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SHOW NOTES FOR EPISODE 638: 9 REAL ESTATE INVESTING TIPS FROM BILLIONAIRES
Most billionaires preserve their wealth by investing in real estate. Even if they didn’t obtain their wealth through real estate, they know the value of real estate to grow, maintain and sustain their wealth! In today’s podcast, Bill shares 9 tips from billionaires who know and use the power of real estate investing to grow their wealth.
Introduction
We know there are billionaires who became billionaires because of real estate. We’ve shared the stories on this podcast of such notable real estate billionaires as Donald Bren of the Irvine Company ($16.2Billion Net Worth), Stephen Ross who built is wealth in affordable housing in the 70s ($8.3 billion), Sam Zell-know as the father of REITs (Real Estate Investment Trusts ($6 billion Net Worth), and others
Billionaires are the creme de le creme of the financial pyramid, and they haven’t gotten there just by getting lucky. A lot can be learned from these billionaires that can help us in our everyday investing, as the difference between a billionaire and an average person is primarily the way they think.-
If you start thinking like a billionaire, you’ve already won half the battle. Most billionaires have abundant wealth, and most of them preserve it by investing in real estate. Even if they didn’t obtain their wealth through real estate, they know the value of real estate to grow, maintain and preserve it!
Here’s what some non-real-estate-made billionaires think of real estate.
- “Ninety percent of all millionaires become so through owning real estate.” – Andrew Carnegie, Scottish-American industrialist and philanthropist (1835-1919)
- “If you don’t own a home, buy one. If you own a home, buy another one. If you own two homes, buy a third.” – John Paulson, American billionaire hedge fund manager, founder of Paulson & Co investment management firm
- “Real estate is an imperishable asset, ever increasing in value. It is the most solid security that human ingenuity has devised. It is the basis of all security and about the only indestructible security.” – Russell Sage, American financier, railroad executive and former US House representative (1816-1906)
- “Current real estate prices aren’t high because they have been driven up by irresponsible speculation. As was often the case in the past. Prices have risen because a constantly increasing population with money to invest has been created – and continues to be created.” – J. Paul Getty, British-American petrol-industrialist, 1966 world’s richest private citizen (1892-1976)
- “I will forever believe that buying a home is a great investment. Why? Because you can’t live in a stock certificate. You can’t live in a mutual fund.” – Oprah Winfrey, American television producer, host, author and philanthropist
- And this guy wasn’t a billionaire but his homespun wisdom is know by many…
- “Buy land, they ain’t making any more of it.” – Mark Twain, American author, known as “father of American literature” (1835-1910)
Here are some practical tips for real estate investors from billionaires. I hope you find them helpful
#1 Don’t Use Your Own Money
This might seem absurd, but most billionaires get there by risking other people’s money. The key to staying rich is to use as little of your money as possible. Despite being atrociously wealthy, billionaires often do not use their money freely. They would much prefer an alliance or an investor to share the risk.
As an individual investor, you might not be able to grab the attention of investors quickly, so the next best thing is to get family and friends involved to help share the burden and pay them back after you’ve made a sizable profit. Securing a bank loan is also a viable option if you have an excellent financial record.
#2 Try to Look for Off-Market Deals
There’s no point in paying a broker if you can do the research yourself and save yourself the money. Off-market deals are often available for a steal price because it gets corrected once the listing goes to the open market.
Wholesale real estate market deals are also an interesting way to make money as they are relatively cheaper than when you flip them individually.
#3 Use the Compound Effect
It is often said that the first million is difficult, but the second million is inevitable. The compound effect hits with residential real estate as they can generate profit year-round. The income from residential properties can be used to buy more residential properties, and these properties will generate more revenue.
#4 Diversify
Billionaires never stick with the same strategy and continuously diversify to minimize risk. Suppose you’ve made good returns from residential properties. In that case, it’s always a good idea to consider a different asset class such as industrial real estate as the returns are higher, and they appreciate higher value compared to residential properties.
Industrial real estate such as warehouses are trending and appreciating because of how our supply chains are restructuring post-pandemic.
#5 Knowledge is Power
Billionaire investor Mark Cuban calls it the “Knowledge Advantage.” He believes that the more knowledge you have about your investments, the better your returns. Try to learn about what you’re buying into, and having more knowledge against the competition can go a long way.
In the market crash of 2008, the people who bought credit default swaps betting against the real estate market had more profound knowledge than the surface-level information that was peddled to the public.
#6 Know the Options Real Estate Provides
Real estate offers options such as upscaling a property, renting it, short-term leasing it, leveraging it, and more. Real estate can be renovated, leased, rented, or flipped for a profit. There are a lot of contingencies no matter which way the market goes. There is always a way to ensure that your property does not depreciate.
#7 Don’t Forget: People Will Always Need a Place to Live
Robert Martinez, founder and CEO of Rockstar Capital and a former guest on the Old Dawg’s REI Network Podcast, said that people will always need a place to live, and he’s right. As long as there are people on this earth, the demand for real estate will continue to increase.
The world’s population has rarely ever decreased, and the real estate market is a testament to the fact that there is a lot of unfulfilled demand in this sector.
#8 It’s Safe
Real estate is a safe investment to park your capital. It is always better to have your funds in real estate than to let it sit in a bank and depreciate over time, especially in these recessive times. If an investor is in it for the long haul, then historically, real estate has consistently appreciated in value.
#9 It’s a Real Asset
Unlike the stock market and even government bonds, real estate is a tangible asset. It can be touched and will always hold value! Real estate is real and a stable wealth-creating and multiplying investment.
During these recessionary and inflationary times, there are few investments out there that have the value or longevity that real estate does. That’s why billionaires admire and utilize its vast wealth building, sustaining and growing power.
References:
DISCLAIMER: Many of the above strategies take knowledge and have a higher degree of risk. You need to do your research and/or work with someone who is experienced to reduce your risk.
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