Building Passive Income

In this episode, the managing principal of CREI Partners, Wayne Courreges III, explains how passive investors should vet real estate Investing deals. Wayne leads the investment lifecycle and investor relations for CREI Partners as the lead sponsor and general partner. For more than 15 years Wayne has worked with a Fortune 150 commercial real estate firm leading property management services of 4.5M+ square feet for both institutional and non-instructional clients over his career. Wayne has worked closely with dozens of real estate professionals executing building strategic plans of over $60M and assisted owners through their investment lifecycle. His background in commercial real estate, passion for leading teams, and desire to increase his investor’s and team’s wealth pushed him to start CREI Partners. 

Today, Wayne delves deep into the following topics to help passive investors analyze real estate investment opportunities including: 

What Is Passive Investing? 

Determine Your Risk Tolerance and Investment Goals  

Assessing the Sponsorship Team   

Assessing the Financial Returns  

Assess the Location and Market Demographics  

Assess the Underwriting and Business Plan  

Analyze The Risks 

Review Tax Implications – Open Q & A 

The Motley Fool definition: Passive real estate investing is when you give someone your money and they do all the work for you. A real estate investment trust (REIT) or real estate partnership where you do not play an active role are good examples. The key point is that a passive investment requires little work on your part. 

Determining your risk tolerance will require that you identify where you fit in the risk versus tolerance spectrum. There are 4 levels to consider-Core, Core-Plus, Value-Add, Opportunistic. Each provides distinct levels of risk/benefit. Core is less risky with more cash flow, but less opportunity for equity growth. Opportunistic is the riskiest with potentially no cash flow, but the highest opportunity for equity growth. 

Are you primarily looking for cash flow or equity growth? Click this link for a brief explanation of the difference. https://www.youtube.com/shorts/3WkyRnc_BBE 

Assessing the partnership team requires that you also know who will be managing the property and executing the business plan.  

Assessing the financial returns. Wayne discusses 3 common deal scenarios and the pros and cons of each. Your goals determine which deal structure makes the most sense for you.  

Important metrics to consider include average annual returns, operation cash flow, equity multiple, and internal rate of return. 

Assessing the market location and demographics. Google can be your best friend in searching out property reviews. Below are some additional tools that can be useful: 

Google Earth https://earth.google.com/web/  

Justice map https://www.justicemap.org/ 

FEMA Flood Maps https://www.fema.gov/flood-maps 

Best Places https://www.bestplaces.net/  

Assessing the underwriting and business plan. The Private Placement Memorandum (PPM) could potentially scare many investors, but it details opportunities, risk, compensation, and other data points. Be sure to attend the investor webinar to get a good feel for the location and potential. Having the PPM reviewed by your attorney is always a good idea. It is also great to sit down with the deal sponsor to go over deal assumptions. 

Deals should be looked at as a business. Revenue minus expenses equals income. Do the estimates make sense? 

Having a generous amount of capital reserves can make the deal look less attractive, by the numbers, but it reduces the risk in the case of an unforeseen event. 

Consider tax implications. Real estate investment attracts high-net-worth individuals due to its ability to provide paper losses through depreciation and cost segregation. For a detailed discussion on tax planning check out our previous monthly meetup with Susan Geist. 

Texas Multi-Family Passive and Active Investors Meetup (Austin, TX) | Meetup

https://www.creipartners.com

https://www.meetup.com/texas-multi-family-investor-meet-up/

https://www.passiveinvestorcoaching.com

https://www.facebook.com/creipartners

https://linktr.ee/creipartners

In this episode, Wayne talks to Susan Geist, PMP, who grew up in a lower-class family in rural Appalachia and began investing in real estate in 2008. Eventually, she achieved a portfolio that now generates over 5-figures in passive income each month. Using strategic investment deductions, she reduced her annual federal tax bill from $137k to $6k while increasing her W-2 and investment income. Her current multi-million-dollar real estate portfolio consists of both long- and short-term rentals, in addition to limited partnerships in apartments, car washes, self-storage, hotels, and mobile home parks nationwide.  

Through her company Rising Femme Wealth, LLC, Susan provides financial education workshops and investment coaching to empower other women with the strategies and confidence to grow their wealth, reduce their tax bills, and achieve financial independence.  

Susan introduces herself and provides a disclaimer. Susan is not a lawyer, CPA, or certified financial advisor, and does not offer legal or tax advice. The information she shares is only for educational purposes, and everyone should do their own due diligence. 

How Susan went from a humble beginning in rural Appalachia to building a current portfolio that generates over 5 figures monthly passive income. She found inspiration to grow wealth and promote financial independence, through her mother’s experience. Susan also provides some details about her personal portfolio. 

