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!

Wait & See? or take ACTION??

Many people ask me:

Is this the right time to invest in apartments?

Aren’t we in a recession?

Shouldn’t I wait for things to settle down?

It isn’t about whether it is the right time or not…

You should be thinking “is this the right deal or not?”

Recessions aren’t always times of darkness. They can be seen as opportunities!

Many smart business people have thrived in times of recessions. They have found opportunities and capitalized on them. Not surprisingly, a ton of amazing companies were formed during times of recession.

Remember 2008-2010 recession and financial /housing market collapse?

Airbnb, Warby Parker, Venmo, WhatsApp, Uber, Pinterest, Instagram, Slack were all formed during that time. Now they are all billion dollar companies and are thriving!

These founders weren’t sitting around debating if they should wait and see , they thought about it and took action!

Same goes for savvy investors. There’s no shortage of smart investors who found lucrative deals during times of recession. Remember, people’s circumstances change, and economic volatility causes lots of distressed sellers and properties to go on sale.

Just today I was contacted by a broker letting me know that a property he listed 3 months ago has recently reduced its sales price by a few millions! From my perspective, it went on “sale”.

Ben and I are not planning on putting our my pencils down, we’re going to keep looking until we find a deal where the numbers look amazing! Because we’re not sitting on the sidelines, we’re not going to miss out on amazing opportunities.

In closing, this is the best quote to answer if this is the right time…

“The best time to start was YESTERDAY.

The next best time is NOW”

6 Ways Real Estate Makes You Money

Real Estate investing creates wealth. Period.

“90% of all millionaires become so through owning real estate”- Billionaire Andrew Carnegie

Real estate investing is incredibly lucrative because it makes you money in more than one way.

Here are 6 ways real estate investing makes you money:

1. Cashflow– it’s the amount of money you make each month after all of the expenses are paid. It’s the money that hits your bank account quarterly.

2. Equity Pay down– when you buy a property with a loan, your renters are paying down the mortgage, thus creating equity for you!

3. Property Appreciation– your investment property will gain market value over time. Have you ever seen a $20MM property worth less in 5 years?

4. Rent Appreciation– this is the organic rent growth in your market which is the amount of rent rate increases per year. This is usually between 2-3% a year, but in 2021 some markets saw organic rents go up 15%. Check out this article in MultiHousing News talking about it.

5. Forced Appreciation-this is when the property’s value increases due to improvements made to the property and tenants paying more for the upgrades and added amenities.

This raises the net operating income and, ultimately, increases the value of the property.

6. Tax Savings-with depreciation and bonus depreciation, you’re creating phantom losses that shield your money from taxes. Don’t forget that taxes are your greatest expense!