Real estate has created thousands of millionaires in the United States.
The great robber baron and millionaire prototype Andrew Carnegie once said, “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.”
Looking back over my career in finance and markets, that statement holds true. I know a lot of millionaires, but I do not know any who don’t own real estate-related investments.
This is especially true of what I like to call the working-class millionaire. These folks made their money owning contracting companies, tire shops, school bus companies, and other businesses that require sweat and brain power. They then pile the excess cash flow produced by their businesses back into local real estate, and over time it creates a fortune.
The story of people who made their initial millions in real estate and then went on to turn the original profits into billions, like Andy Beal and Sam Zell, are the epitome of the upside of the American Dream.
While I have never been much of a fan of the idea of owning actual properties (I don’t want to receive a call about a pipe leak at two in the morning), I have owned a lot of real estate securities like stocks, bonds, and REITs over the year.
By investing in real estate this way, I have never had to hire lawyers to evict a tenant, nor have I ever had to deal with storm damage on commercial property. I am not suited for these tasks by either temperament or skill set.
I am, instead, well suited for buying real estate-related businesses when everyone hates real estate and the headlines are warning of imminent collapse.
I do possess the temperament to buy stocks and then buy more as they plunge in price. As long as I am confident in my calculations of the net worth of the business and the property involved, I treat market dislocations like the buying opportunity they are.
The opportunity to make a fortune in real estate-related securities is being created in real-time, as headlines about the sector are starting to take a darker turn.
The trick is to identify good businesses and solid assets and begin buying on every down day. Stay small and move slowly, and be sure not to commit all your capital at once. The opportunity to add more shares at lower prices is very likely to happen several times before the bottom is in.
RE/MAX Holdings (RMAX) is an excellent example of a real estate business that could end up making you enormous amounts of money.
Looking at the stock’s price today, you would swear that very few people would buy homes this year—but the truth is that there are millions of people looking for new homes, and real estate brokerages like RE/MAX will do well this year. And, as interest rates stabilize and buyers adjust to the new normal, the number of home buyers could explode higher.
RE/MAX has 140,000 agents across 9,000 offices. In addition, its mortgage subsidiary, Motto Mortgage, has more than 225 offices in 40 states. The company claims that no one in the world sells more real estate than its franchisees. According to the company’s most recent presentation, their agents also outproduce competing large brokerages by 2 to 1.
The stock is out of favor and trades at just 11 times analyst estimates for 2023. The dividend yield is 4.91%, so you collect some cash while you build a meaningful position in the stock.
Adam Peterson of Boston Omaha, a money manager with a value-oriented approach, is one of the largest shareholders of RE/MAX. He apparently got the memo about adding to your position over time because he has spent hundreds of thousands of dollars buying more stock in the past several months.
RE/MAX is just the first real estate opportunity we will explore.
The small, off-the-radar real estate opportunities will go to Underground Income and MVP members. Still, at Hidden Profits Report, I will show you plenty of large-cap opportunities to build your real estate fortune over the next few years.
