“Wealth is not his that has it, but his that enjoys it.” – Benjamin Franklin
Real estate investing is still, hands down, one of the best methods for real wealth creation, and just about anyone can do it. But it is a huge topic. There are so many choices, so many types of real estate to invest in. Mobile homes, single-family homes, apartment buildings, warehouses, office buildings, strip malls…
How do you know what to pick? Should you specialize? Is it better to have diversity in your investment portfolio? Or should you stick to one kind of real estate?
Let’s say you find a property that you think might be a good deal. Can you be certain you’ll make a profit if you buy it?
Worst of all, if you’ve heard about the exploding foreclosure market in single-family homes, you may be a little scared to get into real estate investing. With mortgage lenders going under and hedge funds closing, is real estate the right move right now?
With the proper education, you can learn the right methods, the right kind of real estate to invest in, and the right way to structure your deals.
And there really isn’t any need to worry about the foreclosure market or the sub-prime mortgage meltdown. After all, lots of millionaires got their start in down markets. Even in the Great Depression, some people became very, very wealthy. You’ve heard the expression “buy low, sell high” applied to the stock market. Real estate investing works the same way. And a down market means prices will be down. Armed with the right information, you’ll know when to get in and when to get out.
Now, to address the question of what kind of real estate to buy. Answer: There is no wrong kind. If you purchase real estate at the right price, in the right way, and either hold on to it or sell it to someone for a higher price, you’ll make money. This is a very simple formula.
However, depending on how you apply it, this formula can play out in one of three ways: (1) You could end up buying yourself a job, (2) you could build yourself a small well-run portfolio, or (3) you could immediately acquire a large, professionally managed portfolio of apartment houses.
Buying yourself a “job” isn’t something I’d recommend. That’s what happens when you buy lots of little pieces of real estate, either mobile homes or single-family houses, and find yourself constantly running around cutting grass, collecting rents, and fixing leaking sinks. If you end up doing all the work yourself, you won’t want to have many properties – because there won’t be enough hours in a day for you to handle them. That’s not real estate investing, that’s turning yourself into a handyman/landlord.
If you want to build a small real estate portfolio, it’s best to do the basic investing yourself – and hire people to do the maintenance and management With just half a dozen properties or so, you could end up very well off. Good investors in this category buy low. They sell high (if they sell at all). And their deals are structured properly, so their properties have positive cash flow. They have a small portfolio of single-family homes, maybe a duplex or two, and maybe they retire a little early when the mortgages are paid off. Not bad.
But the third option is clearly the best: acquiring apartment houses. This is how real estate investors build dynasties.
The wealthiest and most successful real estate investors are buying multi-family properties because they understand the concept of unit pricing,
You know how unit pricing works in the grocery store, right? If you buy more units (ounces, pounds, packages) per dollar, you get more value. Well, real estate is also measured in units – i.e., the number of living configurations. You can buy one unit for, say, $100,000 (let’s leave the financing out of this to keep it really simple), or you can buy 10 units for $100,000. If those 10 units are all in one building, you’ve hit the jackpot. Because of unit pricing, you’ve gotten more value for your dollar.
There’s another thing the really successful real estate investors do: They buy in the right markets at the right time. If real estate is doing very poorly in one city, you can bet there’s another city that’s doing well. An industrial city in the north will have a different sort of economy than a tech-based city in the west. When one is up, the other may be down. Owning and controlling real estate in different markets at different times can generate some real wealth … fast.
For example, I started out buying small multi-unit properties where I live in Brockton, MA. As that market neared the top of its market cycle, I took my profits and used a 1031 Like-Kind Exchange to defer my taxes and buy bigger properties in markets that were at the beginning of an upswing in their market cycles.
I used the six-figure profits from duplexes, triplexes, and four-unit properties in my “hot” market as down payments for much bigger properties – with much bigger cash flow – in value markets.
Using this strategy, I went on to build a diversified portfolio of apartment houses, including 146 units in Texarkana, AR, 350 units in Jackson, MS, 396 units in Huntsville, AL – just to name a few. And my monthly passive income quickly climbed to more than I used to make in an entire year!
This is also a strategy that you can employ once you understand how money really works.
Money is like water. It’s healthy and alive when it’s moving, like a stream. When it’s stagnant, when it’s still, when nothing’s coming in or out, it’s dead. Real estate investing that models healthy bodies of water, water that moves and flows, is healthy and vibrant and, thus, creates wealth.
People like Donald Trump, Harry Helmsley, and many others all figured out that successful real estate investing means buying multi-unit properties in the right markets at the right points of their market cycles. Use the principles outlined here – along with the right systems to buy, hold, and sell – and you can make your fortune too![Ed. Note: Dave Lindahl went from an $800 net worth to a passive income of hundreds of thousands of dollars and a multimillion-dollar net worth in less than five years. He did it by becoming the “Apartment House King.” Today, his portfolio has over 3,100 units. Dave will be having an exclusive one-day training event this fall to teach exactly how he did it, how he continues to grow his portfolio by more than 100 units a month (!), and how you can follow the same path in today’s market.]