The Millionaire Real Estate Investor

The Millionaire Real Estate Investor

Erik Book Review, Financial Education, Real Estate, Thoughts of a Mastermind, Wealth Creation 12 Comments

I’m an investor. I’m building financial wealth. Is today the day I find an opportunity and make a deal?

the millionaire real estate investor, by gary keller

One of my personal goals is to effectively build financial wealth. I own a house I bought back in June 2015, and have had friends and roommates paying me rent for the whole time. This has effectively covered 80% of my mortgage and has been fantastic for me financially. In 2017, as stated in The Mastermind Within goals post, I want to explore buying another property. I’ve just been keeping tabs on the local real estate scene and have to put more work in to ensure I get a good deal.

Henry suggested I read The Millionaire Real Estate Investor, by Gary Keller, to bolster my knowledge of real estate. I immediately leaped at the book and wanted to devour the contents. The Millionaire Real Estate Investor, is consumable, practical and gets you motivated to go out and try to find deals in the market!

Why do I like real estate as an asset class? Real estate is:

  • Accessible – Anyone can buy it
  • Appreciable – Can increase in value over time
  • Leverageable – You can buy on margin and borrow against equity
  • Rentable – Cash flow baby!
  • Improvable – Through sweat equity or contracting out
  • Deductible/Depreciable/Deferrable – Amazing tax benefits

Summary of The Millionaire Real Estate Investor

Like most personal finance books, The Millionaire Real Estate Investor starts out by touching on the “personal” side of personal finance. Keller goes into a number of common myths which most “non-investors” believe as facts. One example of this is investing is complicated and I’m not smart enough to do it. As many of you reading this probably know, investing can be simple if you learn a set of rules and have a system to identify good deals. Investing is a learn-able skill.

Next, Keller gets into his tips on how to become a Millionaire Real Estate Investor. He has a four step framework for real estate investors to master:

  • First, a real estate investor must “Think a Million”
    • If you want to be a Millionaire Real Estate Investor, you must think and dream big.
    • In this section, Keller talks about getting into the investing mindset by emphasizing growing your net worth, defining your why you want to invest and become financially wealthy, and think about taking action.
  • Next, a real estate investor must “Buy a Million”
    • This isn’t as straightforward as it sounds. To be a successful investor, you need to be smart about your purchases. By purchasing at below market prices and having all your criteria met, you can start making money from day 1.
      • “You make money when you buy, not when you sell”
    • This sounds easy, but it will take a consistent effort to understand the values of the properties in your target location, understand the cost of any repairs or problems with the prospects, and make purchases which will make your renters happy.

“You make money when you buy, not when you sell”

  • Next, a real estate investor must “Own a Million”
    • Once you have “bought a million”, it’s time to pay off the debt and build equity in the properties using the cash flow generated.
    • Keller goes through tips on building your network of contractors, property managers, accountants, lawyers, etc. in this section.
      • Ask the two questions with everyone you meet:
        • “Who do you know that I should know?”
        • “What would you do if you were me?”
  • Finally, a real estate investor must “Receive a Million”
    • At the end of the day, you will be at the top of the mountain and be able to “receive a million” in passive income. That is the goal, to be able to sit back and let the rents come in while your property management company does the work for you!

Meaningful Quotes from The Millionaire Real Estate Investor

Here are some meaningful quotes and insights from The Millionaire Real Estate Investor:

  • Life is too big to think small. If you want to lead a big life, your thinking has to lead the way.
  • “Deals aren’t found. Opportunities are found. Deals are made.” – Dyches Boddiford
  • Be an investor, not a collector, a speculator, or an observer.
    • Investing requires action. Successful investing requires the right action. Investors take action, minimize risk, and buy based on investment value.
  • Your criteria should be based on the following factors: price range, discount, cash flow, and appreciation potential.
  • Be a shopper, not a buyer.
    • Be skeptical.
  • Learning has four stages: understanding, knowledge, wisdom, and power.
    • Understanding means you are aware of something; you get it mentally.
    • Knowledge means you have studied it and see how you could do it.
    • Wisdom means you have experienced it and know it works.
    • Power means it has become a part of you and you do it habitually. You are now unconsciously competent.
  • Negotiate everything! (Price, financing costs, closing costs, possession date, etc.)
  • Make associating with talent your number one priority.
  • Get creative with your financing: lease-option, seller financing, wrap, etc.

Action Steps and Takeaways

As with all books I read, I want to be able to takeaway a few points and apply them in my life. Takeaway one is to start building my network of real estate professionals. I’m going to reach out to the agent I used when I purchased my house to chat about his thoughts. Next, I want to define my criteria for a property: a 3 bedroom, 2 bathroom property with a decent lot perhaps? Finally, I want to get in tune with the market in the location I determine most fruitful. The neighborhood near my house would be fantastic to get another place, but the inventory is very tight right now (only 3 houses under $400k in a 3 mile radius circle). Opportunities are out there, I just need to find them!

Focus, driven by motivation, supported by knowledge and skill causes one to take action without a thought about not succeeding. Never underestimate the power of purpose and focus.

