- Aaron Galvin, CEO of Luxury Living Chicago Realty, says that real estate is a ‘proven’ path to wealth.
- Other investors who Insider spoke with agree. Real estate investing can generate cash flow, plus there’s appreciation.
- To get started, one investor recommends the “4, 3, 2, 1” strategy, which involves purchasing a fourplex first and “house hacking.”
Aaron Galvin graduated with a degree in public relations and marketing in 2002 and moved to Chicago for a sales job in the beer and spirits industry.
He wasn’t particularly passionate about his work at the time, he concedes.”We were selling a product that I didn’t 100% believe in,” Galvin told Insider, who discovered his side gig — leasing out apartments — during this period. “Helping people find a new home is one of the most, if not the most, financially significant and emotionally significant decisions in somebody’s life.”
Not only did he enjoy his side hustle more, but it paid well.
After eight months of doing both jobs, he got to the point where he was making more from renting out apartments than he was from his 9-to-5. That’s when he decided to leave corporate America and bet on real estate.
Galvin worked with his mentor, an established apartment locator in the area, for three years before starting his own real estate brokerage and marketing business. Since founding LLCR in 2017, it’s grown to 70 employees, has leased more than 18,000 apartments, and sold more than $150 million in for-sale condos.
Galvin, now 42 and a father of two, considers himself “financially secure.”
He can afford a higher standard of living than he had as a kid growing up in Cleveland. “I’m very fortunate,” he said of his financial situation. “I come from a traditional, middle-class family. We lived in a suburb and had a 1,500-square foot, three-bedroom house. I was never concerned that we were going to go without, but there were definitely things that I couldn’t do as a kid that some of my friends could.”
He believes in real estate, particularly the Chicago market. He has a primary home in Chicago but doesn’t own rental properties — that was a pre-
recession
goal, he said: “I had a vision for owning 10 condos by the time I was 30. I bought my first when I was 26. And then the Great Recession changed those plans, so I have since sold all of those condos.” But he invests his money in developments like the proposed 21-story, 248-unit apartment tower in Chicago that he’s co-developing with partners Mavrek Development and GW Properties.
“I’ll invest money in these developments because I believe so strongly in the current and future success of downtown Chicago and the multifamily market,” said Galvin. He has other investment vehicles, including mutual funds and cryptocurrency, which he first started investing in in 2017. “So there are some ways that I’ve been able to diversify my investments to ensure the future success and financial well-being of my family. But owning and developing real estate is the most proven path to creating generational wealth.”
Using real estate investing to build wealth
Galvin’s far from the only investor who believes real estate is the most tried-and-true way to generate wealth. Over the last several months, Insider has spoken with dozens of investors who have achieved financial independence through real estate.
Seattle-based investor Todd Baldwin, who started buying properties at age 23, became a millionaire by 25, mostly thanks to rental income. At 28, he became a multimillionaire and felt comfortable leaving his day job. While real-estate investing isn’t easy by any means, he said, “it’s pretty straight-forward: If you just buy real estate and you hang on to it for 20 years, you’re going to sell it for a lot more than what you paid for it.”
Dion McNeeley, who owns property in the Tacoma, Washington area, believes that anyone can use real estate investing to build wealth, no matter where you’re starting from 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 money. I had a lot of bad debt. I wasn’t making a lot of money and was a single parent with three kids. I can’t imagine many more barriers.”
Courtesy of Dion McNeeley
It took McNeeley two years to save up for his first investment property, a duplex that he purchased in the Tacoma, Washington area in 2013. Two years later, he closed on his second place. Today, he owns 16 units across seven properties in Washington state, earns six-figure profits from rental income each year, and considers himself financially independent.
He prefers the hard asset aspect of real estate over the precarious nature of the stock market and other types of investing for a couple of reasons, McNeely explained.
For starters, rental properties can generate cash flow. “Real estate pays me cash flow now 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’s appreciation. When you buy real estate, “you’re gaining appreciation on about four times what you invest,” explained McNeeley, who prefers to put between 20% to 25% down when buying new property. Think about it this way: “If I invest $100,000 into a $400,000 duplex and it goes up 10% in value, I don’t gain $10,000 on my $100,000; I gain $40,000 on the $400,000.”
Another benefit of investing in real estate is principal pay down, he added. Each month when his tenants pay rent, they are paying down a significant chunk of his mortgage principal. Of course, McNeeley also has to use that money to cover other property expenses, but a portion goes to paying off his loan.
He described it as, “a savings account that grows every month without me having to actively put money in.”
If you want to start investing in real estate, consider the “4, 3, 2, 1” strategy. It’s how one New Hampshire-based property investor, Matt “The Lumberjack Landlord,” got his start with very little cash on hand.
The idea is to start off by purchasing a “fourplex,” a four-unit residential building, and live in one unit while renting out the other three. In doing this, an investor is able to subsidize the renovation of the property, as well as their own living expenses. This investing concept is known as “house hacking,” which many young investors, including Matt, have used to get their start in real estate.
“You can see if you actually like being a real estate investor,” he said about the method, which provides a new investor with immediate cash flow. If you enjoy the process of buying, renting, and managing tenants, and want to expand your portfolio from there, you then repeat the process, but at different levels of expense and effort.
For instance, should one decide to continue following the “4, 3, 2, 1” method, the next step after leasing the units in the fourplex would be to purchase a “triplex” (a three-unit building), live in one apartment and then rent the others out. The process continues down the line, with the next step being to purchase and reside in a duplex property while renting out the other half.
Courtesy of Matt and Ashley
By this point, you’ll own a handful of units and your rental income may cover the majority (or all) of your housing costs, which will free up more cash to continue saving and investing in real estate. The final step of Matt’s strategy is to buy a single-family home. “You’re moving up the ladder while having people largely pay your mortgage,” he said.
Not all markets have an abundance of multifamily properties, he noted. His market in New England happens to have a lot of them because many of the cities in the region were built in the late 1800s and early 1900s when that style was popular and no zoning restrictions prevented the construction of them. If there aren’t triplexes or fourplexes available in your area, look for a duplex or a property with an unfinished basement that you can turn into another unit and rent out.
There are countless ways to create a path forward in real estate. But every investor has to adjust their plans and expectations according to their specific market.
If you’re living in less affordable, bigger cities like Los Angeles, New York, or Chicago, shop around in areas just outside of the city, advised Galvin: “Chicago also offers outlying neighborhoods that are really great as well, and we’ve done a lot of leasing in those neighborhoods.”
As for rising interest rates, it shouldn’t necessarily deter you from buying. “As interest rates creep up right now, it’s harder and harder for people to wrap their heads around buying versus renting,” said Galvin. “But it’s all relative. Sub-4% interest rates is not the way that this country was built. The fact that we’re up towards 4.5-5% is nothing compared to where we were in the 80s, when it was 18%, so it’s all relative.”
If you want to build wealth, “owning real estate is the most proven path there,” he emphasized. “It’s not easy. None of it is. But the idea of owning real estate, I’m always an advocate for when the opportunity exists.”
