I once saw a video by Alex Harmozi where he was simplifying different kinds of business models. I believe the video was titled “10 ways to make a million dollars”, or something of the sort. One of the ways that he said you can make 1 million dollars was by borrowing a million dollars and having someone else pay it off. This is basically real estate.
Although real estate appreciates at a much lower rate than the stock market, real estate is the easiest way to 10x leverage; At least for me. I was able to put in about $100,000 to acquire 4 properties that were valued at 1.015 million dollars (probable somewhere between 990k and 1 million today since the market has taken a little drop these past few months). In 30 years, at the ripe age of 61, I’ll have all my properties paid off. Thus, making me a millionaire in off real estate alone. This example also assumes that the housing market stays flat for 30 years and the rental market does not increase. Both of which are not likely to happen.
That point illustrates the power of real estate. It does come with risks, but it can be a fruitful vehicle to wealth if executed correctly. Honestly, it can still work out even if done incorrectly. Many people make mistakes in this game and still come out on top.
My Real Estate Plan
I initially wanted to create a large portfolio of investment properties that would cash flow me into retirement when I first got the idea of buying a second home. Realistically though, as interest rates and housing prices have skyrocketed in the last couple years, it has been getting more difficult to not only acquire more properties, but in making them as profitable as they once were. Not only are interest rates and housing prices up, insurance costs have nearly doubled and the rental market has not came up fast enough to cover those costs. To add to this disaster, the acceleration of the housing values have lead to a displeasing increasing in taxes that further eat into profits.
Although I do love the game of real estate, I think the only purpose it serves me right now is to secure my future. I’ve already locked in my retirement at age 61 in a worst case scenario, and that’s assuming I’m able to keep all my properties. Now, the goal is to try to bring that financial freedom age from 61 to as close to the present as I possible can. Real estate is great for wealth and taxes, but not so much for cash flow. At least not right now anyway.
Currently, I need to find a way to increase my cash flow. Not in real estate, but from a side business. I will continue to work on the profit margins and reducing my expenses within my current portfolio, but I need to work on producing cash flow elsewhere if I want to be financially free in my 30’s. Once my cash flow problem is solved, that’s when I will go right back into buying up more properties.
In the meantime, I was able to use real estate to 10x leverage. I now own 1 million dollars in real estate and I only had to put in about $100,000 to get there. Real estate granted me the ability to secure my freedom in my golden years, and I’m truly grateful. But now, I will be preparing myself to get back into the market by creating a situation where I can make more money. I don’t know how I am going to do it, but I do intend on throwing everything at the wall until I find what sticks.