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SHOW NOTES FOR EPISODE 428: HOW TO GROW YOUR OWN REAL ESTATE EMPIRE
Real estate investing really is the final frontier, where the average person has a legitimate shot at creating real wealth. So, how can someone create and grow their own real estate empire? In today’s podcast episode, Bill spells out the specific steps necessary to make that dream a reality.
Tip of the Week
- GET a Self-Directed Solo 401K
- Better than self-directed IRA, Roth IRA
- Does not require a custodian
- Checkbook access to funds
- Immediate access to funds
- You can open one even if you are a W2 employee
- Can contribute up to $24,000 per year and maybe more
- Can borrow up to 50% of your balance
- Where you can get a Solo 401K: Sense Financial
- Here are some Podcasts on Solo 401Ks: 131: Investing Power of the Self-Directed Solo 401-K and 397: Self-Directed Real Estate Investing.
How to Grow Your Own Real Estate Empire
More millionaires have been made in real estate than in all industrial investments combined. Investing in real estate has several financial benefits, including positive cash flow, tax benefits, leverage, and property appreciation. Therefore, building a real estate empire is an ideal way to become wealthy and fund your retirement. However, many people who attempt to invest in real estate get stuck on income property number one, two or three and never go much further. Building a real estate empire doesn’t have to take a lifetime, you just have to be motivated and keep moving forward no matter what. Even with little or no money, you can still become a millionaire in real estate and reach your financial goals.
I know guys who had nothing and they started wholesaling. As their cash grew, they would wholesale 4 and then buy house number 5, wholesale 4 and buy another house. As their rental income grew, they could do less and less wholesaling and maybe do a flip here and there and keep buying properties. A few people I knew sold off all the single family homes they had and bought their first apartment building and kept acquiring more with time! See BELOW for podcast links to real people who grew Real Estate Empires!!!
You just need to take the right approach and be committed. This podcast is about how to grow your real estate empire over time so that you become financially free through cash flow.
2020 is a great year to take that first step! Here are the fundamental steps you will need to follow:
1. Get Yourself Educated
Start strong by researching and learning about real estate investing ahead of time. Even before you think of buying your first investment property, commit to expanding your skillset. Many real estate investors fail to grow their real estate investment portfolios because they lack the appropriate education. Soak up information from real estate books, blogs, webinars, podcasts, seminars, YouTube, etc.
It is not possible to know entirely everything with regard to real estate investing. However, only take the first step towards buying an income property once you are confident that you understand the ins and outs of real estate investing. This way, you will be able to avoid costly mistakes that can hinder you from successfully building your real estate empire. Having a good mentor can also help to quicken your learning process and give you a solid foundation. You can learn a lot by simply working closely with an experienced real estate investor. But don’t get caught up in analysis paralysis!
2. Set Clear Goals
Having concrete investment goals is essential before you start building a real estate empire. What do you want to get out of your real estate investments? This is what you will use to formulate your course of action, keep you focused, and help you monitor your success. Having clear goals in mind will help you decide the right type of property for you, the number of properties to invest in, and the real estate market that will best help you achieve your investment goals. Remember that the more specific your goals are, the easier it will be to achieve them. I used a factor of $100 cash flow per door. It helped me to calculate how many doors I had to buy to achieve my goal. When most of my properties were yielding $200, $300 and more a door, I surprisingly revised my goals to arrive where I wanted faster.
3. Explore Financing Options
Finding investment property financing is one of the most challenging parts of real estate investing. Before you start hunting for your first deal, you will want to have a good idea of how much you can afford and how you will get financing. Investment property financing could be very tricky and hold lots of surprises! Whether you are financing through cash financing, private money lenders, home equity loans, real estate partnerships, seller financing, conventional mortgages, etc., you need to study mortgage banking and financing as hard as you are studying real estate investing! It’s one in the same!
Choosing the wrong investment property financing option could adversely affect your investment goals. Compare different financing options to find one that is best for your current situation. The right financing for you will depend on the loan type, your eligibility, loan term, interest rate, costs, and loan amount. Ensure you have enough money for a down payment and know your credit score. Also, talk to different lenders to see what loan you qualify for.
I’ve had Michael Becker on my show since I started this podcast. I saw him acquire 3,000 units in 3 years and now he’s approaching 10,000. Besides being just a great guy with excellent instinct, one of his biggest strengths was the fact that he was a mortgage banker for years before he started seriously buying investment properties. He knew every banking product inside and out, he knew how the banks underwrite loans because he had been there and done that. This gave him a tremendous advantage when he left banking to become a full-time real estate investor. I’ll put some links in our show notes to some of our podcasts with Mike.
4. Choose an Investment Strategy
To build a real estate empire and reach your investment goals, you will need to have a strategy. How are you going to turn your investment property into profits? There are many real estate investment strategies that you can use to make money in real estate. Picking the best strategy for you will help you design your path, maintain your focus, and move past your first income property to build your real estate empire relatively smoothly. Some of the strategies to consider include the creative financing using no money down, fix-and-flip strategy, wholesaling, buying notes and liens, hard money lending, lease-options, and the buy-and-hold strategy, etc. Some successful investors have even started doing short-term rental arbitrage (explain) through AirBNB and then started acquiring rental units with their profits.
