7 Steps – How To Build A Real Estate Empire

How To Build A Real Estate Empire

How To Build A Real Estate Empire And Retire Early

Most people only focus growing their active income. This type of income buys fancy cars, expensive homes, and designer clothing, all while simultaneously being taxed at the highest rate out of any income. 

Yep, read that last part again. Active income is the most heavily taxed type of income. 

Why keep focusing all of your attention at earning active income, only to have such a large portion taxed? The focus should also be to generate and build passive income until it equals or surpasses your active income, which is what we’re going to discuss today. 

School Doesn’t Prepare Us

how to build a real estate empire

Unfortunately, the U.S. school system grooms us to become cogs in the active income-generating and tax siphoning cycle. We’re taught to work and trade time for income.

Even high-income professionals such as doctors and attorneys are doomed to trade their time for money for the next 35+ years.

That’s the only thing they’ve been taught – to work, earn their $16,000 paycheck each month, pay about 40% of it in taxes, and be left with $9,600 a month in earned income. 

How fun is that?

While that’s still a great income, pay attention to the tax value.

How much do you pay in taxes?

In comparison, a person who earns $16,000 a month in passive income (cash flow from rental properties or other real estate), pays only $2,300 in taxes. Which means they can take home $12,800 each month.

Which would you rather?

You Still Need Active Income

To be clear, you need to earn active income so that you can invest to create passive income. I’ve said it before that this is the first starting point to focus your attention before passive income creation.

Your goal should be to get really good at what you do so you can make more money to sock away for future use.

Maybe your goal is to work only 4 hours a week, or perhaps that sounds boring. Either way, the goal is to accumulate enough savings to invest and then continue to invest until the passive income earned matches or exceeds your active income. 

Financial Freedom

financial freedom

Have you been taught that it’s “normal” to work 40 hours a week for 40 years to retire at 67?

Most of us have.

I understand that this may not sound ideal, which is probably why you’re here now. Most likely, you’re on the hunt for a tried-and-true method of achieving time and financial freedom.

In other words, you’re interested in building multiple streams of income to cover your living expenses. 

One way of achieving the “mailbox money” of your dreams is to have multiple properties generating passive income streams. This allows you to design your time and your life instead of fearing job burn out or being concerned about getting to work on time. 

Why Real Estate Passive Income?

Think about how you dream of spending your extra time. If you’ve wished for more freedom to spend time with your kids or to see the world, passive income is the ticket.

You may already know that it’s possible to generate passive income from the stock market.

But remember, investing in the market is going to give you ups and downs…hang on for the ride!

Real estate investing creates reliable income streams because you’re investing in stable assets.

If you make $200,000 per year in income, the goal should also be to generate $200,000 in passive income from your investments.

Passive Income Ingredients

Now that you’re aware of passive income and its vital role in becoming financially free, how do you get started?

  1. Focus on building passive income until it matches your active income. 
  2. Invest in assets that increase in value and are physically tangible.
  3. Only invest in assets that can’t be disrupted.

Number 3 above is one of the key reasons you should invest in real estate.

Multifamily properties have withstood the test of time – people always need a place to live, no matter the climate, the economy, or social status.

How To Create Passive Income In Real Estate Investing

Everyone is an investor. You’re either investing your time and energy to earn an active income, or you’re investing your money to build passive income. 

Real Estate Professional Status

As an example, a doctor treats patients and receives $150 from the insurance company. The doctor invested his time in exchange for that payment.

The trick is learning to invest your money so that it begins to earn more money without you investing your time. Because of the way we’re generally taught – to work for an income – people tend to sit on large savings accounts.

(I hear this all the time from new Passive Investors Circle members.)

This “rainy day” cash is reserved for emergencies such as unemployment or a sudden life emergency. 

The downfall is that this massive pile of savings is not earning any additional money.

Grant Cardone says that money has to circulate or flow…that’s why it’s called cash FLOW.

An investment in multifamily real estate syndications could begin earning cash flow and appreciation, growing that money without the time investment.

7 Steps – How To Build A Real Estate Empire And Retire Early

#1 Start With Your Why

The first step toward building passive income is YOU and your ability to develop a clear why.

The BiggerPockets group says there are three things you must change to become wealthy. They teach that all three steps are required – if one leg is broken, the tripod topples over. 

The Wealth Tripod:

  1. You must believe that you can become wealthy.
  2. You must learn how wealth is built.
  3. You must live out the steps needed to make it happen.

Not every investment pans out as you wished or planned, but having a strong why will help you learn from each experience, push past your comfort zone, and keep you on track toward your investing goals. 

#2 Take Action

how to build a real estate empire

The second step to how to build a real estate empire has to do with taking action.

As with most things in life, the action piece is the real key to making progress toward a goal. Often we get excited about something, dive into books and YouTube videos to learn but then never actually get off our rear to do the anything. 

Commit yourself to set aside time each day to take action. 

#3 Decide What Type Of Real Estate Investor You Want To Be

Once you’ve developed your “why” and committed time blocks on your calendar, it’s time to decide which route you’ll take (active vs passive). 

