90% of Millionaires Invest in Real Estate

Did you know that 90% of Millionaires invest in real estate? 

(mic drop)

Pretty surprising huh? When you ask Millionaires how they did it- a majority of them cite real estate investments as the primary reason.

The other day- I was talking to a business owner I admire and respect. Her and her husband have done very well for themselves- they own a strong business and live a good life. She leaned in and told me that yes the business does well and they are grateful- but the REAL ESTATE is what helped them accelerate their wealth.

Can you believe that?!

I have been investing in RE since 2006 and yes, I have seen the wealth building capabilities of real estate. But to hear it from a highly respected business owner/ multi-millionaire- and have her cite real estate as a major contributor- that really made me pause and ask the question: WHY?

Why is real estate such a wealth accelerator?

Here are my thoughts- (chime in in the comments below..)

#1. Leverage- We are able to use other people's money (OPM) to acquire cash flowing assets. Private lenders, Hard money lenders and of course conventional bank loans. We can also leverage seller financing and have the seller be the bank on the loan. So needless to say- we can acquire assets that cash flow but only need to put roughly 3-25% of the purchase price down.

#2. Cash Flow- Ever hear Dave Ramsey say “Cash is King?” Well as a real estate investor, CASH FLOW is king. Not only do you have an asset that should be exceeding the inflation rate through appreciation, but theoretically you have one that pays you a paycheck every month. Grab a good handful of these units and the cash flow can really add up.

#3. Appreciation- Now you never want to depend on appreciation as the #1 driver when investing in real estate, but it does have it’s perks. My motto is analyze the deal for the cash flow, but be aware of the appreciation potential. It can really add up over the long haul. 

#4. Tax Breaks- As W2 employees- we don’t get a lot of tax breaks.. (standard deduction anyone???) Face it- the standard deduction doesn’t go very far. But with real estate- you have depreciation, expenses, and other items that when add up to losses can be deducted against your W2 income. Aligning with the right tax strategy can help you recapture a lot of the cash assigned to Uncle Sam. Real life example- ever since I started investing in RE in 2006- I never had to pay additional taxes. I’ve always gotten a refund even when my income went up. There are income limits you need to be aware of- but as a new investor there are a lot of tax incentives in your favor.

#5. Hedge against inflation- For the last 10 or so years this wasn’t a huge issue, but now with inflation on the raise- having low interest loans on rental properties is a massive advantage. Plus the cash flow and appreciation help outweigh any inflation. In my opinion real estate is a great bank account.. It may not be as liquid, but it will earn you more returns than cash sitting in the bank.

See a reason here that I missed? Drop your comments below.