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Well... I'm 30 and married so I might approach things differently than others. But here is how my husband and I do things:
We max out our Roth IRA's every year. My husband puts his gross income 13% into 401K (his company also does 6% matching). We try to shelter our money from taxes (paying med expenses & preschool through flex accounts, mortgage interest deductions, etc.). We also sock away money for college for our girls, have an emergency fund, a low debt to asset ratio, and no credit card debt. We live modestly - don't buy fancy cars (my car is reliable but 5 years old) but we do buy real estate income property. The income property is by far the biggest money maker of all of our investments combined and this is not including appreciation (even w/ the recent housing slump - the cash flow has still steadily increased). We believe in "passive income" and that is what we go after.
I think most of the posts here represent good advice, but only a couple will ever get close to helping this guy hit his goal of $10 Large by the time he hits 60. First, he'll need to save about $100,000 per year every year starting right now. Maxing out a 401k ain't gonna get it done. Using coupons won't help either. You can't save yourself to wealth. He either needs to do very well investing in real estate or start a business that he can grow and sell. The only way he'll save that kind of money is to earn more.
I agree that Real Estate holdings are the only way I'll get there. Do I need a lot of money to start investing in Real Estate though? I've heard that if you want to invest in Commercial Real Estate you usually need to put down 30%. That's a lot of cash. I know maxing out my IRA, investing in a 401k, and Mutual Funds won't allow me to come close to $10 million but I know it's a good idea to diversify. What is a good way to get into Real Estate with not much out of pocket? Residential investments turn me off.
Unless you are in a small suburban town, it sounds like commercial real estate is going to be out of your reach for quite some time. I’m in one of the most undervalued and lowest price to income RE metros in the nation, yet good commercial real estate that I would like to own is still out of my league. You can create a partnership, or join a partnership to gain an interest in commercial RE though.
Regardless, your 1st RE purchase should be your primary residence. Seriously, I doubt anyone starts with a shopping mall while renting an apartment (unless you are in NYC perhaps). Find a home you will stick with long term and forget about what the previous poster said about moving every couple years to build equity to score easy tax free capital gains. That won’t fly in this depreciating market unless you are buying repos and fixer uppers, and even then it will be difficult. Remember, the average millionaire has lived in the same home for 22 years. This means they weren’t restarting their loans like the average American who moves every 4 to 7 years. Thanks to loan amortization, we pay interest up front, so restarting a loan every 2 years translates to tons of interest for the mortgagee and very little equity for the mortgagor.
After you have your primary residence, you should certainly strive to have cash on hand to buy a 2nd property (be it residential or commercial). For residential investment property, 20% down is standard but 25% will acquire the better interest rate. You’ll also need strong tax returns and a high FICO (760 or above). You may be able to purchase investment property with less down, a lower credit score, and questionable income, but it won’t be remotely as easy as it was during the subprime bonanza.
Why is residential such a turn off to you? I had my hesitations at the beginning, but as long as you run the show yourself (avoid property management), write your own leases (lawdepot.com), & cherry pick your tenants, it can be a beautiful thing to have other people take care of and pay off your properties for you (while having a positive cash flow!). My only regrets are not buying more properties when I had the opportunities. I let two duplexes slip by that are directly next to the University of Memphis. I'm still kicking myself. There's another pointer which should be a given: Location is EVERYTHING when it comes to RE, remember the 3 L's.
I agree that Real Estate holdings are the only way I'll get there. Do I need a lot of money to start investing in Real Estate though? I've heard that if you want to invest in Commercial Real Estate you usually need to put down 30%. That's a lot of cash. I know maxing out my IRA, investing in a 401k, and Mutual Funds won't allow me to come close to $10 million but I know it's a good idea to diversify. What is a good way to get into Real Estate with not much out of pocket? Residential investments turn me off.
Have you figured out how much you need to invest and what type of return you'll need to attain your goal?
I hope no one takes offense to this but I doubt there are many multimillionaires on this forum. If you want to know how to become a millionaire you should be seeking advice from millionaires.
Everybody has their own approach but I've been quite successful in the stock market (it could just be luck, I've had a couple of high flyers).
All I'm saying is you shouldn't rule out the market.
Have you figured out how much you need to invest and what type of return you'll need to attain your goal?
I hope no one takes offense to this but I doubt there are many multimillionaires on this forum. If you want to know how to become a millionaire you should be seeking advice from millionaires.
Everybody has their own approach but I've been quite successful in the stock market (it could just be luck, I've had a couple of high flyers).
All I'm saying is you shouldn't rule out the market.
Actually Glenn, I qualify. I was a millionaire before I was 30.
The stock market is a risky proposition. At best he can expect to earn 8% per year on a continuing basis. Again, he will need to invest heavily in real estate or start and run a successful business he can sell. Residential turns you off? Tough s**t, you don't have enough to invest in commercial - no matter how impressive it sounds. Quite frankly, I doubt you'll ever get there because you don't have the maturity and the right mindset.
I agree that Real Estate holdings are the only way I'll get there. Do I need a lot of money to start investing in Real Estate though? I've heard that if you want to invest in Commercial Real Estate you usually need to put down 30%. That's a lot of cash. I know maxing out my IRA, investing in a 401k, and Mutual Funds won't allow me to come close to $10 million but I know it's a good idea to diversify. What is a good way to get into Real Estate with not much out of pocket? Residential investments turn me off.
I have never made a down payment when buying an apartment building.
I have always had to pay the closing costs and escrow fees, usually $4k to $6k. The first two times I was able to borrow the closing costs.
I have never made a down payment when buying an apartment building.
I have always had to pay the closing costs and escrow fees, usually $4k to $6k. The first two times I was able to borrow the closing costs.
Are such unsecured loans still possible in this current market though? From my understanding, credit is tight for owner occupied property so logically I would think risky investment property would be even more difficult to qualify for. An investor will walk away from his 2nd home or investment property before he will his primary residence. Seems like a down payment would be mandatory at this point in time, especially for a commercial RE loan (apartment building).
Please enlighten us. What's the catch? Are you paying insanely high interest? Was the loan through your local bank (good business relations)? I'm a stickler for low interest fixed rate loans, so let us know the details. Thanks!
I have bought four properties that were each multi-family-residence [MFR] buildings: California, Scotland, Connecticut, and Washington. Each of these were done with zero down, with all but one unit already filled, and with me collecting rent monies before the first mortgage payment fell due.
I have found that buying an apartment building, as my primary residence and living in it 'owner-occupied', entirely changes things. The banks handle these differently. City building inspectors handle them differently, fire marshals act differently, everybody does.
I once got a notice from a fire Marshall where he listed a couple pages of 'problems' and he gave me thirty days to fix them all, or else he would condemn the building. I met with him in his office, and when he learned that I lived in the building, He completely changed his attitude. The dead-line was waived. He said that he needed to keep it an open file, but that if I would come to his office once a month. Drink coffee with him and tell him one thing that I was going to fix each month. Then he could annotate my file, and if the state inspectors looked at his file cabinet, his job was covered. It became a very easy process.
I would have bought more MFRs, but my employer forced me into retirement due to old age when I turned 42. They call it 'high-year-tenure'. So we sold all but one MFR, used the money to buy ourselves a farm. So now we live on a farm, with no mortgage. I get my pension. And we still have one MFR building equity, my Net Worth grows even in my retirement.
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