Every time I meet with a new person or new couple to speak about their first home purchase I give them what seems to many as “wild and crazy” advice. The advice I give is that, if they are truly interested in building wealth over the long term, then they should make their first purchase a multifamily property. Not a single family property.
Now, I know many people reading this may be thinking, “what bad advice, I couldn’t stand being a landlord”, or “when I had a rental property the tenants ripped me off”, or most commonly, “I want nothing to do with being a landlord”.
While I hear these comments loud and clear, I beg to differ. In fact I am myself a landlord as I own and manage many rental units. I will address being a landlord below, but first let me elaborate on why purchasing a multifamily first before a single family home is a great wealth building strategy.
Five wealth building reasons to purchase a multifamily first:
- Have you ever noticed that most of the rich people you know own more real estate then just their home? In fact most rich people own lots of real estate. I don’t have any firm stats on this, but just think about the rich people that you know and I think you will find this to be true.
- Real estate investment is all about the long term. No matter what you hear from these “guru’s” on T.V. or the radio it’s simply not a get rich type of plan. It takes time, so the sooner you get in the game the more likely you are to become wealthy from it over the long term.
- Most first time buyers are already living in a rental unit. They haven’t purchased the dining room set just yet, or the super sized TV, or the formal living room furniture. They know how to live minimally, so why not take these very important minimalist skills and use them to get rich? Living beneath one’s means is a universally acceptable concept. Getting rich takes a mentality of frugality.
- How else will you get started in Real Estate investing? That is a serious question you should ask yourself? If you are not going to do it this way, then what is your plan? The fact is most people don’t give this a single thought and this is why most people do not ever own any real estate other then their home.
This multifamily that you now own becomes part of your investment “portfolio”. You never sell this property unless you have the opportunity to sell this one to get into a bigger and better deal. Einstein said that compounding interest is the 8th wonder of the world. Income from Real Estate Investments provide the same compounding effect.
So here is the bottom line. If you are ambitious and seek to build lots of wealth over your lifetime make your first Real Estate purchase a multifamily. Live in one of the units while renting out the rest. You will be forced to learn the extremely valuable skill of how to manage real estate income properties. Over time you will save enough money to purchase your single family home. By that time you will have so much valuable information in your brain on how to manage real estate investment properties you will have no problem managing your single family home in addition to your multifamily. Finally, if you do a good job with your first multifamily you will naturally go looking for more. This is where the wealth building “rubber” hits the road.
So there it is. A minimum of $100,000 equity in your pocket. Now all that you need to do is execute it. Don’t know where to start? Call us. We have many Realtors in our firm who are very well versed in Real Estate investing because many of us are Investors ourselves.