Is there any truth to the saying '99% of the world's millionaires have become rich by doing real estate'?
"I can name far more non-real estate millionaires than those who are. That statistic isn't only not valid, it's not even close.  Update: The correct quote is ""90% of all Millionaires become so through owning Real Estate"" and it's attributed to Andrew Carnegie. Given that he was born in 1835, I can imagine that his statement was true at he time, but not today." "This quote has it almost backwards. Thomas J. Stanley's recent book (he's one of the duo who researched and wrote about The Millionaire Next Door) claims that the top occupation of millionaires is ""business owner / self-employed"" (28%).  ""Real estate investor"" is lumped in with ""other"" (9%), and if the ordering is correct in the list, it's no more than 2% of the total. (source)" 78.84% of statistics are made up on the spot. Most millionaires became millionaires by being very frugal and living well below their means, all the time.
"Private equity firms have a unique structure: The general partners (GP's) of the firm create funds and manage the investments of those funds.  Limited partners (LP's) contribute the capital to the funds, pay fees to the GP's, and then make money when the funds' assets grow. I believe the article is saying that ultra high net worth individuals participate in the real estate market by hiring someone to act as a general partner and manage the real estate assets.  They and their friends contribute the cash and get shares in the resulting fund. Usually this GP/LP structure is used when the funds purchase or invest in private companies, which is why it is referred to as ""private equity structure,"" but the same structure can be used to purchase and manage pools of real estate or any other investment asset." Isn't that a deduction mostly used by the top 1%? There seem to be mostly 2 types of people, those who own many homes, And those that rent them...  I always thought the mortgage interest deduction was used substantially more by the wealthy than the middle class... (Luxury homes also offer higher deductions right?) If you could find a breakdown, I suspect that it would show not just that they are self employed but own their own company. There are many people that are self employed, many of them make a good living at it, but are not millionaires.  My neighbour the plumber is a perfect example of this sort of self-employed and comfortable but not rich person. The key to wealth growth is to own (a significant part of) a company.  It one way to leverage a smaller amount of money to something much larger.  Plough your profits back in to the company to grow it, pay yourself reasonably for some time as the company grows.  After it is some size, you can afford to pay yourself more of the profits, if not sell it as a going concern to someone else. One last thought - I am assuming that your book is claiming that they made their money through self-employment, instead of choosing to become self employed  after striking rich somewhere.  If I were to win the lottery, I might then become a self-employed something, but in that case it was not my self-employment that got me there. "The crazy thing about this is that $30 million in annual salary and compensation really isn't the end of the story for rich guys.  I worked for a REIT a few years back and the guy that founded that REIT made a few million in salary a year.  I thought the number seemed a bit low for his lifestyle.  He had many properties in the US for his own personal use (around 6-8 BIG homes).  He also had a garage that was insane.  He had over 25 very expensive cars.  My co-workers would say ""Nick is airing out his garage"" when he drove one to work every day for a month without driving the same vehicle twice in one month.  It turns out he owned 30 million shares of stock that paid him $1.00 per share per year.  So while his annual compensation was ""only"" a few million per year, his dividend income was many, many, times that.  Think about that next time you see a CEO's annual income and you think that it really isn't as much as you expect." Not really. I benefit from the very rich and so do you. 2/3 of the 1% are self-made or semi-self made billionaires, and we all benefit from the technologies, businesses, and organisations etc. they have created and continue to create. They are some of the most productive people on earth.  Secondly, by investing their assets - they enable other's to get investments for their businesses to grow, because they are willing to take risks, most of us can't or won't. You can rob them once for a small time gain, many countries have attempted this, and then found out with the smartest people disincentivized to work, the country grinds to a halt, and slips towards poverty. "&gt; Asset prices are high and not matched by real world performance.  See, I know a lot of people are saying this, but I'm not entirely sure this is true. Even if some tech stocks are ""artificially"" boosting the market to crazy levels, can you say it's not warranted? The potential for many are far beyond what we see today. I don't see the current tech stock boom being unable to fulfill like the 1990s boom, and subsequent bust. The infrastructure and logistics weren't there in 1999. They are now.  Beyond tech, businesses are doing pretty well. Up and down, earnings reports are looking good. Stocks are high, but still somewhat based on real numbers. Same could be said for real estate. The demand is real, the prices are high, but it's based on demand.  The danger is what we're missing, just like in 2008. Chances are, there is a fiction out there. Maybe the fiction is in these tech stocks. Maybe it is on mortgages again. I'm not seeing it. There were people prior to 2008 sounding alarm bells about the real estate market. I haven't seen the equivalent today. In fact, I've seen more people trying to figure out how the heck the next correction will come, and nobody really can answer it. At this rate, there might not be a ""built in"" cause, and might come externally like Trump going nuts and launching nukes, or another terrorist attack." The decline in what kind of house you get for $600k is why a lot of people making $100k don't feel rich. I'm amazed at how many houses in my area go for that much, especially when you consider that only 5% of families have the income to consider that affordable. "I think you came up with a worthy Masters/PhD research project, it is a great question. This is in Australia so it is difficult for me to have complete perspective.  