How To Become A Millionaire In 10 Years Or Less Through Real Estate Investing
It’s no secret that investing in property can make you lots of money. But just how much can you earn through property investing? A little extra cash each week? Enough to generate a passive income and retire comfortably?
What about enough to make you a millionaire?
When it comes to property investment, the sky really is the limit. How much you can make really depends on a variety of factors. But yes, with a little persistence, patience, self-education (and maybe a bit of luck), property investing can make you millions of dollars.
Of course, financial happiness is entirely different to holistic happiness, and we understand that millionaire-status isn’t the goal for everyone and may not even be the goal of all property investors. But financial freedom is a great way to help you prioritise what’s really important in life, whether it is spending time with loved ones or pursuing other life goals.
Either way, let’s break down how to become a millionaire with rental property by looking at different methods of wealth generation.
Cash flow refers to the amount you’ll be taking away each month that you own the property. This is the amount you receive in rent from the tenants, after you’ve factored in any expenses or costs that you’ve spent on the property in that period.
This means that your cash flow will generally fluctuate each month, as there will often be expenses in one month that won’t necessarily be there the next (i.e., repairs, vacancy time, buying new appliances, etc.). Other times, you’ll just need to deduct the regular expenses, such as utilities, management fees, etc.
Cash flow is important as it tells you exactly how much you’re making each month. And while this figure may not be much when starting out, accumulating multiple properties that generate positive cash flow, increasing the rent, and reducing expenses are all strategies that can be employed in the long-term to maximise cash flow.
Capital growth refers to the increase in the value of the property you own over time. It’s measured by subtracting the purchase price of the property from its current value (or market value). Capital growth is a great generator of wealth, as it can often increase by doing very little.
As long as you make the right purchase in the right suburb, capital growth can increase with a rising property market. Besides a surge in the market, you can also acquire greater capital growth through home renovations that increase the property’s value (while also working within a budget to ensure you get back what you put in), as well as buying under market value.
You can access capital growth by selling the property once it’s grown in value, or the more advisable strategy of borrowing against usable equity in your property. Equity refers to the amount your home is currently worth, minus how much you owe on your mortgage.
But keep in mind that achieving capital growth is no easy task, requiring a careful selection of property and suburb based on a range of data factors.
Let’s say that your property doesn’t increase in value and you’re breaking even each week in owning the property (your cash flow is $0). While less than ideal, this property still has the potential to still generate wealth.
This is because the tenant is essentially paying the mortgage for you. Once that loan is fully repaid, you’ll have a mortgage-free property, where the income you generate each month goes straight into your pocket, rather than towards repaying the mortgage.
So even in unsuccessful property investments, where money isn’t generated through cash flow or capital growth, you can still generate wealth after the tenant has paid off the mortgage with the loan pay-down.
The great thing about property investing is that there is the potential to capitalise on all forms of wealth generation. You can have a property that generates positive cash flow, while still increasing in value so that you can borrow against the equity, and will eventually be mortgage free through loan pay-downs.
But while the answer to ‘can property investment make you rich’ is yes, becoming a millionaire through property investing can often take time. Some people will want to be a millionaire before retirement. If you’re one of the people looking to maximise your wealth quickly, here are some tips to speed up the process.
Buy more properties.
We’ve touched on this already, but the more properties you own, the higher your cash flow will be. Using equity from the first property is a great way to fund the deposit on the next.
Get the best deal.
Learning negotiating techniques is a great way to get the best deal when purchasing a property. The lower your purchase price is, the more money you’ll have in your pocket to buy that next property.
There is always the potential to upgrade to bigger and better properties to maximise your return.
Buy in appreciating areas.
There are a range of data factors to consider when selecting which suburb to invest in. Carefully analysing these data factors can reveal areas which are set to appreciate faster than others.
Buy a fixer-upper to manufacture capital growth.
You can always buy a property that requires a bit more work for a cheaper price, then with some renovations, you can increase the value. Remember, you’re buying the property for the land it rests on, not the building itself. Don’t be afraid to put in a bit more work with a fixer-upper property to guarantee capital growth.
Invest in your education.
Save money on buyers’ agents by spending time and money on developing your own property investment education. This will allow you to make informed decisions each time you buy an investment property. Educating yourself in this area can be a time-consuming process. However, this can be sped up through a property investment course — check out the Property Investment Accelerator Review for a breakdown of a course that’ll fast-track your education in property investment!
So, does investing in property make you rich? Absolutely! Is it guaranteed? Not necessarily. You need to put in the work, develop your property investing education, make informed choices, and be patient! Good things take time and becoming a millionaire will require a lot of persistence and dedication.