millionaire from real estate

Dream of becoming a millionaire from real estate? 

The good news is that the strategy to become a millionaire in real estate is actually pretty simple. The bad news: simple doesn’t mean easy. It still requires plenty of work and money invested to get there — especially if you want to become a millionaire within five years. 

Follow these steps to become a millionaire real estate investor within the next 5-10 years. 

 

Steps to Become a Millionaire from Real Estate

You don’t need to start with a silver spoon to become a millionaire from investing. You do need to invest consistently, and the more you invest each month, the faster you’ll join the two-comma club. 

Ready to launch your rocket to riches?

 

Step 1: Choose Between Active & Passive Investing

You don’t have to flip houses or become a landlord to build a million-dollar net worth investing in real estate. In fact, you can invest from the comfort of your couch, and never put your name on a deed at all. 

Passive real estate investing options include real estate crowdfunding platforms, publicly-traded REITs, real estate syndications, and private notes. I don’t recommend public real estate investment trusts as a vehicle to becoming a millionaire in real estate. You can’t take advantage of real estate leverage, and public REITs share too much correlation with stock markets. 

Real estate crowdfunding is a viable option as you’re just getting started. Several platforms offer minimum investments between $10-500, helping you diversify into real estate without coughing up tens of thousands for a down payment. But many require a long-term commitment, without necessarily paying the high returns of real estate syndications. Check out Groundfloor and Fundrise as ideal starting points with as little as $10. Groundfloor offers short-term investments, and Fundrise charges a minimal early withdrawal penalty.

The real returns in passive real estate investing come from real estate syndications however. In our real estate investment club, we aim for 15-30% returns on real estate syndications. Most generate passive streams of income while you own them, and come with full tax benefits from property deductions to depreciation

No investment comes without downsides though. Real estate syndications require a medium- to long-term commitment, two to seven years, and don’t offer any liquidity. They typically require high minimum investments in the $50-100K range, unless you invest through a real estate investment club (like, ahem, ours). 

If you prefer a more hands-on approach, you could learn how to buy properties directly. Just beware that it comes with far more skills you need to master. 

 

Step 2: Wrap Your Head Around Infinite Returns

For the math geeks out there, if you invest $0 and earn $1, what’s your return on investment? 

To become a millionaire real estate investor sooner rather than later, you need your money to work double and triple shifts for you. And it can — if you achieve infinite returns. 

You might have heard of the BRRRR strategy in real estate, which illustrates this concept perfectly. The acronym stands for buy, renovate, rent, refinance, repeat: you buy a fixer-upper, rehab it, and then refinance it with a long-term rental property mortgage. 

Here’s the kicker: when you refinance it, the loan amount is based on the new after-repair value, not your original purchase price. That means you can pull cash out of the property upon refinancing, often enough to reimburse your original down payment. 

Which leaves you with none of your own money invested in the property. You can take your down payment money and reinvest it to buy another property. In this way, you can recycle the same down payment over and over again, each time adding a new cash-flowing property to your portfolio. 

You can also earn infinite returns on passive real estate syndications. The sponsor buys a property, renovates it and raises rents (which raises the value), and then instead of selling they refinance. Upon refinancing, they return your initial investment capital back to you, but you still keep your ownership interest in the property. You’re free to reinvest that capital in new deals, even as you keep collecting distributions from the existing property. 

Starting to see how you can become a millionaire from real estate without needing to invest massive sums of money?

 

Step 3: Master the Fundamentals of Your Strategy

Now that you’ve decided whether you want to invest passively in real estate syndications or actively in BRRRR properties, it’s time for you to master your chosen strategy. 

Because make no mistake: if you don’t master it, you’ll make mistakes. And when you’re investing tens of thousands per deal, mistakes are expensive. 

 

Skills Required for Syndication Investing

Syndications offer the easier path, and by a long margin. To begin with, you need to learn how to find sponsors who allow non-accredited investors (unless you already qualify as an accredited investor). That in itself requires some work, because by law these syndicators aren’t allowed to advertise. Ask around among other passive investors, join social media groups, listen to podcasts such as How to Scale Commercial Real Estate by Sam Wilson. 

