Investing in Real Estate Protects Your Wealth from inflation!

Inflation is a common economic challenge that affects us all. It is a measure of the rate at which the general level of prices for goods and services is rising and purchasing power is falling. Inflation has a profound impact on our everyday lives, as the cost of living increases, our money loses its value, and it becomes more difficult to maintain our standard of living.

Recently, inflation has reached 9.1%, the highest it has been in 40 years. This rise in inflation is due to a combination of factors, including built-up consumer demands, supply chain constraints, and the government printing money. These factors have created an environment in which prices are rising, and our money is losing value at an unprecedented rate.

The challenges of saving money in a bank account during inflation are significant. With interest rates at a low of 0.01%, as seen in Chase bank, the returns on our savings are pitiful. This means that the money we put in the bank today will not keep pace with the rising cost of living, and its purchasing power will decrease over time. In an inflationary environment, simply saving money in a bank account is not enough to ensure financial security.

Low interest rates have a significant impact on savings. The current interest rate at Chase Bank is 0.01%, which is pitifully low. This means that the returns on our savings are minimal, and our money is not growing at a rate that can keep pace with the rising cost of living. The pitiful interest rate at Chase Bank highlights the challenges of saving money in a bank account during inflation.

With interest rates this low, it is increasingly difficult to protect our hard-earned money from the effects of inflation. The money we save in the bank today will not keep pace with the rising cost of living, and its purchasing power will decrease over time. This presents a significant challenge for those who are trying to build wealth, provide for their families, or plan for their financial future.

In an inflationary environment, it is important to consider alternative options for saving and investing our money. Simply putting our money in a bank account is not enough to ensure financial security, and we must explore other options to protect ourselves from the effects of inflation.

When inflation is on the rise, the money we put in the bank today will not keep pace with the rising cost of living, and its purchasing power will decrease over time. As an example, if you put $100,000 in the bank today and inflation continues at the same rate, in just 2 years, your $100,000 will only have the purchasing power to buy items equivalent to today’s $85,500.

This highlights the dangers of relying solely on savings in a bank account to protect your hard-earned money. In an inflationary environment, simply saving money in a bank account is not enough to ensure financial security, and it is important to explore alternative options for investing and preserving your wealth.

That is why investing in proven cash-flowing assets, such as multifamily apartments, is a wise choice for protecting your hard-earned money from the effects of inflation. By investing in these assets, you can protect your wealth, grow your savings, and secure your financial future.

Investing in proven cash-flowing assets is an excellent way to protect your hard-earned money from the effects of inflation. By investing in these assets, you can grow your savings, generate passive income, and secure your financial future.

Multifamily apartments are one such asset that can offer a safe and stable return on investment. With the right investment strategy, you can leverage the power of real estate to protect your hard-earned money and achieve your financial goals.

In my video, I discuss the benefits of investing in apartments and how this type of investment can help you protect yourself from inflation. By watching this video, you will gain a better understanding of the potential benefits of investing in multifamily apartments and how this type of investment can help you achieve your financial goals. Whether you are a seasoned investor or just starting out, this video is a must-watch for anyone who is serious about protecting their hard-earned money.

Top 5 strategies we use to protect your assets!

Top 5 Strategies Shalwin Properties Uses to Reduce the Risk on your investment

Did you know that hard assets are typically less risky investments than paper ones? They are tangible or physical items that an individual can own.

Real estate is a hard asset, as opposed to stocks which are paper assets.

As I became more financially educated, I have realized that not losing money and protecting the downside is more important to my financial growth than unpredictable upside. This is one of the many reasons that I’ve gravitated towards real estate and have shifted the majority of my portfolio to hard assets.

Hard assets are NOT risk free, neither is real estate. That’s why it’s important to consider what risk mitigation strategies the sponsorship team is using to protect your investment.

When investing with a sponsorship team, it’s important to know that sponsors can and will implement risk mitigation strategies, which can dramatically reduce the already reduced risk associated with real estate investing.

Risk Mitigation…

What does that mean when we’re talking apartment investing?

Here are Top 5 strategies that Shalwin Properties uses to mitigate risk on our investments.

♔ Interest rate cap purchase: this acts like an insurance policy for interest rate variability on floating rate debt in a rising interest rate environment.

♔ Interest Reserves: this is where the sponsorship team holds funds from investments and reserves it for interest rate fluctuations to cover the monthly debt service or unexpected capital needs. If the reserve is not utilized, it will be distributed back to investors.

♔ Market selection: we choose growing markets with population in migration and increasing, diverse job opportunities

♔ Conservative underwriting: you probably hear this one a lot, but what does it mean? That’s when the various data reports are predicting rent growth or occupancy numbers, we don’t use those numbers in our predictive financial models, we use lower numbers

♔ Insurance (property and business interruption): if a catastrophe occurs (ie fire, hurricane, hail storm), not only is the physical property damage covered and any displaced tenants taken care of, but also the business loss from of income is also reimbursed by the insurance company.

