Do NOT buy rental properties if you’re just starting to invest in real estate! Do this instead…
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Buying rental properties to grow your passive income is so widely suggested among investors, but I think you should work on your active income first! Here’s my advice on how you should approach growing your wealth through real estate…
I used a three-step framework that has worked well for me as well as others. Stage one, “Make” is where you work on your skills to the point you make $250K per year. “Manage” is stage 2 where you hire a team and team them how to do it. In this step, you get your time back and can focus on growing your business. You should make over $1 million before moving onto stage 3! Stage 3 is where you “Multiply.” Multiplying the business is the large part of scaling your business. Here, you can buy rental properties and other assets.
20 comments
First
250k net….right no problem, easy.
When do you decide you’re ready to start hiring? Financially wise.
Interesting on phase 2. I’m at that stage and I was thinking how I’m not making as much profit. Glad you shed some light on that area. Really will help me continue as an owner!
Interesting
Nothing wrong with flipping in my opinion but there is also nothing wrong with starting off by owning rentals. I started that way, but my first property was a 4 plex that I lived in for free while the tenants in the other three units paid all the bills and I still made $500 a month profit.
When I sold 5 years later I made $200,000 (off a $6000 initial down payment) in profit off the equity and used that money through a 1031 exchange to buy a property.
Making millions with rentals is far less risky and less work intensive. I did it while working a full time job.
I’m reading ‘Set For Life’ by biggerpockets this is interesting
Find deals, use opm to fund it.
Need some Tykes in the background!
I agree with you, to be fair though Graham Stephan started off as a real estate agent as well. He was frugal because real estate agents don't know when they're going to get their next pay check and it probably took him some time to become an investor himself. I was going start flipping homes also after watching Flip or Flop on HGTV years ago then decided to build houses from scratch due to the empty lots in my area and the potential for bigger profit margins as well as less guessing with renovation costs with home flips and the crazy numbers contractors quote you to renovate making you unprofitable. But after having trouble getting financing to build my first house I realized I'd have to finance it mostly myself to build credibility so investors can trust me with their money and the best way to do that was to get my real estate license and start selling and reinvesting my commissions. I passed my real estate exam not too long ago and just became a real estate agent here in San Carlos California DRE#02204358 Working in the Peninsula is going to allow me to network with a lot of people with deep pockets.
Great video! This is a really comprehensive guide to building wealth, with lots of practical tips and advice. I particularly liked the emphasis on starting early, investing wisely, and developing good financial habits. Thanks for sharing!
Passive income is myth, if you are just starting out. And like Ryan said, $200+ per month is going to make you rich. And tiring up that down payment is lame! Instead invest in yourself and business to make money first.
This is essentially the @DanLok wealth triangle model. I like it. Starts with
1. high-income skill, (active income)
2. scalable business, ( part active, part passive income)
3. high-return Investments ( passive income)
Have all three and you get really rich. Have just two and you can do very very well. But you start with the high-income skill to have that safenet of always being able to make money yourself before you try and start a scalable business when you have no skill or business acumen
Flipping houses would be the high-income skill, getting yourself out of the process and training people to do XYZ is what allows you to make it into a scalable business, then using the large lump sum of money that you build up overtime to buy high-return Investments which would be the cash flow rentals
Wealth Triangle video: https://youtu.be/hjgN-K_b7nk
Thank you for this!
fire!
Build your cash cow before your cash flow
Ryan, You are truly one of the most, if not the MOST inspirational person I've come across! I love this way of thinking: Make manage multiply!
This is great.
Thanks so much for this information!!
FunTastic!!!