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A few decades in real estate investment have taught us a thing or two about wealth creation. We’ve learned from our own successes and mistakes, and we’ve gotten to learn from others in the investment community as well. Over the years, we’ve met plenty of investors who earn a good living, but we’ve also watched others make genuine fortunes.
What separates the latter group from everyone else? Each individual has their own path to success, but we’ve found that those who become seriously rich investing in real estate tend to have two things in common; they understand a few core investment principles and they have the patience to prioritize long-term strategy over fast cash.
In this article we’ll break down the five core investment principles that drive wealth creation and explain why, in a world full of hares trying to get rich quick, it pays so well to be a tortoise.
1) Use Leverage
The first principle that you need to understand if you want to grow wealth through real estate is leverage. The word may sound fancy, but it boils down to this simple concept: use the money you have to secure financing and acquire more valuable assets, then that money will start making money for you.
Here’s an example of what that looks like in practice:
Say you have $50,000 and you use it as a down payment to invest in a $250,000 rental property. Now instead of just having $50K, you control a $250K asset. If that property goes up 10% in value, it’s a $25,000 gain. That would be a 50% return through appreciation alone. Factor in rental income, loan paydown, and tax benefits, and that original $50K starts earning you a lot more than your original investment.
Leverage essentially means making money work to its full potential. You could let that $50K languish in a savings account earning a little bit of interest, or you could use it to unlock equity and create cash flow from an asset worth five times as much.
Of course, this doesn’t work with just any property and you can’t guarantee appreciation rates, but investors who do their homework and are able to identify good assets can create serious wealth from relatively small out-of-pocket investments. Leverage that is used wisely is the quiet engine behind a great deal of success.
2) Use Other People’s Money
Even if you’ve only got $100 in your bank account, there’s no need to count yourself out. The truth is that most successful investors don’t start with piles of cash. They start by learning how to use other people's money (OPM) to fund their deals.
Convincing other people to loan you money might sound hard, but if you go about it the right way it’s really not. Instead of begging for financing, you just need to explain what you do and how lenders can benefit by working with you.
You can structure it a few ways:
Debt partner: You borrow money for a set return (something like 8-12%) and secure it with the property.
Equity partner: You bring the deal and execution; they bring the funds. Then you split the profits.
The key? Lead with value, not need. Explain your process and then show documentation to back it up. Keep a one-page summary that maps out the deal from start to finish so that your potential lenders understand how it all works and what they can expect to gain in the end. If you’ve done successful deals before, use your one-pager to show your most recent. Once people with money realize that they can profit by backing your deals, they’ll be asking you if they can invest instead of the other way around.
Your one-page summary should include:
Basic info about the property
Purchase price + rehab costs
ARV (after-repair value)
Timeline and exit plan
Make sure that everything is well-documented and always use a promissory note, lien, and title insurance. Show that you’re a serious professional, and you’ll attract serious partners who want to keep working with you.
3) Stack Your Returns
The ability to stack your returns makes real estate stand out as a tool for wealth creation. Whereas stocks might give you one source of return (appreciation), rental properties give you four.
Appreciation: Your property can naturally increase in value over time, or you can force appreciation by making strategic improvements. Either way, you’ll have an asset worth more than what you paid for it.
Loan paydown: Your tenant pays rent, which covers the mortgage and slowly pays off your debt for you. The more the debt is paid down, the more equity you have.
Cash flow: Profit from rental payments is a monthly source of cash flow into your pocket.
Tax benefits: Deductions like depreciation and deferrals like 1031 exchanges allow you to recycle funds and keep scaling your portfolio.
Each of these builds on the other. While it may take years and years to pay off an investment property, it’s important to bear in mind that the compounding effect of these returns eventually results in tremendous value that will be well worth the wait.
4) Make the Tax Code Work for You
The fourth principle of smart real estate investment is making the tax code work for you. You might think Uncle Sam is only ever interested in slowing you down, but the government actually wants to encourage investment. Tax advantages are built right into the system; you just need to know what they are and how to use them.
Depreciation:
Depreciation deductions allow you to recover the cost of property acquired for business purposes over a number of years. You can deduct a portion of the property’s value from your taxes each year, usually over a period of 27.5 years for residential real estate. That means less taxable income and more cash to put towards growing your portfolio.
1031 Exchange:
1031 exchange deferrals, or like-kind exchange deferrals, allow you to reinvest gains from the sale of one rental property into the purchase of another of equal or greater value while deferring capital gains taxes. This enables you to make the most of asset sales and scale your portfolio more quickly.
Wise investors use these tools year after year. Find a great CPA who understands real estate inside and out and you can explode your wealth simply by using the tax code to your advantage.
5) Think Long-Term
What’s the biggest difference between wealthy investors and everyone else? Most people think months into the future; the wealthy think decades ahead.
If you really want to become wealthy through real estate investment, this is the most important principle to understand. Get-rich-quick schemes are not what make investors seriously rich. Instead, planning strategically, hanging onto assets, and focusing on the big picture is how the most successful investors build their fortunes.
Thinking long-term is a simple concept, but it’s easier said than done when you’re young, broke, and eager to finally get some money in your pocket. That’s why most new investors get caught up thinking about the $5K profit they could make from a wholesale deal or the $50K profit they could make from a flip.
But the ones who will go on to be truly wealthy aren’t thinking that way. They’re thinking about:
How appreciation compounds quietly over 10+ years
How every rent payment chips away at debt
How tax advantages multiply when you hold long-term
Short-term wins feel great, but long-term holds create generational wealth. The investors who stay patient through rate hikes, market dips, and renovation headaches are the ones who end up with portfolios that pay them for life.
How to Start Copying the Playbook
So, how can you start implementing these principles and start investing like the rich? For the most part, it’s a matter of defining your long-term goals and finding the right support to help you achieve them.
Here’s a simple roadmap to get you started:
Step 1: Write your buy box.
Think about your ideal investment property and define what kind of deal you’re looking for. What’s the year built, bed / bath count, price range? What are the neighborhoods you want to own in? Envisioning the kind of property you’d want as a long-term hold is going to give you something tangible to start with.
Step 2: Find a mentor.
It’s great to follow people online, but try to connect with a local investor who’s been where you want to go. Someone who can make real introductions and give you insight into all the nuances of the specific market you’ll be working in is far more valuable than any book or podcast. Walk a few properties with them and notice what they notice. Make sure you listen more than you talk.
Step 3: Build your team.
It’s hard to imagine a successful investor who sources deals, rehabs properties, manages finances, and handles the day-to-day without help from anyone. Find an investor-friendly agent, a reliable contractor, a CPA, and a property manager. Surrounding yourself with good people is going to make all the difference.
Step 4: Start small.
All you need to become an investor is one house. Maybe it’s a rental. Maybe it’s a house hack. It doesn’t matter where you start, so just start where you’re at. You’ll be able to grow from there.
Step 5: Be patient.
Anything that’s worth having takes time to build; whether that’s a career, a business relationship, a reputation, a portfolio, or a fortune. If you want something that is real and lasting, you simply can’t get it overnight. It can be frustrating and even scary at times to put your faith in the process, but it’s the only way to really make things happen.
The Bottom Line
The people who become wealthy investing in real estate aren’t doing magic tricks, they’re just good at keeping the big picture in focus.
If you want to be successful, that’s all you really need to do, too. Surround yourself with the right people, show others you’re a serious professional with a solid plan, and then stay disciplined and execute. Don’t lose faith when your initial returns are small. Remember that you win by playing the long game and hang in there. We promise your patience will be rewarded. When you invest the right way, you’re not just building a portfolio, you’re building a secure future one smart move at a time.