However, I can speak about the US of A. To your first point relatively few people inherit their wealth.  According to a brief web search about 38% of billionaires, and 20% of millionaires inherited their wealth.  The rest are self-made. Again, in the US, income mobility is very common.  Some act like high level earners are just born that way, but studies have shown that a great deal of income mobility exists.  I personally know people that have grown up without indoor plumbing, and extremely poor but now earn in the top 5% of wage earners.   Quid's points are valid.  For example a Starbucks, new I-Phone, and a brake job on your car are somewhat catastrophic if your income is 50K/year, hurts if your income is 100K, and an inconvenience if you make 250K/year.  These situations are normal and happen regularly.  The first person may have to take a pay day loan to pay for these items, the second credit card interest, the third probably has the money in the bank.  All of this exaggerates the effect of an ""emergency"" on one's net worth.    To me there is also a chicken-and-egg effect in wealth building and income.  How does one build wealth?  By investing wisely, planning ahead, budgeting, delaying gratification, finding opportunities, etc...  Now if you take those same skills to your workplace isn't it likely you will receive more responsibility, promotions and raises?  I believe so.  And this too exaggerates the effect on one's net worth.  If investing helps you to earn more, then you will have more to invest. To me one of the untold stories of this graph is not just investing, but first building a stable financial base.  Having a sufficient emergency fund, having enough and the right kind of insurance, keeping loans to a minimum.  Without doing those things first investments might need to be withdrawn, often at an inopportune time, for emergency purposes. Thanks for asking this!" I don’t understand why people think its okay to write these kinds of articles that mislead the public. First of all, wage mobility in the US is always fluctuating. People move in and out of the 1% all within a lifetime. Secondly, go to Bls.gov there are statistics showing that MOST of the 1% are actually self-made first generation millionaires. Though coming from a wealthy family helps set up the child to a better future it isn’t typically because of inherited money, but is because of the fact that richer parents better educate their kids in FINANCIAL LITERACY.  Just remember its easier to spend the wealth empire that your parents built than it is to actually maintain it. "The first red flag of your ""facts"": One of the article's sources is an Atlantic article with the title, ""Entrepreneurship: The Ultimate White Privilege?"". The article rants on and on about politically correct SJW nonsense.  Red flag 2: The Andrew J. Oswald ""What Makes an Entrepreneur?"" study that is cited to prove access to capital is a helping factor (Your daddy money argument) is from 1998. A hell of a lot has changed since then. Forbes reported a 32% jump (up to 70%) of self-made millionaires from 1982 to 2012.  Red flag 3: The article was trash, mainly used as a tool to attack ""white privileged males"". The article only said, ""Hey, look a study!"" and didn't mention any data. The only actual mention of data in the article is ""more than 80% of funding for new businesses comes from personal savings and friends and family."" Well, yeah. That's where most businesses look for their first small investment.  Actual facts:  [60% of billionaires are self-made](https://www.entrepreneur.com/article/269593)  [70%+ percent of millionaires are self-made](http://www.thomasjstanley.com/2014/05/america-where-millionaires-are-self-made/)  Btw, thanks for the laugh. Didn't know anyone took Qz serious!" Can't pretend to be an expert in construction or real estate but I'm pretty sure that you can approach the people you know and pay them on a per job basis. I'm pretty sure finding other workers on a per job basis will be easy. I wouldn't say its common but its not uncommon either. "I'm sorry, but if one of your goals is to ""get the small house together at the manor"", you're already a huge success by almost the entire world's standards.  I don't care if [this](https://gregzavitz.files.wordpress.com/2011/10/1103-linden.jpg) is the ""manor"" and [this](https://www.theposhshedcompany.co.uk/uploads/products/listings/De_Lange_210317_2_-_Copy.jpg) is the ""small house"", you're still beating out A LOT of people on the ladder of success." People just love becoming more well-off than they currently are, and one of the ways they do it is with leverage. Leverage requires credit. That desire is not exclusive to people who are not already well-off. For a well-off person who wants to become more well-off by expanding their real estate ventures, paying cash for property is a terrible way to go about it. The same goes for other types of business or market investment. Credit benefits the well-off even more greatly than it benefits the poor or the middle-class. "This article is also light on sources. It overstates inherited wealth. People who work with rich people know the saying ""shirtsleeve to shirtsleeve in three generations"". There is a proclivity of rich descendants to squander their fortune, which totally negates a majority of this article. In sum, this article and news source insists on itself" Look, the richest guy I know personally is the first college grad in his family, and he is the first generation of natural-born citizens in his family. He worked (and lucked) his way from almost nothing to rich as fuck, but the fact that I happen to know him personally doesn't nullify his status as a statistical outlier.