Are you a successful business owner or professional that would like to invest your money in real estate? Do you lack the time to be a full time active investor? In this blog post I willreveal a step by step plan for a 24 year old busy professional that asked me how I would build my real estate empire over a sixteen year period.
Now, I’ve got this young gentleman, he’s 24-years old, he says he has $300,000.00 in cash. As I mentioned he’s got 16 years to build a portfolio, and he’s going to add $150,000.00 to his real estate portfolio every year to grow that into as much cash and equity as he can get by the time he’s 40. Now, this gentleman, it seems to me, is he’s maybe a doctor, a professional or a business owner with an inheritance or something like that, so I think that there’s two ways to make money. There’s active and there’s passive.
He probably is not interested in being the active partner, because if you’re going to be working and adding $150 grand a year to your portfolio, you probably aren’t an active investor. Now, on the passive side, if I were in his shoes I would do a couple things. Step one, I would find a very good, active partner. I’d find an active partner, the guy who wants to be in the trenches, who is going to do all this stuff. I’m typically the active partner, I’m the guy in the trenches. I have millionaires who back me all the time and I’m the guy going down into the trenches, finding the properties, going to the auctions, getting the death, the divorce, the downsizing, and all that stuff. I find a very good, active partner to go and source properties out.
Second thing, I would be looking for depressed markets. Depressed markets, these are markets where today you can buy for very, very cheap and in the future, depending on the transportation, net migration industry, these markets will be in a better position. Now, I’m from Winnipeg, Manitoba Canada and Winnipeg traditionally, has been the butthole of North America, excuse my language. Twenty years ago … It’s 2015 today, 20 years ago, Winnipeg was not a place to be. People could buy, even the building I’m standing in, back then you could buy it for $20-30 grand. Today, this same building is worth $400,000.00. Now, if you want to go and look for depressed markets, find an active partner who’s in those markets.
Then the third thing is if you put those together and if you do some sort of arrangement where maybe this guy does … I don’t know what the split would be, but a 50/50 split, where he does all the work, you supply all the money. Here’s the x-factor. The fourth thing I would do … This is all very traditional. Invest in depressed markets, you can do buy-in holds, you can do single family homes, you can do apartment blocks, you can do anything as long as it’s in a depressed market. In 16 years, very likely, if the depressed market has the right fundamentals, it’ll be up. Split your deals 50/50 with a guy who’s very smart and doing all the work.
The last thing is I would bring other investors in, bring in other passive investors and take pieces of their deals, so that it’s not your money and it’s not your time, it’s not your effort, it’s not your energy, but you’re bringing a group of investors together to invest in the deals that you and the active partner are investing in. If you do this kind of formula, this $300,000.00 plus the $150,000.00 per year, you’re going to have millions and millions of dollars by the time you get 16 years down the road, because there’s six profit centers in real estate. There’s debt, leverage, all sorts of things you can use, and if you put them all together you’re going to have a lot of money in 16 years.
To summarize here are the steps he should take…
- Find an active investor he can partner with.
- Invest in depressed markets that have huge growth potential.
- Split the proceeds 50/50 with the active investor.
- Bring in other passive investors to add to your investment pool and get a piece of the equity and growth that they bring to the table.
I hope you got value from this post, please share it if you did. If you have any questions about Real Estate investing that you would like me to answer, please post it in the comments below.