Rental income is a significant source of revenue for mega millionaire real estate investors, despite a decline in ownership. Learn more.
Real estate investors traditionally use rental property to build and consolidate wealth, and the strategy appears to be paying off, according to the latest Millionaire Corner research, which shows that rental property is one of the top three sources of income for the average American household with a net worth exceeding $25 million.
These mega millionaires attribute more than 16 percent of their annual income to rents derived from their residential and commercial properties, according to our research, which shows that $25 million plus investors receive an average of $7.7 million in income each year, with nearly $1.2 million coming from rental properties. Investment income averages nearly $1.4 million a year, and income from such sources as wages, salaries or a professional practice averages $1.7 million annually.
Though rental income remains a primary source of income for $25 million plus investors, our study also reveals that mega millionaires are slightly less likely to be real estate investors now than they were in 2010. The mean value of their real estate holdings is down, as well.
Nearly half (48 percent) of $25 million plus investors owned residential rental property in 2010. Now that share is 42 percent. Average values are down from nearly $4.7 million in 2010 to $3.2 million this year. The share owning commercial rental property has fallen from 45 percent in 2010 to 37 percent this year, and the average value of the property is down from $8.5 million to $6 million.
Ownership of undeveloped land has held steady at 44 percent, though the value of the property has fallen by more than half, from nearly $6.5 million in 2010 to $2.9 million this year. Other holdings of mega millionaire real estate investors include real estate investment trusts or REITs (39 percent with an average value of $2.5 million) and other real estate investments (28 percent with an average value of more than $2.6 million).
The share of $25 million plus investors who owns their primary home is 92 percent, down from 97 percent two years ago. And, the average value of their primary residence is $3.7 million, down from the 2010 average of $5.1 million, according to our study, which shows that the richest Americans have become slightly less avid real estate investors over the last two years.