It all started with an argument with a friend. “What is the quickest way to becoming a millionaire in America?”
We would argue back and forth as to explain how and through what can help people achieve the millionaire status.
The typical answer is “Work hard, go to school and get a good job”, right? But if it was that easy, everyone would be a millionaire.
My friend’s answer always confounded with saving and investing. Simply, use compound interest and compound your investments. Again, only if it was that easy. Then why do so many 65 year olds continue to work?
(Pssttt… Listen to this content on a Podcast: https://soundcloud.com/thekwakbrothers/episode2 )
I was born in South Korea and immigrated to the U.S. when I was 7.
Today, my brother and I are 24 and 23 years old with over a million dollars worth of real estate investments.
We quickly realized that there is a simple way to becoming a millionaire without saving money, budgeting, cutting credit cards, or even having your money managed by some financial adviser who makes commission off of your hard earned money. There is a faster and a lot more secured way to having a net worth of a million dollars and that is through acquiring real estate.
The common belief today in becoming a millionaire is by saving up to it. In fact, I want to applaud those who are saving up to a million dollars because it probably won’t happen. Apart from inflation and the volatility of the stock market, the discipline alone to save up to millions is non-existent. As many studies conclude, the majority of America’s millionaires became one through acquiring real estate. Here’s how that works in comparison to simply saving.
Saving up to millions of dollar has worked for one particular period of time. Today, that idea doesn’t work. In fact, I would argue that it has never worked at all. Studies and data clearly shows that those who simply save don’t end up becoming millionaires. Now, are there few people that do? Yes, but these people make unrealistic sacrifices and a battle uphill against inflation. (2017 inflation rate is at 3.2%. Your investment would have to make a much stronger yield to make your investments worth it) Let alone, a million dollars in a retirement account is simply not enough to live on today. Because of our advancement of modern medicine, people are living longer. If people are living longer, they also need to be able to sustain their revenue and source of income. A million dollars simply cannot sustain an individual long enough to live off of. We need to shift our mindset to cash flow instead of accumulation. Many of the ideas that I’m going to share with you comes from Garrett Gunderson. He’s a 21st century financial expert that focuses on debunking financial myths. You can read more of his articles and writings as well.
In real estate, the ability to rent homes to other people have been a very profitable business for thousands of years. Historical findings show that the early Native Americans leased land to another tribe in exchange for goods and commodities. Ancient Rome’s wealthiest man, Marcus Crassus, also came to his wealth through real estate. Because of this unique ability to earn income, cash flow can be created by simply taking enough possession of income producing properties while it builds equity.
What’s even beneficial is that real estate can be easily leveraged by certain debt instruments such as a loan or a line of credit. Because of these abilities, you can buy an income producing real estate with very little cash. Often with just 10-25% down. With some knowledge and training, you can even do little to no down payment when acquiring a property through creative acquisition strategies.. For example, I just bought a rental property for $2,500 down on a $90,000 property. In 15 years, the property will be paid off and I will be $90,000 wealthier plus the income of $500/mo. that the property will generate. Another example is that my partners and I just bought an 8 unit apartment building for no money down. We also didn’t even use bank financing as the seller financed the purchase for us. These situations are not always typical but if you acquire the knowledge to stay opportunistic, you will know how to turn situations around for a no-money down purchase.
Now, some of you guys are saying, “But.. Real Estate is risky! Look what happened in 2008”. I agree. Anything can be risky if you’re not properly educated or informed about the given activity or topic. Could you imagine if you were to jump into the cockpit of a fighter jet plane without getting the proper training? Your odds of being able to take off and land the aircraft is slim to none unless you played a lot of simulation games. Even then, the risk far outweighs your skill level. Much like so, many people are often misinformed or uneducated about investing in general. Hence why I wrote this article! The 2008 market crash had less to do with real estate investing than faulty lending practices by the banks. Easy access to funds gave unqualified people the ways to buy houses without getting firmly educated in what they were doing. This is what we formerly like to call it “speculation”. Speculative investing is the worst way to crush any chance of you becoming a millionaire.
If you are still not convinced that real estate is the best investment vehicle, ask yourself, ‘Why would banks lend money on real estate but they would laugh at the idea of lending money for stock investments?’. Think about it… If you were to go to the banks and ask for a loan so you can invest in stocks, bonds or mutual funds, what would the loan officer think about that? Even to you, the idea seems silly, right? If the banks are in the business to assess risks and lend money away, why would they lend money for real estate purchases if it seems so “risky”? Could it be perhaps that stocks, bonds and mutual funds are more risky than real estate? Investment brokers and advisers spend millions of dollars in marketing to convince you that real estate investing is risky. One of my good mentors told me, “There are suckers being born every minute, don’t let that be you”. It only takes a good handful of suckers for these investment brokers to make money off of you and your lack of involvement in the investment decisions. It’s time to take control of your finances instead of delegating your responsibilities away. As Garrett Gunderson puts in, (Paraphrasing) “I can’t [go to the bathroom] for you. You can’t delegate that so don’t delegate your personal financial responsibility to someone who has no business in doing so or someone who doesn’t share the same passion as you do” Millionaires don’t play around with their money or delegate the responsibility to someone else. They take control and make all the important plays.
If you want to become a millionaire in 5 years, the quickest way is to acquire a million dollars of real estate and have it paid off using the rental income or simply enjoy the cash flow so you don’t have to work at a job that produces income that get’s taxed before you even see the check. In real estate, the tax from the rental properties can be deferred, leaving you with very little to no taxes to pay on that income. Read my other article about how to properly calculate cash flow from rental properties: https://thekwakbrothers.com/2017/06/analyze-rental-deal-calculating-cashflow/
My brother, partners and I are about to acquire an apartment complex valued at $1.5 million. Because of the size of the apartment, we are going to be able to pay it off in less than 20 years and it will consistently generate about $10,000 a month in net income. I didn’t mention that we didn’t use our own cash or credit to acquire the apartment complex. We are using strategic partnerships and relationships to raise the money to acquire it. It’s all about what you know, who you know and how to put deals together.
Here’s my point. If you want to become a millionaire in less than 5 years and create a massive cashflow to live on, acquire a million dollars worth of real estate. It’s definitely do-able and there are no rules that says you can’t. Even if those properties are in debt, your tenants will be paying down the debt for you while you still get to earn income from it. With enough properties, you can be earning $5000, $10000, or even up to $100,000 a month from having tenants live in your properties. Stocks, bonds or mutual funds can’t do this even with a hefty dividend payout. You would need to at least own more than 5-10% of a public company to even see enough income to live on but stocks can’t be leveraged with debt when acquiring it. Hence, real estate trumps all investments in terms of producing cash flow and net worth at the same time.
Some of you may already think… “I don’t have any money or credit to start buying houses”. Well, neither did my brother or myself! We were in College when we started learning, investing and growing. It did take a lot of sacrifices and effort to learn and practice what we learn but knowing that we can retire in 5 years is worth the little bit of patience. On the flipside, some of you are now even considering real estate investing as a career like what my brother and I are doing! The best part about real estate investing is that not only it’s an active career that you can build but the investments are directly impacting your ability to retire or scale back your time commitment. With certain amount of properties, Daniel and I can put in little or no time every week. You don’t get the same option with many jobs or certain service oriented businesses.