My Recommendation

I could write 10,000 words on my notes, thoughts, and findings from this book. Keller has given me a framework to work through when looking to invest in my next property. My next steps after reading The Millionaire Real Estate Investor is to define my criteria, start scouting the market to determine the value of properties in my cross hairs, and finally start networking with other real estate professionals and agents. I recommend The Millionaire Real Estate Investor to anyone looking to build financial wealth using real estate. You won’t regret it.

The Millionaire real estate investor

Buy this Book!

Do you currently invest in real estate? Do you want to in the future? What would you recommend I do? Are there any other real estate books which would be beneficial for me to read?

Erik

Comments 12

  1. Hey Erik,

    Good job of taking the second step to purchase another investment property. I am a realtor and can give you some tips if you ever need it. I have a few real estate posts on my blog that you can check it out. I am in Canada by the way, so I can only answer general real estate questions, not local specific questions.

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      Author

      Hey Leo, thanks for the comment. I will certainly check out your blog! Do you have any posts on things like short sales or foreclosures?

  2. Ive largely avoided real estate in my portfolio to date. My thought is I already have a home in my area that represents a decent proportion of my portfolio. To be diverse if I were doing straight real estate I’d probably try to diversify geographically. I personally will be sticking to reits when I do increase my real estate exposure simply to diversify. Also because I don’t really want the work of my own property. In my honest opinion if you want to directly invest in real estate you need multiple properties in different locales to be successful.

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      Author

      Thanks for sharing your thoughts FTF. To sum up your points, it’s the trade-off between risk and return. By buying a property, you hold all the risk and by putting in the effort, you can boost your returns. I agree with your opinion, it’s just getting there which will be the fun part! At the end of the day, maybe I’ll have 5-10 properties total, but who knows!

  3. Hi Erik,

    The only investment I’ve made in real estate is my own home, of course I can’t leverage that for income until I move out, but it makes up about a third of my net worth currently, which is where I’m comfortable keeping things until the proportion gets out of whack.

    You should pick up the Bigger Pockets Book on Rental Property Investing by Brandon Turner if you’re considering renting. Just finished reading it and it’s pretty informative.

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      Author

      Hey Max, thanks for the comment. I’ve been on Bigger Pockets a little bit. I really like what rental real estate and dividend stocks have to offer, cash flow which can grow and the underlying asset which can appreciate! Also, thank you for the suggestion!

  4. Hey Erik,

    In Canada, the housing market is quite stable and we rarely see foreclosures in the market. However, I do know that in the States, foreclosure properties are out there and you can get a decent discount for those properties. With that, there’s also the risk that the previous homeowners doing quite a bit of damage to the property. I would recommend that you start with better quality properties since this is your first rental property. Once you have gotten the hang of it, then you can venture into the foreclosures.

    Let me just share with you that it’s quite different to be living in the same house as your friends/tenants vs when you rent out the whole property. You can be called anytime for minor issues. So having a good quality property will lower those call volumes and your stress.

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      Author

      Hey Leo, you have a lot of experience in this and it shows. Thank you for your insightful comments and getting back to me! 🙂

      That certainly makes sense on my point on foreclosures; I probably won’t venture into them unless there is a great deal on the market. Who knows though, at the right price and right location, I might have to! 😉 In all seriousness, thank you again for your comment. I appreciate it!

  5. Great review of the book. I have to admit I’m don’t have the time or energy to currently be a landlord. Running the numbers I haven’t found a scenario that makes sense to get a property manager and eek out a profit but if I did I’d be all over it. I have also heard that BiggerPockets.com is a fantastic website for real estate investors but must admit I haven’t done a ton of research.

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      Author

      Hey Mustard Seed Money, you got a break from making guest posts 😉 You paid off your mortgage! You don’t want to go into debt again?

      All jokes aside, yes I’ve checked out BiggerPockets and it is a great site for real estate investors. One thing I do worry about is the number of people getting into the space, but there will still be deals. Thanks for the comment and have a good one.

  6. I’m not a real estate investor because I don’t want to be a landlord. I may end up renting my current house when we move (we’ve only been talking about it for 5 years now…) and hiring a property management company, but that cuts into profits.

    How are real estate prices in your neck of the woods? In my area (Kansas City metro area) prices are really inflated, mostly due to the low interest rates we’ve seen for so long now. It’s the reason why we’ve stopped looking, prices are just way inflated.

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      Author

      Hey GFY, depending on the value of your current place, you could potentially do a cash out refi where you wouldn’t really care about the “profits”, it would more be for equity build via rental income. Then with that cash, you could invest it in the stock market or buy another place with it. Lots of options.

      In Minnesota, there are areas with very nice, 3.5k sq ft houses, 5 bed 3 bath for 400-500k depending on the neighborhood. In Minneapolis in particular, my area is dense and a lot of people want to be near the lakes, so prices have appreciated about 40% in the past 5 years. Zillow thinks my house is worth 365k, up from the 288 I paid for it. In the surrounding suburbs, I don’t believe houses have appreciated a whole lot. Again, it depends on the neighborhood, some cities have great schools and houses are in the 500k range (these are very nice places btw). I’d put the average at about 250k.

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