Why investing in Rentals Won’t Generate Wealth

Sung Tolliver
Apr 12, 2018 · 4 min read
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One common misconception investors have, is they think having rental properties will generate massive wealth. Truth is, it won’t, they won’t be the primary reason for growth. Why is that? Read on to find out.

Lots of us want to have cash flow of about 10K a month, about you need to realize that you’ve got to invest about 800K to achieve this. it probably sounds like a huge number, but that’s the reality, and that’s the problem with rentals, simply because they don’t give you enough cash flow to give you the massive wealth. Even if you get rental properties at lowered rates, and you rehab, refinance, rent, and do the thing, but even so it’s quite a long pathway to massive wealth generation. The problem is that it doesn’t scale well, since it requires a lot of planning and overhead on your part. Rentals does put you into a decent cash flow area, but if you want to actually have a good, solid stream of income, this isn’t the way to do it. You honestly only can get up to 6,000 on the annual, and it can be quite hard for a person to really get into the act of selling properties as well.

However, it isn’t bad to invest in rentals, but rather, it’s something that you should consider as a good sort of beginning ground.

Now, you might think having a scaled rental portfolio is the way to go. You might get a property with multiple units, and you probably make about 700 a month from this. However, you will need to tap into savings in many cases, and the problem is, instead of it taking a little bit of time to get to the point of sustainable income, it takes about ten years.

While yes, this is faster than a typical job, it won’t save your finances. You might think that you can drastically increase the wealth that you have super fast, and while rentals are an amazing means to get additional income, it won’t create miracles. If you want to feel financially free, you need to get a hard lesson on spending habits, work, and time. If you want to diversify the steams, you’ll be less susceptible to downturns in economics, get tax benefits, and you can still invest in rentals.

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You will soon realize that rentals are a way to go in some cases, but it’s slow. It does take time and won’t generate a ton of money right away.

So how do you get money? Well, you need to have a vast portfolio with not everything in rentals. Instead, you invest in rental real estate to diversify while building the current wealth at higher rates. Investing in rentals is actually second to building a large net through other means. The best way is to do the following:

Start, run, and sell businesses, work a sales job that gives you a chance to grow your income quickly, work a high compensation means that have stock options.

Now there are investors who have used rentals to build massive wealth, but it is a big issue for many, and often, it can be hard since you’re trying to do this without having to spend a whole lot. You want to make sure that you’re running multiple projects, not putting money down, raising your capital, having a team on hand, and running a business that is full-scale. At the end of the day, that isn’t a rental or investing. Rentals are basically the product and they’re building a big business around the product. That’s different than buying a rental or two a year.

If you want to make money, build a business, and when you make a sale, you’ll realize that you’re not just getting a cash flow, but you’re also increasing your net worth, since businesses are valued in different ways, and commonly through a lot of gross revenues and earnings.

So keep this in mind when you’re going into business and investment, and try your best to give yourself the rental properties that you want, but also don’t put all of your money into it, but instead be smart.

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