shirt. I lived in one unit and rented out the other unit.
Moved out after 3 years and continued to rent both units. I took over those duties and did a better, but not great, job myself. Made a decent profit, and the cash flow usually covered the expenses. Learned something valuable about myself: Would have probably made similar money by simply investing in index funds and avoided the hassle of tenants and property upkeep.
I love this article and the concept of buying 1 a year over 10 years. My situation is similar with a twist. I then saved up a bunch of money in index funds. At the 12 year point in my career, I found a great real estate market in Alabama, and purchased six single family homes with cash. I realized this was cash flowing much better than the paid off townhouse in D. I would like to get into rental real estate investing.
A common thread has been to find a good team. Has anyone experience with turn key companies? Unfortunately, the site was broken by the hosting company this morning. We were forced to restore a backed-up version of the site. Basically, what that means for you and me is that any forum post or blog comment you left on Sunday as well as several hours of work on blog posts that I did no longer exists. We are taking steps to keep this from happening again. There was one brief conversation lost that I hope you will carry into your post on the new tax bill.
Someone responded with a bit more detail: Given the interest this real estate post generated, it might be worth addressing in WCI. Part of the difficulty is nobody is really sure exactly how this thing is going to work, at least not until the IRS publishes their worksheet on it. Real estate carve outs were generous I thought. After all admin is deep into real estate, all signs point toward favorable treatment. Hate to break it to ya, but tax treatment has always been WELL in the favor of real estate. Sounds like this particular post is talking about our next door neighbor who retired a couple years back.
For anyone thinking about following this path, try and look past the standard bucket of reasons to skip real estate: Those are things to be avoided by learning more — just like you learned that investing in front-loaded mutual funds with high fees and buying Bitcoin futures are bad ways of investing. That said, I encourage docs NOT to be afraid to learn and run a new business. It does require a learning curve and some effort to accomplish this and it takes some skill to make it worth the hassle vs. However, it can be done and it does provide stable income and diversity. Definitely not for everyone but there really is no limit on how much you can make if you throw your effort into it.
Not an MD but I enjoy this blog as it fits well for other high income families. Once you pass the inflection point of the compound growth curve, RE investing can get pretty darn fun and cash flow gains of a few thousand a month or more every year are not all that hard to achieve.
Play with the math a bit over 20 years of RE investing and the numbers will blow your mind. Leverage magnifies both returns and risk so please do not over extend yourself beyond what lets you sleep at night. My preferred level of debt is zero. You have mentioned a very interesting approach. If you take the same money being invested in real estate and put all that in a well-diversified US stock market index fund such as VTI, over years, how would it have performed versus the exercise you mention?
And even if someone did, what would you do with it? Would you base how you are going to invest going forward on what happened over the last 10 years? ARUN, I can give you an example of almost that comparison. I started investing in my K in and stopped when I left the group in It is not solely invested in index funds I started my real estate purchases in and stopped after I bought the last unit at the market peak in about Over the long haul, the real estate has been much better for me than the stock market.
It is currently generating a 6 figure cash flow of which half is not taxed. I hope that gives you some idea. This is VERY interesting and a great data point to consider.
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Especially areas like Denver is massively booming in their housing needs. One thing that worries me is that single investors like doctors with very low amount to enter the game kk?
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There is never a bad time to invest in real estate. Markets go up and down all the time in real estate and in the stock market. There are always bargains to be found in any market. Each property needs to be evaluated by itself to see if it would be a good deal. You make your money when you buy. My opinion of multiple unit places is to stay at 8 units or above. The more units it has, the lower is you cost per door, so the higher is your cash flow. But as the complex gets bigger, it may be too expensive for you to buy.
Shop around in the smaller apartment complexes and look for a good deal. My largest is 31 units, my smallest is 4 units. Sure, you can do that through syndications. But if you live in a small town you can slowly work up from duplexes to triplexes to 8 apartment buildings etc. I think I was just showing my ignorance with the variety in real estate.
Thank you for the prompt reply! You are correct, I would not make a decision based on the answer. I have never seen comparative data since the following factors prevent generalized comparison: In spite of these limitations, I was hoping to find if I can confirm my conjecture: If a few people with real-life, long-term experience in average type of real estate investing were to compare the two options, equivalent investments in total stock market would yield a reasonably good performance in comparison with real estate investment. Both can be excellent investments.
I see no reason to limit oneself to just one of them. If you really want hands-off real estate investing, you can tilt the portfolio a bit toward REITs. On your latter point, I went from a negative to a 7-figure net worth by investing in real estate from to late in 3. I now have enough net income from RE to stop working tomorrow, if I want. The advantages of real estate become apparent once you have a few years of doing it under your belt.
Personally, to compare it with mutual funds, its not even a fair fight. If I put the same capital into indexing in those 3. Re3iRtH — it is somewhat difficult to understand what you have been saying. How exactly did you accomplish this? Can you provide numbers to back your claims? I purchased a condo in which I was living in. I purchased my first rental in Cash flow and rent growth happened. I purchased a couple more rentals and graduated residency in Then appreciation and rent growth happened. I used my own savings, rental property cash flow, and some equity to purchase a couple more rentals long distance with a property manager , as well as some passive syndicated investments.
I actually went very slowly and gradually because I am conservative. Hope that fills in some details. You also have no idea how much money someone poured into investments. The only way I would invest in real estate. Returns and tax treatment is unfavorable on cash purchases. Like you, I have since added a few passive real estate syndications, although no capital profit has been realized yet since its very early.
Just a tiny bit of cash flow. Excellent question, but effectively impossible to answer accurately. Some will show the stock market outperforming, some will show real estate outperforming. That trend is clear even from the mini-sample of people commenting on the blog right here. Nothing is going to change your individual index fund returns.