The Millionaire Real Estate Investor

Gary Keller

📚 GENRE: Business & Finance

📃 PAGES: 432

✅ COMPLETED: November 9, 2020

🧐 RATING: ⭐⭐⭐⭐

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Short Summary

In The Millionaire Real Estate Investor, Gary Keller reveals wisdom and guidance he acquired after interviewing over 100 millionaire investors. Keller delivers proven real estate investing strategies, and sprinkles in lessons about the importance of personal growth. 

Key Takeaways

1️⃣ Establish Your Criteria — Before you begin investing in real estate, narrow down what you’re looking for and pursue houses or complexes that meet your criteria. Do you want to invest in single-family homes? Multifamily? Commercial? Decide what you want and begin looking for properties that fit your criteria.

2️⃣ The Many Benefits of Real Estate — There are a lot of great benefits that come with real estate investing. From tax benefits and cash flow to leverage and appreciation, there are many reasons why real estate investing is a worthy venture.

3️⃣ Know Your ROI — Know what kind of return you’re looking for before you buy a property. A good target is probably at least 12%. In the evaluation process, make sure the property will produce cash flow worthy of your investment of time and resources.

Favorite Quote

"Buy it right, pay it down, pay it off."

Book Notes 📑

Preface

  • Big plans yield big results. Have a plan, regardless of what you’re doing.
    • Have to work at it and be persistent. Execute the plan.

Part 1

  • Think, plan, achieve.
    • Do this process for anything.
  • Think of yourself as an investor. Seek deals always.
    • Identify yourself with investing. Make it part of your identity.
  • High-achievers are highly focused.
  • Dynamic trio of investing:
      1. Criteria —What you buy
      • It’s what you’re looking for exactly.
      • Single-family or multi family? Location? Etc.
      • Narrows down the selection process. Only properties that meet your criteria are considered.
      1. Terms —How you buy it
      • Price, ROI, etc. 
      • This is all about getting the best deal possible.
      1. Network —Who helps you. Your team. 
      • The people that help you out. You can’t do it alone.
  • Your path to financial independence is not through your job.
    • It’s through investing and buying assets to produce income.
    • Set aside a percentage of your check towards your investing portfolio
      • Your 401(k) is not enough!
  • Think of all the things money could do for your life, from buying stuff to helping charitable organizations.
    • Strive for it. Believe you can have all of these things, because you can if you work hard and invest correctly.
    • Imagine what you can achieve and become.
    • Don’t ever doubt yourself or limit your beliefs of what you can become.
  • Invest in something you know, like single-family homes, and become an expert in that area.
  • You make money in real estate investing by buying good deals.
    • “You make money when you buy.”
  • Having sound criteria minimizes your risk.
    • You have to be specific with what you’re looking for in a property and be disciplined enough to only buy based on your strict criteria.
  • If you bought a $100,000 investment house each year by putting just $10,000 down and your investments grew by 5% per year, you’d be a millionaire in less than a decade.

