OPM vs. Personal Savings: Which is the Better Route to Real Estate Investing

Building wealth through real estate requires capital—but where that capital comes from can significantly impact your success. Should you use other people's money (OPM) or rely solely on personal savings? Each approach has its pros and cons, and the best strategy often depends on your goals, resources, and risk tolerance. Let’s break down both options to help you decide.

Option 1: Personal Savings – The Traditional Path

Advantages of Using Personal Savings:

1. Full Control: You’re not answerable to investors or lenders.
2. Reduced Risk of Debt: With no loans or investor obligations, you avoid interest payments and repayment schedules.
3. Ownership Benefits: You retain 100% of the deal’s equity and profits.

Challenges with Personal Savings:

• Longer Time Horizon: Saving enough for a property can take years.
• Limited Scalability: Your growth is capped by how much you’ve saved.
• Opportunity Cost: Money tied up in real estate could have been used for other investments or emergencies.

Example Scenario:
If you saved $100,000 for a down payment, you might be able to buy one property. But scaling to a portfolio of multiple properties could take decades.

Option 2: OPM Investing – Leverage for Growth

Advantages of Using Other People’s Money (OPM):

1. Faster Scaling: You can close more deals and grow your portfolio quickly.
2. Diversified Risk: Sharing risk with investors protects your personal finances.
3. Infinite Returns: With little to no personal capital invested, your ROI can skyrocket.

Challenges with OPM Investing:

• Shared Control: Investors or lenders may have input on decisions.
• Relationship Management: Building and maintaining trust with investors is crucial.
• Higher Expectations: You must deliver consistent results to keep investors engaged.

Example Scenario:
By raising $500,000 through investors, you could buy multiple properties and generate significant cash flow, even while retaining a portion of equity.

If you’re new to OPM investing or want to avoid common pitfalls, check out this in-depth guide:
Top 5 Mistakes to Avoid When Using Other People's Money in Real Estate Investing

Side-by-Side Comparison: OPM vs. Personal Savings

Which Strategy Is Right for You?

The decision comes down to your goals:

• Choose Personal Savings if:

  • You prefer complete control and minimal risk.
  • You’re okay with slower, steady growth.

• Choose OPM Investing if:

  • You want to scale quickly and maximize ROI.
  • You’re comfortable managing investor relationships.

Final Thoughts

Whether you choose personal savings or OPM investing, understanding the strengths and challenges of each strategy is key. For many successful real estate investors, combining both approaches offers the best balance of control and scalability.

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The information contained herein is for general guidance on matters of interest only. This information contained herein is not intended to provide you with any advice on financial planning, investment, insurance, legal, accounting, tax or similar matters and should not be relied upon for such purposes. Marcin Drozdz, M1 Real Capital Inc are not financial, legal or tax advisers. You should assess whether you require such advisers and additional information and, where appropriate, seek independent professional advice. You understand this to be an expression of opinions and not professional advice. You are solely responsible for any actions you take with the content and hold Marcin Drozdz and M1 Real Capital Inc or any of it's affiliates harmless in any event or claim.