Former California Governor Arnold Schwarzenegger’s journey epitomizes the quintessential American dream.
Born in Austria and of humble origins, Schwarzenegger arrived in America with “empty pockets” in 1968, at age 21. He competed in bodybuilding competitions, winning several awards – but even as a champion, he found himself working in construction. He once commented that he considered the $5,000 he earned from building a wall “a big paycheck.”
In 1982, Schwarzenegger made his breakthrough in the film industry with “Conan the Barbarian,” quickly establishing himself as a bankable star in Hollywood. With iconic performances in films like “The Terminator” and “Predator,” he solidified his status as one of the highest-paid actors in the industry.
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However, it wasn’t movies that brought Schwarzenegger his first taste of wealth.
On a interview with real estate mogul Grant Cardone, Schwarzenegger revealed the process that led him to the millionaires’ club.
“I was a millionaire before I did ‘Conan’ or ‘The Terminator,’” Schwarzenegger counted Cardone. “I became a millionaire because of the real estate market.”
Schwarzenegger detailed exactly how he amassed his first fortune. But will it be possible to replicate his strategy today?
‘Arnold, listen to me’
“There was a real estate agent named Olga,” Schwarzenegger recalled. “She was from Lebanon and was as tall as Danny DeVito. She said to me, ‘Arnold, listen to me, you need property to generate income. When you have a house or when you have a condominium, then you have to pay the mortgage, you have to pay the expenses, but I’ll find you a six-unit building that has an owner’s unit in the front.’”
Schwarzenegger said the apartment building Olga found cost $240,000. He emphasized that this was in the 1970s.
For context, the average price of homes sold in the US in 1975 was about $39,000.
Although the apartment building represented a significant investment, it proved to be highly advantageous for Schwarzenegger.
“Two years later, I made $400,000 when I sold the building – I only put in $27 and a half,” he revealed.
In other words, Schwarzenegger made a tidy profit of $160,000 (subtracting $240,000 from $400,000). If the down payment of $27,500 was your only investment in the property (meaning the rental income covered the mortgage payments and other expenses), the return on that investment would be 481.8%, not including the additional rental income that he may have obtained along the way.
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Now and then
Given Schwarzenegger’s success with this investment, we may wonder whether it is viable to replicate this strategy today.
Well, the landscape has evolved significantly since the 1970s, with soaring house prices requiring substantially higher investments.
While the fundamentals of real estate investing remain strong — it is possible to purchase an apartment building and earn rental income — would-be investors must navigate a market where entry costs have risen, posing greater challenges for those without substantial capital. .
To put things into perspective, the average home price in the US had Reached US$417,7000 in the fourth quarter of 2023.
Multi-unit apartment buildings can fetch significantly higher prices.
However, nowadays, you don’t need to be a property owner to invest in real estate. Publicly traded real estate investment trusts (REITs) offer easy access for individuals seeking exposure to the sector. At the same time, there are also crowdfunding platforms that allow you to become co-owner of diversified real estate portfolios.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