As you start networking with sponsors, you need to learn how to vet them carefully. Ask probing questions such as:

    • What types of properties do you invest in and why?
    • What markets do you invest in and why? 
    • Have you ever issued a capital call? 
    • Can you send me your track record? 
    • Can you send me references of investors who have participated in at least three of your deals?
    • How do you mitigate risk in your deals?

You also need to learn how to vet deals. But vetting deals is less important than vetting sponsors — if you find the right general partners, you develop trust in their expertise and judgment. 

You can also simply join a real estate investment club that specializes in syndications for non-accredited investors. Like, say, ours! Every month we propose a new syndication deal, and any members who want to participate can do so with as little as $5,000. That’s a lot easier than the typical $50-100K.

Related Article Read: Ways to find pre foreclosure homes.

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Real estate investments? Awesome. Being a landlord? Less fun.

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Katie earning passive income from real estate syndications

Skills Required for BRRRR Investing

If you go the active investing route, prepare for more labor and more skill required on your part. But in exchange, you do get more control over your real estate deals.

First, you need to learn how to find good deals on properties. While some investors do use real estate agents to buy properties listed on the MLS, the best deals aren’t just publicly advertised. That’s the definition of market pricing. If you want to score an actual bargain, you need to find off-market deals, which costs time and money.

Beyond learning how to find deals, you need to finance them. That in turn means cultivating relationships with as many lenders as possible. For conventional mortgage loans, try Credible. Those will only work for your first couple deals, and aren’t flexible either. Build relationships with several portfolio lenders such as Kiavi, Forman Loans, Visio, and New Silver. Remember, you need purchase-rehab loans and long-term mortgages.

Then consider lining up unsecured business lines of credit that you can draw on as needed. Check out Fund&Grow, which helps you open $100-250K in unsecured business credit. You can use this flexible credit for closing costs, renovations, down payments on investment properties, or even to buy cheap real estate outright.

You’ll also need contractors — lots and lots of contractors. Electricians, plumbers, roofers, HVAC specialists, foundation and structural contractors, low-cost handymen. Network with as many of them as you can, and get comfortable both negotiating with them and managing them with constant quality checks, feedback, and fix requests. Contractors are notoriously difficult to work with, and will only perform quality work to the degree that you demand it of them by checking every single detail.

Don’t forget about pulling permits and hassling with local housing inspectors. That’s always fun.

When the renovations are complete, you get to advertise the property for rent, show it to prospects, screen tenants, sign lease agreements, collect security deposits and follow your local laws for how to hold them, inspect the units regularly, and oversee ongoing repairs.

No one said becoming a millionaire from real estate was easy!

 

Step 4: Invest Consistently

If you want to become a millionaire from investing, you can’t just “see what’s leftover at the end of the month.”

Your savings rate needs to become your highest financial priority, your top budget line. You invest first, and everything else comes second.

The faster you want to become a millionaire, the more you need to invest each month. For example, at a 10% return, it would take around $12,750 invested each month to become a millionaire in five years. At a 20% return, you could drop that to $9,750 each month (we aim for 15-30% average returns in our real estate investment club).

On a longer time horizon, it takes far less of course. At a 10% return, it’d take around $4,900 per month to become a millionaire in ten years, and at 20% returns it would take just $2,700 per month. Play around with our compound interest calculator here for gits and shiggles.