Part 2

  • Thinking in a financially savvy way is key.
    • Have the motivation to succeed. Look at success as something you have to achieve rather than something you want to achieve.
  • Big success requires a big why. What’s your higher purpose? 
  • Investors see money as an opportunity to invest. Consumers see money as an opportunity to spend.
    • Investors spend money for consumption and pleasure last, while consumers spend money for consumption and pleasure first.
  • Prioritize investing over spending.
    • This takes discipline and sacrifice.
    • Keep investing your money in assets that work for you and create passive income.
  • No other forms of investments have had more of a consistent and positive impact on an individual’s net worth than real estate.
    • The government actually wants you own real estate, so there are some built-in advantages to owning real estate.
  • Advantages of owning real estate:
      1. Accessible —Because the property is used as collateral for mortgage loans, financing a home purchase from a bank is relatively easy.
      2. Appreciation —Homes generally appreciate in value over time.
      3. Leverage —Mortgage loans allow you to put in only a small amount of cash to obtain a house, which appreciates in value over time.
      • “The way to wealth is debt.” — Trammel Crow
      • Debt allows you to get a really high return on investment on your properties. 
      • You can also convert equity gains in the home into cash without selling the asset. This is another way of using leverage to your benefit.
      1. Cash Flow —You can buy a property, rent it out, and have the tenant’s rental payments pay off your mortgage debt. 
      • Plus, if you do it right, your other expenses will also be covered by rent payments and you’ll have a little extra that goes in your pocket.
      • Rent prices have risen over time.
      1. Improvable —You can rehab your property to add value immediately.
      2. Tax Benefits —Real estate is deductible, depreciable, and deferrable.
      • Deductible — The tax code allows for certain deductions involved with owning real estate. Maintenance, improvements, interest paid on your mortgage can be deducted to offset investment income, which ultimately reduces your taxes.
      • Depreciable — You get to claim an annual decline on the building and its contents. This allows you to reduce taxes on your asset when your asset is actually appreciating in value in the market.
      • Deferrable — The 1031 Exchange allows you to delay taxes.
      1. Stable —Real estate is slow to rise and slow to fall. It won’t surprise you.
      2. Livable —You can live in your property if you want.
  • Invest as much money as you can. Make this a priority in your life.
    • This requires sacrifice in your daily life, but it’s worth it. Don’t be a consumer, be an investor.
  • There are two primary ways to make money in real estate:
    1. Equity build up
    2. Cash flow growth
  • Equity buildup comes from two places:
    1. Price Appreciation — The market price of the property goes up over time.
    2. Debt Paydown — Reducing the mortgage by paying each month. Your equity goes up. With each month’s payment, you are pouring more equity into the property.
  • Cash Flow Growth — Occurs when your monthly cash flow from rent exceeds your monthly expenses.
    • Quote: “Buy it right, pay it down, pay it off.”
  • Important components of criteria:
    • Location — Emerging neighborhoods close to businesses, schools, restaurants, etc. 
    • Type — Single-family, multi-family, apartments, commercial, etc.
    • Economic — Broken into four parts. You need to find out the values of homes and rent in the target area.
        1. Price range
        2. Discount you’ll require
        3. Cash flow you expect to receive
        4. Appreciation you expect
      • Buying at a discount = built in equity in the property.
    • Condition — What kind of shape is the property in? 
    • Construction — How much work or construction will be needed?
    • Features and Amenities — Try to match what other houses in the same area have, otherwise it may be tough to sell the property.
  • Refining and perfecting your criteria comes by analyzing a ton of properties. Start looking at properties and familiarize yourself with the process.
  • Purchase properties at a 20% discount. Try to anyway.
  • Property tax, insurance, and vacancy can eat up 40% of monthly income alone.
  • To estimate various expenses (like carpet replacement, electricity bill, water bill, etc.), you have to call around in the area and get a feel for prices.
  • The best way to learn is to get out and buy property.
    • Take action! Wisdom comes from doing.
  • When it comes to property, focus on buying it right, operating it right, and selling it right.
  • If you don’t buy a house at a discount, both cash flow and ROI go down.
  • There are three ways to increase monthly cash flow:
    1. Raise Rent
    2. Lower Expenses
    3. Minimize Vacancy
  • Shoot for at least a 12% total return when you invest in properties. 
    • Keep track of your ROI for each property.
    • House and rent prices typically appreciate 5% per year
  • Think of your dollars as either employed (working for you) or unemployed (just sitting there).
  • You are your greatest asset. Always learn. Always develop.
    • The more you learn, the more you earn.
  • Real estate investing boils down to four keys:
    1. Get in (buy) for less with little or no down payment.
    2. Maximize cash flow by increasing rent and lowering expenses.
    3. Reduce or delay taxes.
    4. Increase your return on investment in equity.