90% of Millionaires Are Invested in Real Estate? 5-Steps To Get Started

Investing in real estate is a common money move thanks to a low barrier to entry and real estate’s outstanding ability to hedge against inflation and appreciate over time. It has become especially popular because it can potentially be a gateway to millionaire status.

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The famed wealthy entrepreneur Andrew Carnegie famously said more than a century ago, “Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.”

Carnegie was coming from an era, when there were far fewer investment opportunities, so that figure is no longer valid (if it ever was accurate in the first place is highly debatable); but he made a point that has stood the test of time: real estate investing can help you build quite a lot of wealth.

So how do you get started in investing in real estate, and, ideally, end up amassing millions as a result?

GOBankingRates spoke with Larry Wagner, owner at Leave The Key Homebuyers , to assemble the 5-step guide everyone should follow when getting started investing in real estate .

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Understand Your Financial Situation

Where do you stand financially? We’re talking about things like the debt you carry, the reliability of your income, your credit score, and the amount of money in your emergency fund. Know exactly where you’re at with all aspects of finance. It’s very risky to embark on any investment, including real estate, when you are not on solid financial footing with a comprehensive overview.

“Before diving into real estate investing, it’s crucial to assess your financial health,” Wagner said. “Make sure you have a strong credit score, a reliable source of income, and savings to cover down payments, potential repairs, and non-paying tenants. For beginners, securing financing through traditional mortgages, FHA loans, or even partnering with private investors are good starting points. Knowing what you can afford will help you avoid over-leveraging and getting into trouble down the line.

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Immerse Yourself in Your Target Market

Every successful stock investor has thoroughly researched the company they’re investing in. So, it only makes sense that if you want to be a successful real estate investor, you need to be incredibly well-informed on what and where you’re thinking about buying.

“Whether you’re looking at single-family homes, multi-family units, or commercial properties, understanding the local market dynamics is essential,” Wagner said. “Study neighborhoods, rental rates, appreciation trends and economic factors. But don’t just do this from behind a desk; get out there and meet people operating in this space.”

Don’t Wait for the Perfect Property — Start ASAP

Wagner finds that one of the biggest mistakes new investors make is waiting for the “perfect” property. This is a mistake, in his opinion. You should instead seize the day and take action when you can.

“In real estate, there’s no such thing as a perfect deal, and waiting could mean missing out on good opportunities,” Wagner said. “It’s better to start small, learn the process, and grow from there. By taking action, you gain valuable experience and avoid analysis paralysis, which can delay your progress. In real estate, just like the stock market, ‘time in the market’ is your best friend, so the sooner you start, the more you will grow.”

Start Small and Focus on Cash Flow

You can easily get in over your head and bite off more than you can chew as a real estate investor. Start small and focus on cash flow.

“For first-time investors, it’s often best to start with a smaller, more manageable property like a single-family home or a duplex,” Wagner said. “The focus should be on properties that generate positive cash flow, meaning that your rental income exceeds your expenses, such as mortgage, taxes and maintenance.”

Wagner also cautioned against banking on real estate appreciation as a sure thing.

“Don’t rely on appreciation to succeed, as this can be risky,” Wagner said. “Strong cash flow gives you financial flexibility while building equity over time and makes it easier to purchase your second property.”

Build Your Team

Investing in real estate is a major endeavor and you shouldn’t go it alone if you want to be as successful as possible.

“Real estate investing isn’t a solo venture,” Wagner said. “You’ll need a solid team that includes a real estate agent, property manager, attorney, and contractor. A great real estate agent will help you find the right deals, while a good property manager can handle the tenants and repairs. It’s essential to surround yourself with experts who can help you navigate the process smoothly.”

This article originally appeared on GOBankingRates.com : 90% of Millionaires Are Invested in Real Estate? 5-Steps To Get Started