Here’s how much you’d have after ten years, at different monthly investment amounts and rates of return:

6% 8% 10% 12% 14%
$500 $82,309 $91,707 $102,446 $114,733 $128,805
$750 $123,463 $137,560 $153,670 $172,099 $193,208
$1,000 $164,618 $183,414 $204,893 $229,466 $257,610
$1,250 $205,772 $229,267 $256,116 $286,832 $322,013
$1,500 $246,927 $275,121 $307,339 $344,199 $386,415
$1,750 $288,081 $320,974 $358,562 $401,565 $450,818
$2,000 $329,235 $366,828 $409,785 $458,932 $515,220
$2,250 $370,390 $412,681 $461,009 $516,298 $579,623
$2,500 $411,544 $458,535 $512,232 $573,665 $644,025
$3,000 $493,853 $550,242 $614,678 $688,397 $772,830
$3,500 $576,162 $641,949 $717,125 $803,130 $901,635
$4,000 $658,471 $733,656 $819,571 $917,863 $1,030,440
$4,500 $740,780 $825,363 $922,017 $1,032,596 $1,159,245
$5,000 $823,089 $917,070 $1,024,464 $1,147,329 $1,288,051
$6,000 $987,706 $1,100,484 $1,229,356 $1,376,795 $1,545,661
$7,000 $1,152,324 $1,283,898 $1,434,249 $1,606,261 $1,803,271
$8,000 $1,316,942 $1,467,312 $1,639,142 $1,835,727 $2,060,881
$9,000 $1,481,559 $1,650,726 $1,844,034 $2,065,192 $2,318,491
$10,000 $1,646,177 $1,834,140 $2,048,927 $2,294,658 $2,576,101

 

Infinite Returns: Recycling the Same Investment Money

Here’s where things get interesting though. When you successfully achieve infinite returns on your investments, it takes less cash on your part to become a millionaire from investing. How much less? Well, it depends on how quickly you can turn over your investment capital, and what kinds of cash flow you keep earning after getting your money back.

Say you use the BRRRR strategy and invest $50,000 in a property, and refinance within six months. With each property, you add $200 in monthly cash flow. That means that each $50,000 you dedicate to investing can add two more properties to your portfolio each year, adding $4,800 in annual income. Thus, a single $50,000 for investing would add ten properties to your portfolio over five years, adding $22,000 in annual income. And that says nothing of reinvesting that passive income along the way for compounding returns.

Invest early, invest often, and invest for infinite returns when possible.

 

Step 5: Diversify Carefully

Imagine you invested with the BRRRR method in Flint, Michigan back in the 1970s and ‘80s. You lived and worked there, and built up a portfolio of rental properties there. Then the main manufacturing jobs disappeared, along with much of the town’s population. Rents drop, property values drop, and your portfolio loses a huge percentage of its value and income.

Therein lies the risk in failing to diversify: a single shock could wipe you out.

The opposite risk holds true too however. If you get shiny object syndrome and chase every new investment strategy you come across, you won’t master any of them. You’ll continue to make rookie mistakes because you failed to develop expertise in a single strategy or real estate market.

This is why I invest passively in syndications. I can invest $5,000 apiece with different sponsors operating in different states, buying different asset classes from multifamily properties to self-storage facilities to mobile home parks to industrial real estate.

It’s a lot harder to invest long-distance following the BRRRR method. Buying turnkey properties is hard enough long-distance, but buying fixer-uppers? Fuhget about it.

That doesn’t mean you shouldn’t invest locally using the BRRRR strategy — if you live in a market with strong returns on rentals and landlord-friendly laws. If not, stick with passive investing in real estate syndications.

You can further diversify with real estate crowdfunding platforms and stocks. I aim to keep around half my investment portfolio in stocks, because stocks let me diversify across many sectors, market caps, and countries around the world. Stocks serve a different purpose in your portfolio, offering fast liquidity, growth, and ease of investing with tax-sheltered accounts.

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How about fix-and-flip loans?

We compare the best purchase-rehab lenders and long-term landlord loans on LTV, interest rates, closing costs, income requirements and more.

How Long Will It Take Me to Become a Millionaire?

It depends on your average annual returns and how much you invest each month. Boost both for faster progress.

Plus, it helps if you can earn infinite returns. But they’re easier described than achieved.

Plan on investing at least $5,000 per month if you want to become a millionaire in 10 years, and believe you can earn 10% returns on average. See the “Invest Consistently” section above for more sample numbers.

