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hanselandmetal t1_itz01so wrote

Complicated answer with lots of paths, but generally real estate appreciates if managed properly. These folks usually also own commercial, which is heavily tied to rental income.

Let’s say you put up a down payment and finance an underperforming 20 unit strip mall in a decent part of town for $100,000 with only one tenant paying $10,000 a year. You market the property and get 14 more tenants paying $10,000 a year, the value will increase dramatically.

Now refinance the property, and take advantage of tax benefits, and do this again 5 times. Now package your portfolio and do this same concept with portfolios of properties.

Over time you will have enough cash flow and assets to get any loan you want, and can make the same or new investments with relative ease.

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likesleague t1_itzb8at wrote

I don't think a five year old knows what refinancing to take advantage of tax benefits is, or packaging a portfolio. Other than the 3rd paragraph it was easy to follow though.

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x1uo3yd t1_itzr50s wrote

> "LI5 means friendly, simplified and layperson-accessible explanations - not responses aimed at literal five-year-olds."

This is from the /explainlikeimfive/ rules; the OPs response is fine.

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likesleague t1_itzsw36 wrote

OP asked how people get rich with real estate; I doubt they (or the average person who does not have an asset portfolio) knows what refinancing actually is, or what packaging a portfolio is.

Me referencing an actual five year old was just tongue in cheek.

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x1uo3yd t1_itzui58 wrote

The fact that two technical terms appear in a sentence that basically says "Rinse and Repeat" does not suddenly make it inaccessible.

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