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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.

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?

Is it time to put our head in the sand and wait?

In the last few months, mortgage rates have gone up like crazy. They went up a fourth time last week. Unprecedented. This is the biggest change in interest rates in years! And it only happened over 7 months!

In most of our properties, this has resulted in our debt payment DOUBLING. We care about interest rates, because when we put together a capital stack, a big chunk of the capital is the loan. The debt service on that is determined by the interest rate, which is very important to your bottom line and cash flow.

What’s unprecedented about these hikes is that it happened fast, happened multiple times, and the market hasn’t had time to adjust to it, resulting in minimal and even negative cashflows.

This is a sledge hammer that the federal reserve is taking to what they perceive to be “red hot, out of control inflation”.

No one has a crystal ball. It would have been impossible for anyone to predict this scenario. Despite multiple “what if” scenarios that we play out when we are underwriting a deal, we couldn’t have predicted all the factors affecting today’s economy such as: the credit markets, the federal reserve, inflation, energy costs going up, and supply chain disruptions.

The good news is that real estate is cyclical. We are currently in a down cycle.There are less sellers, less buyers, and the debt market is unstable because lenders are hesitant to lend!

So, is it time to sell and get out? Is it time to put our head in the sand and wait?

The cycle is neither bad nor good…it just is. For current real estate portfolios it requires pivots in strategy and requires the courage to keep going! No, you shouldn’t sit this one out.

The truth is that a recession brings HUGE opportunities for those who can overcome their fear and prepare to take action!

Cap rates are expanding and real estate is at a discount. Debt is expensive but real estate prices are coming down! I’m seeing prices go down by several millions!

As long as the deal makes sense financially, you can bake in the interest rates.

Remember, interest rates go up and they go down. They won’t stay up forever, they will come down.

We just need to make sure we are able to play a longer game and ride it out.

Exciting things are coming. Let’s get ready to go bargain shopping!

What in the world is Depreciation?

Two things that are guaranteed in life are death and taxes! Sound familiar?

Taxes are our biggest expense.

One important way to build your wealth is to create strategies to minimize taxes.

It’s important to know that you can indeed decrease your taxes with certain investments.

In general, whenever you make money, you are typically taxed on that money.

For example, if you own a dividend stock, you will be taxed on the dividend you received as a distribution. Even if your money is sitting in a savings account, and you make an interest rate of 0.01%, you will be taxed on that income.

How does real estate investing provide tax benefits?

Now I am not a CPA or attorney, but you’ve heard me talk about the benefits of real estate investing and how one of the most powerful of those benefits are the tax advantages.

Do you know how those tax advantages work?

One word. DEPRECIATION

So what exactly is that? Well, The Oxford Dictionary defines depreciation as “a reduction in the value of an asset with the passage of time, due in particular to wear and tear.”

Depreciation is an accounting method, allowed by the IRS, of allocating the cost of a tangible asset over its useful life to account for declines in value over time.

Ok, but what does that mean in layman terms?

On a very basic level, you are telling the IRS that your asset is losing value, even if it is cash flowing AND appreciating in value. You’re doing this legally! These are essentially phantom losses.

When you invest in an apartment syndication, you are a fractional owner of a multimillion dollar property. Every tax year, you will receive a K-1 Tax form that will claim either gains or losses.

Below is an actual K-1 from one of my investments. You can see that I invested $50,000 and received a loss of -$49,001 for that year.

This passive loss can offset any future distribution I get from this real estate investment or any other passive investments, meaning I don’t pay taxes on my gains unless they are more than $49,001.

If I don’t use it in one calendar year, then I can carry it forward until I can use it!