Most millionaires are created via real estate?

[prosper]

I've heard this statement several times but I have never actually seen the proof. Does anyone have any references?

[kork13]

I've actually heard mostly the opposite -- that most first-generation millionaires build their wealth through decades of systematic investment in retirement accounts. With that said, there are probably very few millionaires that do not own at least their own home (if not a rental or three). Another common factor among many first-generation millionaires is that they own their own business, or have some form of income-generating side-hustle. None of these factors are requisite, but all of them are often involved in the making of a millionaire.

[Captain Save]

I don't have facts on this but I doubt it's either.. I would think that out of the 2 it's most likely real estate .. It all depends on how everything is categorized.

I can see how retirement account would be #1 only if they count pension lump sums. Otherwise people don't save enough

My personal opinion is that most millionaires are created by starting their own businesses. But for something like that, they might not even use that as a category.. they might categorized each type of business separately.


Also, do we reallly want to be millionaire through a pension?

[disneysteve]

Most self-made millionaires (not born rich) get there through saving and investing.

"Of those who are self-made millionaires the study revealed their top sources of assets included investments/capital appreciation, compensation and employee stock options/profit sharing. Those who were born wealthy were more likely to cite inheritance, entrepreneurship and real estate investment appreciation as an asset source.

When it comes to investment strategies, those who are self-made were more likely to add equity investments, while those who were born wealthy typically had more real estate investments."

[scfr]

I have a couple thoughts on this:

1. I'm unaware of a study of all millionaires world-wide. The results of an individual study is going to depend on the population sampled. For example, if a private banking group conducts a study, they are naturally going to be focusing on private banking clients or potential clients.

2. Isn't asking how wealth is created a bit like asking how health is created? How can it be narrowed down to just one trait? Isn't it more likely that there are many different ways to achieve it, and more likely that it's the cumulative result of a combination of effort and traits and habits with a bit of luck thrown in? A millionaire with a large real estate portfolio didn't just wave a magic wand and have the portfolio appear overnight. They probably had to study the market and work and save to secure their seed money, all before they even started building their portfolio.

[disneysteve]

How can it be narrowed down to just one trait? Isn't it more likely that there are many different ways to achieve it, and more likely that it's the cumulative result of a combination of effort and traits and habits with a bit of luck thrown in?

I understand your point, but splitting the average self-made millionaire into two camps - primarily equity investors and primarily real estate investors - is fairly straightforward. My wife and I are millionaires and own no real estate other than our personal home. We made our money through saving and investing. I would think splitting people between those two camps isn't that difficult.

[Captain Save]

I understand your point, but splitting the average self-made millionaire into two camps - primarily equity investors and primarily real estate investors - is fairly straightforward. My wife and I are millionaires and own no real estate other than our personal home. We made our money through saving and investing. I would think splitting people between those two camps isn't that difficult.

I disagree. Wouldn't most real estate investors also have money in equities .. and vice versa? and wouldn't most equity investor (who are millionaire) have at least one piece of real estate valued over at least 500k ?

[disneysteve]

Wouldn't most real estate investors also have money in equities .. and vice versa? and wouldn't most equity investor (who are millionaire) have at least one piece of real estate valued over at least 500k ?

The question isn't if people have any equities or own any real estate. The question is where did they really make their money. Folks who made their fortune in real estate often invest relatively little in stocks, and vice versa for those who made their money in the market.

We are millionaires. We have no real estate investments. Our only real estate holding is our personal home which is only worth maybe 225K. The bulk of our wealth has come from equity investing. I think you'll find that most millionaires are very heavy to one side or the other - real estate or stocks. And I think the majority of self-made millionaires will fall on the stock side.

[disneysteve]

My personal opinion is that most millionaires are created by starting their own businesses.

I would disagree with this if you are talking about people in the $1 million to maybe $3 million range. Now if you're talking about the multimillionaire crowd, I think that's where you get into the business owner crowd.

[Captain Save]

The question isn't if people have any equities or own any real estate. The question is where did they really make their money. Folks who made their fortune in real estate often invest relatively little in stocks, and vice versa for those who made their money in the market.

We are millionaires. We have no real estate investments. Our only real estate holding is our personal home which is only worth maybe 225K. The bulk of our wealth has come from equity investing. I think you'll find that most millionaires are very heavy to one side or the other - real estate or stocks. And I think the majority of self-made millionaires will fall on the stock side.

I see what you're saying but how do the publications making those statements define it? Is it whichever one holds the most weight ?

Your home is worth 225k but where I live , it's normal for a single family to be worth 500k, and that 's not in a rich town.

Regardless, of how it's define, I don't think that answers the OP's question.


I think the majority of self made millionaires probably make it through their profession (not RE or stocks) but since we're talking RE vs. Stocks ... I think that subset of millionaires would probably own more stocks than real estate (not fact, just my opinion) .. so it would sku the numbers. The reason I doubt stocks are making a bunch of people millionaires is cause as we discussed countless of times before .. .People are not saving as much as they should be. You guys in this forum are a minority.

[disneysteve]

The reason I doubt stocks are making a bunch of people millionaires is cause as we discussed countless of times before .. .People are not saving as much as they should be. You guys in this forum are a minority.

It's true that most folks aren't saving enough, but we're not talking about those people. We're talking about millionaires. We're talking about the minority by default. There are only about 11 million millionaires in the US out of 325 million people, so just over 3% of the population.

There are quite a few millionaires among the regulars at this site. At least a couple are real estate millionaires. Many others are equity millionaires.

[Captain Save]

I googled the "how many millionaire" stat. I saw an article probably the one you're referring to and it says 1 million in investable assets not including primary residence. IF that's the case stocks will win this race by a mile. Owning investment properties has a much bigger barrier of entry than equities.

[james.hendrickson]

I googled the "how many millionaire" stat. I saw an article probably the one you're referring to and it says 1 million in investable assets not including primary residence. IF that's the case stocks will win this race by a mile. Owning investment properties has a much bigger barrier of entry than equities.

Actually - barriers to entry is an interesting point. There have been several companies which have been promoting crowdsourcing real estate funding - I understand the minimum for buy in for some deals these companies are brokering can be as little as a few hundred dollars.

[Captain Save]

Actually - barriers to entry is an interesting point. There have been several companies which have been promoting crowdsourcing real estate funding - I understand the minimum for buy in for some deals these companies are brokering can be as little as a few hundred dollars.

Are you talking about funds like "fundrise" ?.. I think these attract the equity type of investors.. a lot more passive.. someone else is making your money work for you.. but you have less control.

[Keshet]

I've never read "The Millionaire Next Door" so I'm not sure if it gives any insight. Also Dave Ramsey's company is putting out a book based on a study of millionaires by Chris Hogan, "Everyday Millionaires'.