A common objection we hear from people is "I don't have enough money yet to get a property on my own." We don't want that to stop you from investing! Additionally we hear "I don't have the time or knowledge to figure all of this out. Can I partner with someone that knows what they are doing?"
We hear you! We want to make real estate investing have as low of a barrier of entry as possible, so we're running down some ways for you to get your money invested, so that it can grow, instead of sitting on the sideline and not getting in the game!
First off, why do I want to invest in real estate? Lets cover 8 top reasons why people want to choose real estate to invest in:
1) Rents Paid By Tenant: you aren't having to pay the mortgage on the property each month as your mortgage payment is getting paid by your tenants (assuming you pick a property that cashflows well). No money comes out of your pocket each month to make that mortgage payment.
2) Mortgage Balance Gets Paid Down Each Month: In addition to covering your mortgage payment each month, part of that money is going to pay down the mortgage balance. This isn't a huge one right out of the gate, but your mortgage balance will slowly work its' way down over time.
3) Appreciation (particularly LEVERAGED APPRECIATION): In many cases a real estate asset will appreciate somewhere between 5-12% per year, depending on location. Let's assume you're on the low end and it's only 5%. Because you're typically putting down 20-25% on the total cost of the property, that appreciation effect is actually 4-5x greater because you're not paying 100% cash on the property.
For example, lets say you put down 20% on a $300,000 property that is appreciating at 5%. This means you put down $60,000 on that property. With 5% appreciation, that property appreciated by $15,000 in one year's time (300,000 x 5% = $15,000). That $15,000 gain represents a 25% cash on cash return of the $60,000 you put down. That means, just on this one lever alone, you earned 25% in 1 year! This is the power of leveraged appreciation!
4) Hedge Against Inflation: Inflation has been on the rise recently. This means that your dollar is not growing as fast as the buying power that it has. Typically, as inflation goes up, things like rents and property values go up as well. Therefore, if you have your money invested in real estate, those rents and property values increasing will continue to grow as things inflate, so your money won't lose that buying power over time vs keeping it sitting in a bank. So real estate is a good place to sock your money away as inflation continues to rise.
5) Depreciation: Each year Uncle Sam likes for us to pay him some money. However, when you own real estate, it is a depreciating asset. Therefore, you get to use that depreciation each year against your taxable income, lowering the amount of taxes that you'll pay in each year. So simply by owning this asset, your tax liability can be lowered.
6) Additional Tax Deductions: All of your expenses related to the property can be deducted on your taxes. In addition, things like mileage driven going to the property can also be deducted, so there are even more advantages come tax time when you own these properties. (Remember, we're not CPA's so make sure you consult one for your own situation)
7) Real Estate Is A Tangible Asset: You can physically see it and feel it. This isn't the same when it comes to investing in cryptocurrency or stocks. For some people, that's a big deal, knowing your money is going to something that physically exists and whose value will not go to zero.
8) Allows You To Leave A Legacy: Whether you have children or loved ones, owning real estate is something that can be passed down to future generations (or charities or great causes too!). The work that you did acquiring it and getting the mortgage on the property is done. You can hold it, pay down the mortgage balance, and leave something for others to reap the reward on. It's a way to build generational wealth from one generation to the next!
Now that you can see the benefits of investing in real estate, and you decide it's a vehicle that you want to use to build wealth, chances are you may not have enough money right away to put down on your own property. Thats ok! There are great opportunities out there to invest with others and pool your money together. There are a few different ways you can do it. Today we're going to talk about doing it through a real estate syndication.
A real estate syndication is a way for people to passively invest in a portion of the total property. A group of investors pool their money together into an investment. This is something governed by the SEC (Security and Exchange Commission), so there are some guidelines in place to make sure everything is on the up and up. We won't get into all of the nuances here.
In short, your role as an investor most likely is a Limited Partner. For someone wanting to be passive, this is a fantastic opportunity. You don't have to pick the property, you don't have to execute the strategy of the property, and most importantly, you don't have to take any calls about tenants, toilets, and trash.
You get to partner with an experienced person you know, like, and trust and they will do all the day to day work. You get updated on the status of the property, hopefully get regular cashflow distributions, and get a portion of the profit on a sale.
How much money do you need to invest in something like this? It depends on the person putting together the investment. For some, there may not be any limitations. However, there will probably be some bar set on a low end limit, to ensure it's worth that person's time to work with you. For some it can be as low as 5k-10k. For others it can be higher, such as 25k-100k to get in.
Investing this way allows you to get in on a great investment without breaking the bank. You don't have to save up for a property all by yourself. You get to experience the economies of scale and diversified risk of a larger property without having to save up to get one yourself.
You also get to partner with people that may be further down the investing path than you are. Your operator has probably invested in other properties, worked with investors, and is more experienced recognizing a great deal. So you get to place your money with someone experienced and savvy, and get to participate in the great returns as well.....all without the headache of managing the asset. It's a win-win!
If you want to inquire about an opportunity like this, fill out this form and we can start a conversation to see if it would be a fit to work together.