Making Multifamily Money - Dec 4th 2024

Real Estate Updates

Back in 2013, when I was $250,000 in student debt, I set my net worth goal to be $6,000,000 by the age of 50 in order to retire “earlier” than most.

Why was my net worth goal 6 million?

4% of 6 million is $240,000/year which is the equivalent of 2 pharmacist salaries. Real estate and index funds average 7% per year. If I can live off 4% per year, then the 6 million nest egg will never be touched. That was my goal and dream.

Fast forward to 2024, I surpassed my net worth goal of 6 million at the age of 34. That is 16 years FASTER than anticipated.

Did I set my net worth goal too low? Back in 2013, I thought 6 million was impossible and overwhelming and at the time seemed like a big hairy audacious goal. Fast forward to today, I should have 10x my original goal to 60 million in retrospect.

I share this not to brag, but to illustrate this concept. We overestimate what we can achieve in 1 year, but underestimate what we can achieve in 10 years.

80% of my net worth was built through real estate. I bought and held single family homes in California and rode the natural market appreciation. When interest rates dropped during COVID, I executed a huge cash out refinance to pull out lots of equity which I then used to buy a 26 unit APT, 20 unit APT, and 200 lot MHP.

Since the 26 unit and 20 unit APTs were value add deals, I was able to renovate the units, raise rents closer to market, and slowly increase the net operating income. As the NOI goes up, the value goes up assuming CAP rates stay the same.

I prefer apartments since I have more control over the value via forced appreciation. My single family homes had natural market appreciation vs apartments had forced appreciation.

Single family homes and 2 apartments helped me hit my 1st net worth goal of 6 million, but now I want to scale apartments to achieve my newest net worth goal of 60 million by the age of 45.

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