We all know the basic formula to building wealth: earn as much as you can, consistently save more than you spend, and invest sensibly.
But there’s one other common step that the vast majority of millionaires have taken: investing in real estate.
“Investing in real estate seems like a natural result once the basics are covered and excess cash is generated,” says John of personal finance blog ESI money. Having retired early with a personal fortune of $4.2 million, John knows a few things about saving and investing – especially as he has spent the last few years speaking to a 100 millionaires about the source of their wealth.
Using these interviews as his basis, John has identified a four step process the majority of the millionaires he has encountered used to accumulate wealth.
- “Person/couple begins with normal job, then works to grow income and/or advance, generating additional, strong career income.
- “While doing this they keep their spending under control, creating an ever-widening financial gap between what they make and what they spend.
- “As this cycle continues and feeds itself, they look for additional sources of investment and real estate seems a natural fit for this extra cash.”
As you might expect, the majority of millionaires are goal oriented and not afraid of hard work. They’re fully committed to a long term career plan which involves constantly improving and adding to their skill set.
Crucially, they’re also strong-minded enough to avoid the careless indulgences and extravagances that come with increased financial stability – the temptation to spend more as you earn more, in other words.
By spending frugally even as their income creeps up, millionaires are able to save consistently, which is key to building wealth.
Experienced Investors Are Serious About Property
William D. Danko, the co-author of the best-selling The Millionaire Next Door, has recommended steadily saving 20% of your income each month to build wealth.
With this foundation of financial security in place, people can then turn their attention to additional investment opportunities like real estate.
With the considerable advantages of capital growth, positive cash flow, booms in housing values, leverage and tax advantages, and countless others agree that property investment is one of the most effective ways to build personal wealth. Like any other route to wealth it takes a lot of hard work, patience and dedication, but if you’re committed the rewards can be huge. The vast majority of BRW’s Rich List feature property investors or people who have made their fortune in other industry and then invested heavily in real estate.
We recommend that you seek professional advice from a trusted and licensed financial planner and real estate agency that has a successful track record in helping people invest in property, such as our highly experienced agents at Action Realtors.