5. Acquire Your First Investment Property
Once you have everything in place, then you need to take action to realize your dream of building a real estate empire. A journey of a thousand miles starts with a single step. Building wealth with real estate is not going to take a day. The key is starting out small and building up from there. Of course, I know some that would even question that – because they started with a 200 unit apartment building! Nonetheless, it still all starts with buying your first investment property.
The idea of buying an investment property can be daunting for first-time real estate investors. So, how do you go about it? Well, the first thing you should know is that the performance of your first investment property will greatly influence your success as a real estate investor. This is because it will influence your ability to buy a second property. There are many investment properties for sale in the real estate market. However, not all properties are the same. You should aim for positive cash flow properties with a good return-on-investment. With the right knowledge and tools, you will be able to find a profitable investment property.
Be sure to check out some of the great free online real estate investment tools available to help you easily and quickly and find the best-performing investment properties in the US housing market. Check out places like BiggerPockets.com, Mashvisor, Investopedia and BankRates.com, to name a few. You will be able to run the concrete numbers to see how well an income property will perform financially. Some of the key metrics you can calculate with online tools include rental income, cash flow, cash on cash return, cap rate, and Airbnb occupancy rate.
6. Build a Team of Real Estate Professionals
Another key aspect of how to build a real estate empire is hiring a team of professionals to help you with the day-to-day work involved with rental properties. Outsourcing will save you from many of the headaches of managing rentals. Some of the professionals to include on your team include property managers, real estate agents and brokers, accountants, attorneys, mortgage brokers, home inspectors, etc. Hiring professional property management will be very crucial as you add to the number of investment properties in your portfolio. It will free you up so that you to continue expanding your portfolio and even invest out of state. It would be wise to build up a team that you can trust and work with for the long-term
7. Buy More Investment Properties
The secret to building a real estate empire is knowing how and when to buy multiple rental properties. Ask any real estate mogul for advice on how to build a real estate empire and they will probably mention to you that they were always in the “acquisition mode” – looking to grow their real estate investment portfolio. Buying the first investment property is usually the hardest part. If you successfully completed that hurdle, there are a number of routes you can take to acquire more investment properties and build a real estate empire. Using leverage, OPM (other people’s money), owner financing and many other strategies can help you achieve your goal of creating a real estate empire.
Saving up to buy a second investment property may take you many years. To speed up the growth of your real estate empire, you can leverage your home equity to access funds to buy another investment property. You can also use positive cash flow from your existing property to fund your next investment. Just repeat the process and acquire multiple rental properties. However, remember to always seek out to find, compare, and analyze the best income properties for your real estate investment.
With multiple income properties, each generating positive cash flow, you will be able to grow a great ATM cash machine, so to speak. You can keep on growing your real estate empire over time and invest in even bigger projects with higher profits. However, keep in mind that with bigger projects there are bigger risks. So, make sure you do your homework, always run the numbers and carefully before investing.
8. Diversify Your Portfolio
It can be tempting to acquire the same type of investment properties on the same street. In any case, they may be generating the same amount of rental income and bring in positive cash flows. However, the real estate market is usually dynamic and your suburb may have a bad year. If this happens, you may find it hard to find tenants for all your rentals and it’ll slow down your financial growth. The solution to this is diversifying your real estate portfolio by investing in different locations and in different property types.
For example, you may start out with single-family homes, but diversifying and building a multi-family real estate empire could work best for you. You may live in the Ohio real estate market, but as you grow, you may find investment properties in the Phoenix real estate market or the Pittsburgh real estate market to be stable and profitable. Keep exploring different opportunities as you build your empire.
In Conclusion
Making money in real estate involves more than just buying a single investment property and waiting to earn monthly income from it. For someone learning how to build a real estate empire, you will realize that it takes good planning, relevant knowledge, a lot of effort, and consistency. There is no secret to being a successful real estate investor. You just have to do the work, follow the right steps and never give-up (of course you can when you reach your goal).
Podcast Guests Who Created Their Own Real Estate Empires
001: How I Grew My Real Estate Business to $28 Million in Three Years With Joe Fairless
002: How to Acquire 3,000 Units in 36 Months with Michael Becker
005: From Broke Rock ‘n Roller to Millionaire Real Estate Mogul
101: From Converted Duplex to Working With Robert Kiyosaki & Donald Trump to Multifamily Mogul
145: Rich Dad Robert Kiyosaki Reveals Why the Rich Are Getting Richer
185: The ABCs of Real Estate Investing and Property Management with Ken McElroy
333: Real Estate Rockstar Acquires Nearly 4,000 Units in 8 Years
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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Additional Episode Sponsor: Meno Studio – menostudio777@gmail.com
