How to use real estate investments to build generational wealth

  • Aaron Galvin, CEO of Luxury Living Chicago Realty, says real estate is a “proven” path to wealth.
  • Other investors Insider spoke to agree. Real estate investments can generate cash flow and there is an appreciation in value.
  • To start, an investor recommends the “4, 3, 2, 1” strategy, which involves first buying a fourplex and “hacking the house.”

Aaron Galvin graduated with a degree in Public Relations and Marketing in 2002 and relocated to Chicago to pursue a sales position in the beer and spirits industry.

He wasn’t particularly passionate about his work at the time, he admits. “We sold a product that I didn’t believe in 100%,” Galvin, who discovered his side job of renting out apartments around this time, told Insider. “Helping people find a new home is one of the most important if not the most financially significant and emotionally significant decisions in a person’s life.”

Not only was he enjoying his part-time job more, it was paying well.

After doing both jobs for eight months, he got to the point where he was making more out of his apartment rentals than his 9-to-5. That’s when he decided to leave American business and pursue real estate.

Galvin worked with his mentor, an established housing agent in the area, for three years before founding his own real estate brokerage and marketing business, Luxury Living Chicago Realty. Since LLCR’s founding in 2017, the company has grown to 70 employees, has leased more than 18,000 homes and sold more than $150 million in condominiums.

Galvin, now 42 and a father of two, considers himself “financially secure”.

He can afford a higher standard of living than he did as a kid growing up in Cleveland. “I’m very happy,” he said of his financial situation. “I come from a traditional middle-class family. We lived in the suburbs and had a 1,500 square foot three bedroom house. I never had any concerns that we’d go without it, but there were definitely things I could do as a kid that some of my friends couldn’t.”

He believes in real estate, especially the Chicago market. His primary residence is in Chicago but he doesn’t own any rentals — that was a


recession

he said: “I had a vision by the time I was 30 to own 10 condos. I bought my first one when I was 26. And then the Great Recession changed those plans, so I’ve sold all of those condos since then.” But he’s investing his money in developments like the proposed 21-story, 248-unit residential tower in Chicago that he’s co-owning with developed by partners Mavrek Development and GW Properties.

“I will invest money in these developments because I believe so strongly in the current and future success of downtown Chicago and the multi-family housing market,” said Galvin. He has other investment vehicles, including mutual funds and cryptocurrencies, which he first invested in in 2017. “So there are a few ways that I have been able to diversify my investments to ensure my family’s future success and financial well-being. But owning and developing real estate is the most proven way to create generational wealth.”

Invest in real estate to build wealth

Galvin is far from the only investor who believes real estate is the most proven way to generate wealth. Over the past few months, Insider has spoken to dozens of investors who have found financial independence through real estate.

Seattle-based investor Todd Baldwin, who started buying real estate at the age of 23, became a millionaire by the age of 25, thanks largely to rental income. At 28, he became a multi-millionaire and was comfortable with quitting his job. While real estate investing is by no means easy, he said, “It’s pretty simple: If you just buy real estate and hold onto it for 20 years, you’re going to sell it for a lot more than what you paid for it.”

Dion McNeeley, who owns real estate in the Tacoma, Washington area, believes anyone can use real estate investing to build wealth, regardless of where you start financially.

“I made it to 40 without ever having $1,000 in the bank,” the 51-year-old former truck driver told Insider. “I didn’t inherit any money. I had a lot of bad debts. I didn’t earn much money and was a single parent with three children. I can’t think of many more obstacles.”

Dion McNeeley

Dion McNeeley owns 16 units on seven lots in Tacoma, Washington.

Courtesy of Dion McNeeley


It took McNeeley two years to save up for his first investment property, a duplex he bought in 2013 in the Tacoma, Washington area. Two years later he graduated with second place. Today, he owns 16 units in seven Washington state properties, earns six-figure profits from rental income every year, and considers himself financially self-sufficient.

He prefers the hard-asset aspect of real estate to the precarious nature of the stock market and other types of investments for a number of reasons, McNeely explained.

First of all, rental properties can generate cash flow. “Real estate now pays me cash flow that I can spend, save or invest,” he said. Of course, buying real estate requires an upfront investment (for a


down payment

and


closing costs

), but it’s manageable, said McNeeley, who saved $20,000 over two years to buy his first investment property.

Then there is appreciation. When you buy real estate, “you’re getting an appreciation of about four times what you put in,” explained McNeeley, who prefers to save between 20% and 25% when buying new real estate. Think of it this way: “If I invest $100,000 in a $400,000 duplex and the value goes up 10%, I’m not making $10,000 on my $100,000; I win $40,000 on the $400,000.”

Another benefit of investing in real estate is the return of capital, he added. Each month, when his tenants pay rent, they pay back a significant portion of his mortgage principal. Of course, McNeeley also has to use that money to cover other real estate costs, but a portion goes toward paying off his loan.

He described it as “a savings account that grows every month without me having to actively put money into it.”

If you want to start investing in real estate, consider the “4, 3, 2, 1” strategy. That’s how a New Hampshire-based real estate investor, Matt “The Lumberjack Landlord,” started out with very little cash.

The idea is to start by buying a “fourplex,” a four-unit apartment building, living in one unit and renting out the other three. This allows an investor to subsidize the renovation of the property and their own living expenses. This investment concept is known as “house hacking,” which many young investors, including Matt, have used to get started in real estate.

“You can see if you actually want to be a real estate investor,” he said of the technique that provides instant cash flow for a new investor. If you enjoy the process of buying, renting, and managing tenants and want to grow your portfolio from there, repeat the process but with varying degrees of effort and expense.

For example, should one decide to continue to follow the “4, 3, 2, 1” method, after renting the units in the fourplex, the next step would be to purchase a “triplex” (a three-unit building) in which one lives in an apartment and then rents it out to the others. The process continues as we move forward, with the next step being to buy a duplex property and live in it while renting out the other half.

matt lumberjack landlord

New Hampshire based real estate investor Matt “Lumberjack Landlord” and his family.

Courtesy of Matt and Ashley


At this point, you own a handful of units and your rental income can cover most (or all) of your housing expenses, freeing up more money to continue saving and investing in real estate. The final step in Matt’s strategy is to buy a single family home. “You’re moving up the ladder while people mostly pay their mortgage,” he said.

Not all markets have an abundance of apartment buildings, he noted. Its New England market has many of these because many of the towns in the area were built in the late 19th and early 20th centuries when that style was popular and no zoning restrictions prevented construction. If triplex or fourplex apartments are not available in your area, look for a duplex or property with an unfinished basement that you can convert into another unit and rent out.

There are countless ways to find a way forward in real estate. But every investor has to adapt their plans and expectations to their specific market.

If you live in less affordable, larger cities like Los Angeles, New York, or Chicago, shop in out-of-town areas, Galvin advised: “Chicago also has really great suburbs, and we’ve rented a lot in those neighborhoods.”

Rising interest rates should not necessarily discourage you from buying. “With interest rates rising right now, it’s becoming increasingly difficult for people to choose between buying and renting,” Galvin said. “But it’s all relative. Interest rates below 4% is not the way this country was built. The fact that we’re going up to 4.5-5% is nothing compared to the 80’s when it was 18%. , so everything is relative.”

If you want to build wealth, “owning real estate there is the best way,” he emphasized. “It’s not easy. It’s none of that. But the idea of ​​owning real estate is always a proponent whenever the opportunity arises.”

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