How to Become a Millionaire through Real Estate Investing
By Rebekah Green on 12/25/2024.
Reviewed by Hezekiah Randolph
Andrew Carnegie's assertion that 90% of all millionaires were created through real estate investing still resonates today. While the landscape may have evolved since Carnegie's era, modern millionaires and billionaires remain drawn to real estate investments for their myriad benefits. From the potential for passive income to long-term appreciation and tax advantages, real estate continues to stand out as the preferred investment vehicle for the wealthy.
​
Moreover, real estate offers opportunities for everyday investors to achieve millionaire status. At Hezekiah, we are dedicated to demonstrating how real estate investing can pave the way to millionaire status, showcasing how accessible and enjoyable it can be.
​
With its enduring appeal and wealth-building potential, real estate remains a cornerstone of financial success, offering a pathway to prosperity for investors of all backgrounds.
Becoming a Millionaire Through Real Estate
Indeed, amidst the multitude of real estate investment options, the classic approach of buying a property and renting it out remains one of the most dependable paths to real estate millionaire status.
​
This buy-and-hold model is renowned for its efficacy in augmenting net worth, primarily due to its incorporation of four distinct wealth-generating mechanisms. Let's explore each of these in brief:
1. Cash Flow
Cash flow in real estate investment refers to the rental income received from tenants. After deducting expenses such as mortgage payments, property taxes, insurance, and maintenance costs, the remaining profit constitutes the net cash flow. When investors make informed decisions regarding their investment properties, they often find themselves with a significant surplus of profit after covering these expenses.
This surplus represents passive income generated from real estate, which investors can utilize for various purposes. They may opt to allocate this income towards covering personal living expenses, thereby achieving financial freedom. Alternatively, investors can reinvest their earnings to fund additional real estate investments, thereby expanding their portfolio and accelerating wealth accumulation. Thus, cash flow serves as a vital component in building wealth through real estate investing, offering opportunities for both financial stability and portfolio growth.
2. Appreciation
Appreciation in real estate refers to the increase in the value of properties over time. For instance, in Charlotte County, there was a notable appreciation of 14.4% in the median home sales price from December 2020 to December 2021. While real estate values may experience temporary declines during recessions, they typically rebound due to the persistent demand for housing and the finite nature of land.
Real estate's inherent value lies in its essential function as a shelter, making it a fundamental necessity for individuals and families. Additionally, the scarcity of land further contributes to the appreciation of real estate values over the long term. Despite occasional market fluctuations, the enduring demand for housing ensures that real estate investments generally maintain their value and continue to appreciate over time. Therefore, appreciation serves as a key driver of wealth accumulation in real estate investing, providing investors with opportunities for long-term financial growth and stability.
3. Tax Benefits
As a property owner, you stand to benefit from various tax advantages associated with real estate investment. These include deductions for depreciation, capital improvements, and mortgage interest expenses. By deducting these standard expenses from your taxable income, you can potentially save thousands of dollars on your taxes annually.
​
Depreciation allows you to deduct the gradual loss of value of your property over time, providing a significant tax benefit. Additionally, expenses related to capital improvements, such as renovations or upgrades, can be deducted, further reducing your taxable income. Mortgage interest expenses incurred on loans used to finance the purchase or improvement of investment properties are also deductible.
​
The cumulative effect of these tax deductions can lead to substantial savings on your annual tax bill. Moreover, as you acquire more real estate assets, your tax savings can increase proportionally. Therefore, leveraging the tax benefits of real estate investment is an effective strategy for minimizing tax liabilities and maximizing financial returns.
4. Debt Leverage
The fourth way to generate wealth through renting out real estate involves renters paying down your debt. Through obtaining a mortgage, you gain access to an investment property that might be financially unattainable upfront. Unlike with your primary residence where you're responsible for repaying the debt, rental income from tenants enables them to cover the mortgage payments on your behalf.
This combination of rental income, appreciation, tax benefits, and debt leverage lays a solid foundation for building wealth in real estate. By capitalizing on these multifaceted wealth-building mechanisms, investors can pave the way to achieving millionaire status in the realm of real estate investment.
Investing Considerations
Before embarking on real estate investing, it's essential to take several factors into account. Given the numerous potential pitfalls in real estate investment, proper planning is crucial to mitigate risks.
Therefore, here are some key considerations to ponder before acquiring your initial investment property to avoid common mistakes made in Real Estate investing.
How Much to Invest
Real estate is typically regarded as an illiquid investment, implying that extracting cash from the investment can be challenging once it's committed. While some real estate investments offer more liquidity than others, aspiring millionaires in real estate investment often gravitate towards long-term projects. Therefore, it's prudent to conduct a thorough review of your finances to ensure you're comfortable with the idea of tying up your capital for an extended period.