I consider a 10% return on investment to be the benchmark for good returns. Besides having a nice right to the double digits, it’s also roughly the long-term average annual return on the S&P 500.

In my real estate investments, I aim to beat 10% returns. Specifically, I want to average at least 15% on my real estate syndication investments in our Co-Investing Club.

 

Tips to Become a Millionaire Investor Faster

Ready to light the world on “FIRE”? (No apologies for bad puns around here, sorry.)

As you embark to join the seven-digit club, track your progress with a financial independence/retire early calculator (FIRE calculator). That which gets measured gets done.

Try these tips to become a millionaire from real estate faster.

 

Grow the Gap

No one wants to hear it, but you become a millionaire faster by investing more money each month. That means taking every step possible to boost your savings rate — the gap between what you spend and what you earn.

You can grow that gap in two ways: spend less and earn more.

The simplest way to spend less is by house hacking. After all, housing is your single largest expense, so eliminating it frees up thousands more dollars each month to invest and start compounding.

Consider getting rid of a car as well. My family lives with no car at all. Sound extreme? So does becoming a millionaire from investing within five or ten years. But I won’t press the point; you’re either open to exploring the idea or you’re not.

 

Lower Your Tax Bill

First, take full advantage of employer matching for retirement account contributions. It’s effectively free money, and part of your compensation package that you leave on the table if you don’t maximize it.

Also max out your Roth IRA contributions, and consider using a self-directed IRA to invest in real estate for infinite returns. Imagine all those infinite returns compounding tax-free!

Earn too much money to contribute to a Roth IRA? Use the backdoor Roth IRA strategy.

If you plan to retire early, consider setting up a Roth conversion ladder.

 

Stash Your Cash with Higher Yields

As you set aside money for real estate investing, don’t let it lose money to inflation in a savings account. Hold it in a high-yield account like Concreit, which currently pays 6.5% interest and lets you withdraw your money at any time. I use it as a staging area for my real estate investing funds.

Alternatively, you can park money in short-term notes. For example, Groundfloor currently pays 7.25% interest on a three-month note. 

 

Final Thoughts

If reaching millionaire status were easy, everyone would be one.

But the concepts above aren’t rocket science. Sure, it takes a second to wrap your head around an infinite rate of return. But anyone can become a millionaire real estate investor, no expensive degree required.

Keep stacking up passive streams of income from real estate. Build your real estate portfolio, property by property, syndication by syndication, adding more rental income with each addition.

Don’t ignore stocks, either. Real estate offers a great vehicle for reaching financial freedom, but a balanced portfolio includes stocks in every region of the world, every sector of the economy, every market cap. If you don’t know anything about stock investing, just use a robo-advisor like Acorns or Charles Schwab for now. Beyond automatically investing for you, they can also automatically transfer money to your investment account.

When you hit a net worth of a half million dollars or so, you can always upgrade to a human financial advisor. But for now, broad index funds in the form of ETFs or mutual funds will serve you well.

Start with passive real estate investment opportunities, because they require less skill and work. You can gradually learn the skills you need as an active investor if you so choose — or not.

Most of all, enjoy the journey. I’ve been living my ideal lifestyle long before becoming a millionaire in real estate, spending much of each year overseas traveling with my family. As much fun as it is to become a self-made millionaire from real estate, the true reward lies in lifestyle design and intentional living.

 

How do you plan to build your real estate empire? How are you building passive monthly income?

Related Article Read: What Is the Due Diligence Period in Real Estate?

Related Article Read: How to transfer property from a person to an LLC.

Related Article Read: What You Need to Know About Condemned Houses in 2023?

 

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About the Author

G. Brian Davis is a real estate investor and cofounder of SparkRental who spends 10 months of the year in South America. His mission: to help 5,000 people reach financial independence with passive income from real estate. If you want to be one of them, join Brian and Deni for a free class on How to Earn 15-30% on Fractional Real Estate Investments.

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