There’s a lot of advice and opinions out there on how to succeed in real estate investing… some good, and some bad. If you want to be successful, there’s really one principle that stands out to me as universal. It’s called The Three Stages of Real Estate Investing. This comes from Gary Keller’s book, The Millionaire Real Estate Investor.
The Millionaire Real Estate Investor is one of my favorite books on how to gain wealth through real estate. On today’s show, I’m going to walk you through The Three Stages of Real Estate Investing, and explain why this concept is instrumental to your success. Click play to learn more!
More About This Show
The Three Stages is at the foundation of my personal real estate business, as well as our work through Morris Invest. Because if you want to build wealth through real estate investing, you have to put the right fundamentals in place. Once you fully understand this concept, you’ll be able to stick with real estate for the long haul. If you have a long-term goal, I think this principle will guide you throughout many different seasons and stages of investing.
The Three Stages of Real Estate Investing
- Buy. If you’re a new real estate investor, you’re automatically going to be in this first stage of real estate investing. All of your efforts are going into buying real estate, and building out your portfolio. I know this is going to sound a bit counterintuitive, but when you’re a new investor in this buying phase, you shouldn’t be overly concerned with making money. But wait, it gets better! You can, and should, still make a profit when you’re in the buying phase, but it’s not your main objective. Keller claims that even $1 is a worthwhile investment, but in today’s economy, I’d aim for at least $100. This is after your expenses are covered, so be sure you’re running the math and making a smart investment. Regardless, the point is that this stage is all about purchasing properties in order to increase your net worth. The cash flow doesn’t really matter, because you’re not using it to live off of just yet. You’re just getting your investing career off the ground.
- Own. The second stage of real estate investing is when you’re starting to pay down your loans, you’re building equity, and you’re laser focused on nurturing and maintaining the health of your portfolio. In this stage, you’re increasing your net worth and taking advantage of different investing strategies. In the own phase, you’re really starting to see your hard work pay off. You’re slashing taxes, gaining equity, seeing appreciation, and all of the other benefits investing in real estate has to offer.
- Cash flow. In this last stage of real estate investing, you have the correct number of properties to support your lifestyle entirely through cash flow. You’ve built out your portfolio and you’ve reached financial freedom.
Understanding this principle is essential to your success, especially if you’re a new investor. You can’t get discouraged when things are moving slowly because real estate is a long-term strategy. It’s not supposed to be overnight success. And when you understand this, you can stick it out no matter what types of challenges or obstacles are in front of you.
“All great achievements are the result of sustained focus over time—all of them.” – Gary Keller
Episode Resources
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The Millionaire Real Estate Investor by Gary Keller
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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