How Long to Hold Investments
Real estate investment is conventionally viewed as a long-term endeavor. While occasional market booms may lead to rapid wealth accumulation for some investors, such instances are the exception rather than the norm. Typically, real estate growth unfolds gradually and steadily over time.
​
For those seeking quick returns, renovating a single-family home can offer a relatively short timeline, often less than a year. However, opting for this route may mean foregoing the benefits of cash flow, tax advantages, debt leverage, and appreciation associated with rental properties. Therefore, investors may prefer to hold onto their investments for longer periods to capitalize on the four wealth-generating mechanisms inherent in the buy-and-hold model.
Which Types of Real Estate to Invest In?
As mentioned earlier, there are numerous avenues for real estate investment, including:
​
-
Single-family homes,
-
Multi-family properties,
-
Real estate development,
-
Commercial real estate,
-
Securities such as REITs, mutual funds, and ETFs, and
-
Real estate syndication, where investors pool their capital to acquire ownership stakes in higher-value properties.
Diversifying your real estate portfolio across multiple investment types can help mitigate risk and optimize returns. Therefore, it's not necessary to limit yourself to a single investment type. However, it's essential to carefully evaluate your options and determine where to begin your investment journey. By understanding how to construct a well-rounded real estate portfolio, you can leverage a combination of investment strategies to achieve your financial objectives.
How to Become a Millionaire Through Real Estate Investing
Here’s a simple, three-step plan to help you earn your first million in real estate.Â
Step 1: Do Your Research and Create Your Investing Strategy
Before committing to any investments, conducting due diligence is essential. This involves comprehending your investment options and formulating a flexible investing strategy. For property acquisitions, it's imperative to grasp the dynamics of the local real estate market and conduct thorough inspections of potential properties. Similarly, when considering investments in securities like REITs, reviewing the prospectus, which outlines fund details, is advisable.
​
Crafting a real estate investing strategy entails devising a loose plan that aligns with your ultimate financial goals. Whether aiming to accumulate a million dollars' worth of assets or generate a million dollars in income, it's crucial to chart a course from your current position to your desired destination.
​
Our Education Center offers a wealth of informative articles authored by industry experts, aiding in expanding your understanding of real estate investing and refining your investment strategy. Accessing these resources can provide valuable insights and guidance on your journey toward achieving financial success through real estate investment.
Step 2: Make Your First Investment
Acquiring your first investment asset is often the most challenging step. However, once you've initiated your journey onto the property ladder, subsequent investments tend to become more accessible.
​
Every investor's approach varies. Some opt for a conservative start by investing in inexpensive and liquid real estate securities. Others take a more proactive approach by diving into property acquisitions, whether for renovation and resale or long-term rental purposes. Regardless of the chosen path, the key is to take that initial step. While thorough research is essential, investing inherently involves a degree of experimentation, particularly in the early stages. Remember, investing is a continuous learning process. Therefore, don't delay your entry into the market until you feel fully knowledgeable. Instead, seize opportunities to commence your investment journey in any capacity available to you as soon as possible.
Step 3: Reinvest Your Profits
Reinvesting investment profits is a powerful strategy for accelerating the growth of your real estate portfolio and ultimately achieving millionaire status through real estate investing. Merely acquiring one asset isn't sufficient; the key lies in leveraging that initial asset to acquire additional assets that can generate further profits. By continually reinvesting these profits into acquiring more assets, you initiate a virtuous cycle that propels you towards generational wealth.
​
This approach enables you to compound your returns over time, exponentially increasing the size and value of your real estate portfolio. Through strategic reinvestment, you not only expand your asset base but also enhance your income-generating potential, thereby solidifying your financial position and paving the way for long-term prosperity.
How Hezekiah Can Help
Hezekiah introduces a contemporary approach to traditional real estate investment models. Operating as a real estate syndicate, Hezekiah connects accredited investors worldwide, facilitating the acquisition of high-value properties within the exclusive Southwest Florida real estate market. Through pooled funds from multiple investors, Hezekiah provides access to lucrative deals that may have otherwise been unattainable for individual investors. With a minimum investment of $25,000, investors can secure a share in one of Hezekiah's nine investment types:
​
​
Hezekiah's seasoned team of real estate experts meticulously scouts properties, negotiates purchases, and establishes ownership LLCs, with all investors listed as LLC members. Subsequently, the team oversees renovation work, new construction, or ongoing property management as per each investment's unique requirements. Hezekiah handles the operational aspects, allowing investors to partake in the outcomes collectively.
​
For aspiring investors who are not yet qualified accredited investors, Hezekiah encourages them to commence building their real estate investment portfolios. As their asset base grows and net worth expands, they move closer to accredited status. When ready, Hezekiah stands prepared to offer distinctive investment opportunities tailored to their needs and aspirations.