Your money is safest when it’s invested in real estate

It’s not safe in your savings account…

It’s not safe in your retirement account…

It’s not safe in your stock account…

It’s not safe in cryptocurrency….

but it is SAFE in apartments.

We MAKE SURE it is SAFE!

The Ultimate Secret to Explosive Wealth Building

You’re probably not surprised that I strongly believe that real estate is a great place to put your money. The convergence of the tax benefits, appreciation, capital preservation, and cash flow creates a very powerful strategy for wealth creation.

As an investor, your next step is to decide if you want to invest actively or passively.

It doesn’t have to be black or white. Why not do both? I know I do.

There are benefits to doing both active AND passive real estate investing.

Personally, I believe that passive real estate investing utilizes the most powerful tool of all for wealth building.

What is such a powerful tool for building wealth? One word….LEVERAGE

Leverage allows you to grow explosively, instead of linearly.

When you invest passively in real estate you are leveraging other people’s time, other people’s money, and other people’s expertise.

Other People’s Time

You’re busy. You’re busy with your family, your job, your side gigs, your life. Why make your most precious resource a limit to your wealth building?

Don’t have time to learn the business model of apartment investing? Don’t have time to hire maintenance personnel? Don’t have time to take tenants to eviction court? Don’t have time to explore a new market or underwrite a new property?

Why not work with people who do have the time? Leverage those people’s time. Remember, there are only 24 hours in the day. There are people already dedicating their time to these activities. Why not use their time to make your money grow for you?

Other People’s Money:

With passive real estate investing, you’re not relying just on yourself or your available funds to purchase a property. You can combine other people’s funds with your own to purchase a large property. Another component of leveraging other people’s money is using the bank’s money…using debt to purchase property.

Other People’s Expertise

It takes time and resources to become an expert in anything. But if you can rely on someone else’s expertise, then why do you have to spend the time or the funds to become the expert? It takes 12-16 years and hundreds of thousands of dollars to become a physician specialist. When we need specialized medical expertise, we leverage other people’s expertise. The same concept is applied in passive real estate investing.

Do you know that my passive real estate investments helped me leave my job in the ER?

BONUS Depreciation, why you should care!

Over the last several weeks, I’ve spent time educating you on the tax benefits of apartment investing. We’ve spent time understanding depreciation, what a cost segregation study is, and how apartment investing gives you more tax benefits than other asset classes.

There is one more term you need to know! BONUS DEPRECIATION.

This is an accelerated form of depreciation that allows for you take advantage of 100% of the depreciation in the first year of ownership. This is a HUGE benefit!

The Tax Cuts and Jobs Act, enacted at the end of 2018, increased first-year bonus depreciation to 100%. It went into effect for any long-term assets placed in service after September 27, 2017.

The 100% bonus depreciation amount remains in effect from September 27, 2017 until January 1, 2023.

After that, first-year bonus depreciation goes down as follows:

80% for property placed in service after December 31, 2022 and before January 1, 2024.
60% for property placed in service after December 31, 2023 and before January 1, 2025.
40% for property placed in service after December 31, 2024 and before January 1, 2026.
20% for property placed in service after December 31, 2025 and before January 1, 2027.

This year is the last year that you can get 100% bonus depreciation in your first year of ownership.

This doesn’t mean that tax benefits associated with real estate are going away. You will still be able to take depreciation, it just won’t be upfront in that first year of ownership, it will be spread over the next several years.

Many people utilize tax loss harvesting as a strategy to reduce yearly taxes. For those investors that are interested in harvesting your tax losses, you should invest asap!

Cost Segre-WHAT???

Recently, I talked about DEPRECIATION.

Today, I’ll cover why there is more depreciation with apartments than other asset classes, and how we determine the depreciation amount.

Two words: Cost Segregation

A cost segregation study is a detailed study of the cost components of the apartment building that looks at each element of a property, splits them into different categories, and allows you to benefit from an accelerated depreciation timeline for some of those building components.

This type of study is conducted by a specialized firm, usually a team of tax advisors and engineers, working together to decide which components of a building should go into each category, and how much each element costs on its own.

So why do apartments give you more depreciation?

Let’s compare a self-storage building versus an apartment building.

The self-storage building has very basic components, metal frame, roof, and a possible air conditioning unit.

Now let’s think about the apartment complex components. In a 200 unit apartment building, we have 200 bathtubs, 200 plumbing fixtures, 200 kitchen cabinets, 200 carpets/floor, and so on and so forth.

There are a lot more components which essentially equates to more depreciation!!

Ok, we’ve established we need depreciation to take advantage of the tax benefits, AND we get more depreciation with a cost segregation study.

We’ve also discussed why apartment investing translates into more depreciation than other commercial asset classes.

Next time, I’ll cover BONUS DEPRECIATION and why you should care about it!