To be an active real estate investor, you need time and expertise at your disposal. To have a successful real estate business, you’ll need the skills and people in your circle to support the day-to-day operations of a successful business. 

Some questions you may want to ask yourself are:

  • Do you have spare time, outside of family and job, to dedicate to active investing?
  • Do you have time to manage rental properties yourself?
  • Are you physically able to keep up with rental properties and repairs needed?
  • Do you have supportive (soon-to-be) team members who can help manage the property or will you hire a property management company?
  • Do you have the capacity to make strategic decisions (renovations, evictions, purchases, and sales) about your property? 

If not, that’s okay. It might be best for your lifestyle and current capacity to pursue passive investing in real estate syndications over individual rental properties. (This is what we’ve done.)

#4 Decide What Type Of Real Estate Assets To Invest In

Whether you choose the active or passive route to real estate investing, there are two main categories to decipher between Residential and Commercial.

Residential properties consist of four units or less and include:

  • single-family homes
  • duplexes
  • triplexes
  • quads

Commercial properties include:

  • office buildings
  • retail (strip centers)
  • storage units
  • multifamily properties (five or more units)

Many investors start in the residential real estate market but quickly realize that, to scale, commercial rental property investments would be more beneficial.

All investments come with risk and require you do do your research before jumping on board. We view real estate syndications as posing less risk than others and have chosen this as the option for our family.

#5 Learn and Utilize The Wealth Generators

When investing in physical properties, there are four main Wealth Generators to watch:

a. Cash flow

One of the most attractive reasons for investing in physical property is the potential for cash flow. Cash flow is leftover money after the property expenses and mortgage is paid each month. We love putting our feet up and knowing that money is “flowing” into our lives. 

b. Appreciation

When a property increases in value over time, that is appreciation. As with any investment, there are ups and downs, but historically the value of real estate has continued to increase in the US.

One way to “force” appreciation is by investing in value-add property, where improvements increase the value of the asset through physical updates and renovations. 

c. Leverage

When you take out a mortgage to buy real estate, each month, your tenants pay rent. Their rent money pays down your loan balance. This helps you automatically build wealth over time

Let’s say you bought a rental property valued at $300,000 with a mortgage of $200,000. During your ownership, the property broke even and never appreciated – which is very unlikely. 

Once the mortgage is paid off, you own a property worth $300,000 free and clear you never had to pay or save for. How is that? Your tenants bought it for you by paying rent (which you used to pay off the mortgage). Not a bad deal!

d. Tax Advantages

One of the most overlooked advantages of building wealth through real estate is the tax benefit.

Owners of real estate get to deduct:

Also, when an investor sells a property and uses a 1031 exchange to reinvest the proceeds, they can defer all capital gain taxes. Passive investors reap these rewards and more.

#6 Find the Right Investment Opportunity

The sixth step to how to build a real estate empire has to do with the actual investment opportunity.

Once you decided to take the passive real estate route over active investments in rental properties, you must find an opportunity that supports your passive income desires. 

Once you apply for and join the Passive Investors Circle, we’ll share upcoming investment opportunities with you in an effort to support you toward your investing goals. 

Rest assured that we pre-vet deals ourselves and require that they meet our high standards for deals we want to invest in ourselves.

Some things we look for are:

  • A robust operating team with a solid track record and a history of integrity and excellence.
  • A or B class multifamily assets in markets with strong job growth, population projections, and job diversity.
  • Value-add business plan with conservative underwriting and multiple exit strategies.

We encourage you to review deals and craft your own set of criteria as well.

#7 Reserve & Fund

Investment opportunities fill up first-come, first-serve, which is why it’s crucial to educate yourself first, before there’s a live deal in front of you. Our latest offering filled up in 5 days.

Once you’re well educated and adequately researched, you can take advantage of a soft reserve while taking the time to review the investment materials. 

If you decide to move forward, you review and sign the Private Placement Memorandum, a legal document that goes into detail about:

  • The investment opportunity
  • Risks involved
  • Your role as an investor in the project

The final step is to wire your funds or send a check. This completes your active role in the process. Pretty easy, right?

Next, you’ll receive an update when the deal closes and then monthly updates after that. On most deals, you can also expect monthly/quarterly passive income distributions. 

Summary

If you’re ready to stop trading time for money, you’ve got to go all-in on the passive income game. Invest in yourself, grow your active income and begin saving toward buying assets that increase in value. 

The only thing that can hold you back now is fear. Create an intentional mindset shift in yourself through learning about passive investments in real estate syndications.  

You can do it and we’re here to help.

Are You Ready To Get Started?

If you’re ready to begin replacing your active income with passive income so you can build time freedom AND financial freedom, apply to the free Passive Investors Circle today!

Are you an accredited investor that's interested in learning more about passively investing in real estate?
Click HERE for more information

2 comments

  • Brad

    I’d like to see a realistic investment strategy (in this real estate syndication model) that begins with investing $50K-$100K and ends up earning $200K/yr. in passive income. How long does this take to get to that point and what would the model actually look like? To me, with the returns that have been discussed, it seems as it would take a long, long time to get up to $16K-$17K/mo. of passive income, assuming one doesn’t have a HUGE chunk of capitol right off the bat.

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