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This individual is 31 and became financially independent through real estate.
Here are his cliff notes
1. Pick a niche
Real estate is a really big world. If someone tells me they're a real estate investor that could mean a lot of things and it goes beyond buying a home and renting it out for a few hundred bucks of profit each month.
Pick a niche that fits your goals best. If work-optionality asap is your goal I'd recommend value-add apartment buildings (step 4 on this list) then flipping your gains into a debt fund (step 5).
2. Pick partners to invest with
If you want passive income the truth is you'll have to outsource your work in exchange for your capital. Being an investor instead of an owner is the only way to be really passive in anything.
That means you'll want to pick strong operators in the niche you landed on who are great at finding deals, operating them, qualifying for the loans, taking on the liability, already have infrastructure in place to run deals, and have a strong track record of creating profitable investments.
If they want to continue growing their portfolio, they will take on investors. Trade your capital for their expertise and infrastructure.
If you want to buy deals yourself that's fine too, just have a reasonable expectation of how much capital and work you need to put up to make your portfolio successful.
In either scenario, you'll go further with partners. So find out what that partnership structure looks, what your involvement will be (active or passive), and hunt for the best partners for you.
3. Find the number you're shooting for
To me I wanted $100k per year in passive cash flow from the lowest risk investments in the real estate industry. In my opinion right now that's a diversified debt fund. The lowest risk ones tend to pay around 8% per year and pay every month.
So, if you want to make $100k per year and you'll achieve that through a low risk debt fund, you'll need $1.25M invested there ($100,000 / 0.8).
So to me my north star was I need $1.25M to hit my passive income goal. That's where the focus on step 4 comes in.
4. Grow your equity first
People tend to focus on cash flow too early in their investing career in real estate. Here's how I see it...
Take the scenario above. Debt fund that pays 8% per year and you have $100k to invest in it. That means you'll make $8k per year.
It's not nothing, but if your goal is to be work-optional asap then it won't move the needle enough for you.
I'd rather put that $100k into a deal that gets me larger capital gains and overall growth. I know my goal in this scenario is $1.25M so my goal is to grow my $100k into a figure closer to that through appreciation deals.
I'm not saying ignore cash flow on a deal. I don't believe in buying deals that don't cash flow from day 1. But there are different strategies that offer higher equity potential usually in exchange for lower cash flow upfront.
I started off with a $50k investment in value-add apartment deals and that grew into $100k then into $200k, then $400k, and on and on... I kept investing more cash and flipping my gains into new deals but if I just parked it into a debt fund first it'd take me way longer to hit my number.
Grow that $100k in a risk-adjusted way fast through equity until you've grown your investment enough that you can move onto step 5.
5. Flip your equity into cash flow
Once you hit your number pull back into your higher cash flowing option. This is where you greatly reduce risk, diversify a lot, and look for consistency of payouts versus total growth.
Thanks for reading...
My disclaimer is this...this is a reflection of my journey. Real estate isn't the only way to hit a goal like mine. To me, it's the most risk adjusted way given my background and comfortability with the investment and the amount of money I had to invest.
Hope it's helpful
Here are his cliff notes
1. Pick a niche
Real estate is a really big world. If someone tells me they're a real estate investor that could mean a lot of things and it goes beyond buying a home and renting it out for a few hundred bucks of profit each month.
Pick a niche that fits your goals best. If work-optionality asap is your goal I'd recommend value-add apartment buildings (step 4 on this list) then flipping your gains into a debt fund (step 5).
2. Pick partners to invest with
If you want passive income the truth is you'll have to outsource your work in exchange for your capital. Being an investor instead of an owner is the only way to be really passive in anything.
That means you'll want to pick strong operators in the niche you landed on who are great at finding deals, operating them, qualifying for the loans, taking on the liability, already have infrastructure in place to run deals, and have a strong track record of creating profitable investments.
If they want to continue growing their portfolio, they will take on investors. Trade your capital for their expertise and infrastructure.
If you want to buy deals yourself that's fine too, just have a reasonable expectation of how much capital and work you need to put up to make your portfolio successful.
In either scenario, you'll go further with partners. So find out what that partnership structure looks, what your involvement will be (active or passive), and hunt for the best partners for you.
3. Find the number you're shooting for
To me I wanted $100k per year in passive cash flow from the lowest risk investments in the real estate industry. In my opinion right now that's a diversified debt fund. The lowest risk ones tend to pay around 8% per year and pay every month.
So, if you want to make $100k per year and you'll achieve that through a low risk debt fund, you'll need $1.25M invested there ($100,000 / 0.8).
So to me my north star was I need $1.25M to hit my passive income goal. That's where the focus on step 4 comes in.
4. Grow your equity first
People tend to focus on cash flow too early in their investing career in real estate. Here's how I see it...
Take the scenario above. Debt fund that pays 8% per year and you have $100k to invest in it. That means you'll make $8k per year.
It's not nothing, but if your goal is to be work-optional asap then it won't move the needle enough for you.
I'd rather put that $100k into a deal that gets me larger capital gains and overall growth. I know my goal in this scenario is $1.25M so my goal is to grow my $100k into a figure closer to that through appreciation deals.
I'm not saying ignore cash flow on a deal. I don't believe in buying deals that don't cash flow from day 1. But there are different strategies that offer higher equity potential usually in exchange for lower cash flow upfront.
I started off with a $50k investment in value-add apartment deals and that grew into $100k then into $200k, then $400k, and on and on... I kept investing more cash and flipping my gains into new deals but if I just parked it into a debt fund first it'd take me way longer to hit my number.
Grow that $100k in a risk-adjusted way fast through equity until you've grown your investment enough that you can move onto step 5.
5. Flip your equity into cash flow
Once you hit your number pull back into your higher cash flowing option. This is where you greatly reduce risk, diversify a lot, and look for consistency of payouts versus total growth.
Thanks for reading...
My disclaimer is this...this is a reflection of my journey. Real estate isn't the only way to hit a goal like mine. To me, it's the most risk adjusted way given my background and comfortability with the investment and the amount of money I had to invest.
Hope it's helpful
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