Risk vs. Reward: Next Level Wealth

In my previous blogs, I’ve written about how I used to be dirt poor but managed to get myself out of debt and rebuild my credit score. I’ve written about how I sold insurance and flipped cars to start saving some money and build wealth. I also wrote about how I went from earning $6 per hour as a janitor to a 6 figure salary in the tech industry in just 5 years. All of these things were very helpful in building a successful life for myself but it’s not what catapulted my wealth to the next level.


Before I get into how my net worth went into the millions, I want to share my greatest investment regret. Back in 2003 when I was 18 years old, my friend Anthony told me to buy stock in a new company that he thought was a great idea. “I think they’re going to be big and their stock price is only a few dollars per share.” He said. I politely declined and told him that the company wasn’t going anywhere. That company’s name? Netflix


Now, how did I build my wealth? Yes, I made money on stocks, I was lucky enough to buy Amazon when it was $195 per share and sell it when it was over $1,000 per share. I also held thousands of shares of stock in my Silicon Valley startup company that was acquired. I also still hold dividend paying stocks in my portfolio today, which I reinvest each time a dividend is paid out. All of these things helped to put and keep money in the bank.


But what really took it to the next level? Real estate. Now keep in mind, I don’t consider myself a hardcore real estate investor. I don’t go to auctions and buy short sale houses, I’m not a slumlord, and I’ve never attended one of those awful get rich in real estate seminars. Those things are just aren’t me.


Yes, I’ve remodeled and sold some homes. But for me what it’s really about is doing the research to buy the best possible property at the best possible time and holding onto it for the equity.


Back in 2011 during the recession, the real estate market was down. Regular folks were scared to buy anything. The markets were uncertain and no one knew where the bottom was. It was a scary time to invest in real estate anywhere in the country.  


This is when I was buying. I had a choice to make. I could buy multiple properties in California but outside of the Silicon Valley, live in one and rent out the rest, or I could invest everything I had into one property right in the heart of Silicon Valley.


Let’s stop for a minute and think about it. Every market in the world was down. Stocks, bonds, real estate, you name it. Nobody knew where the bottom was. The market could rebound tomorrow or it could keep going down for another 10 years. Now imagine how you would feel at the thought of putting all of your money, everything you had, into one piece of property.


I had to ultimately choose what I thought would be the best long term investment for me and my family. My research and my gut told me to not only invest everything I had into one Silicon Valley property, but to also get a loan to be able to do it. That’s exactly what I did. I was terrified but I had to trust my research and my gut.


That was 7 years ago. I took a huge risk and it paid off. Currently, I own several million dollars in Silicon Valley real estate. It wasn’t luck. It was about research and timing. And as the old saying goes:  “location, location, location!” That adage is true but what exactly is it about the location that makes it so good? I can’t speak for other states or cities outside of the Silicon Valley but here, what defines the location is the school district.


You can certainly buy a nice house in a safe neighborhood in a mediocre school district and see some equity appreciation but it will never appreciate as quickly as that same house in a good school district.


My real estate is in the area near Apple’s new campus. Simple supply and demand dictate and houses in this neighborhood usually sell for hundreds of thousands of dollars over the asking price, with multiple bidders. Many of whom are all cash buyers. Money from all over the world flows into the Silicon Valley real estate market.


Buying a house is an emotional decision. When people buy a house they expect to live in it forever and never sell it. So because of that, most people buy the house that is best for them personally. Not what is best for the majority of potential buyers who are looking in that neighborhood.  


Especially things like soft characteristics that some buyers are willing to pay more for. Things like the number on the address, the fengshui of the house, the direction that the front door faces, or even having all bedrooms on the ground floor. For some buyers, all of those things will increase the value even higher above the hard numbered comps.


I think one of the things I’ve learned along the way from when I used to flip cars is that anytime I’m considering buying something, in that very same thought, I am already considering how to sell it. The same goes for real estate.


When I bought my house in San Jose, I considered the things that other people shopping in this neighborhood want. How many of those boxes does this house check? Is there anything about this house that will make it difficult for me to sell? I am always considering these factors for everything I buy. Whether it’s a car, a watch, or a house.


Don’t be scared to take risks in life. The bigger the risk, the bigger the reward. They key is to make sure they are calculated risks. You have to do your research, time it right, and most importantly, trust your gut.