What is tax optimization and why you should do it? The 2 biggest wealth killers are taxes and inflation. 

Tax laws were fundamentally put in place to shape the economy; tax shelters were put in place to promote housing and job creation. The government rewards investment into these sectors and not utilizing the tax deductions legally available to you is stealing from yourself and your family. 

Most CPAs are not trained in real estate investment so they can only offer limited advice, it is up to each individual investor to become educated in real estate specific tax shelters. Knowledge is power over your personal tax situation. 

“Tax buckets” and Depreciation. The IRS splits your income into 3 distinct buckets: active, portfolio, and passive. Gains and losses in each bucket are separated and typically cannot be combined. 

Active income: W2 income, running a business or an LLC, or if you have Real Estate Professional status. Short-term rentals are considered an active business if self-managed, as is active house flipping as your primary job. Active income incurs income taxes as well as 15.3% self-employment tax. 

If your AGI is below $100,000 per year, you can take up to $25k in passive real estate losses-One of the few places passive and active income might interact. 

Portfolio income: Stock and bond sales, dividends, interest from accounts or owner financing interest, and sales of non-business assets such as a non-rental home. These are taxed as capital gains or losses. 

Passive income: Rental income whether single family homes or syndication, royalties, and short-term rentals if you have a management company. 

Real estate (buildings only), equipment, or capital asset depreciation, allows you to generate a paper loss on the tax return without losing money. The depreciation amount changes with lifespan divided by value. Building lifespans are either 27.5 or 39 years. 

Cost Segregation separates components of the business asset that depreciate faster than the building overall such as appliances, flooring, fixtures, etc.  

Bonus depreciation allows more of the depreciation loss in year 1. 

Depreciation recapture at the sale of the property is taxed at the ordinary income rate up to 25%, rather than lower capital gains tax. Because of potentially higher tax rates, consider taxes at exit and opportunity for 1031 etc. 

Tax loss harvesting can be a helpful technique to reduce capital gains tax on passive income. A limit of $3k in losses can be used on active income and the remainder of loss can reduce capital gains on stock, non-business property sale, etc. 

Investing in real estate syndications offers passive losses through depreciation and cost segregation. 

A work vehicle over 6000lb also provides another opportunity for depreciation losses, without recapture under certain circumstances. 

For couples involved in real estate, one partner without a W2 could obtain REPS (Real Estate Professional Status) could be a great strategy to avoid taxes. This would allow you to take all passive real estate income and move it to active earnings to offset W2, much like self-managing a short-term rental. 

Online training and Workshops offered by Susan Geist:  

Sensational Investing the Financial Security Formula-How to set up an income generating portfolio) 

Tax strategies and Planning-Expands on topics mentioned here 

Personal Coaching Sessions

Does 27 ½ years exclude the age of the residential property? No matter the age, 27.5 years is the depreciation time for residential property. 

Can we extend the depreciation to W2 income? Most of the time, no, unless you have Real Estate Professional Status 

What is the tax effect of participating in real estate syndication? K-1s are issued from the syndication LLC listing passive income and losses generated through depreciation after a cost segregation. Losses can carry forward to offset future gains. 

I thought losses were limited to $3,000? How did you get more? Capital losses up to $3,000 can be used to reduce W2/active income, but additional capital losses can be used to offset capital gains. 

How do you see solar panels and associated tax credits? Solar panels take a lot of time, if they ever make your money back. So, do your math to make sure the investment makes sense. Otherwise, check with a CPA on this tax credit in your situation. 

Did you purchase the short-term rental for tax benefits? It is not cash flowing very well due to the economy, but yes, it was purchased for tax benefits. As a short-term rental being used as an active business, it is a 39-year depreciation. Susan also did a cost segregation study and used accelerated bonus depreciation on that property. Leverages debt to utilize tax benefits that yield funds available to reinvest. 

Does depreciation affect the land value or just the property? Just the structure is depreciated, not the land. 

Are there specific cost segregation firms? Yes, there are specific firms. Engineering-based firms focus on commercial properties, and some online firms will perform cost segregation for single-family homes at lower cost. The cost is also deductible. 

How much time is spent actively managing the active short-term rental? At least 100 hours per year must be spent on the property and it must be documented. 

Links and Resources: 

https://www.risingfemmewealth.com/ 

[email protected] 

https://calendly.com/risingfemmewealth/60min?month=2023-02  

https://www.linkedin.com/in/susan-geist  

CREI Partners

Texas Multi-Family Passive and Active Investors Meetup (Austin, TX) | Meetup 

https://www.passiveinvestorcoaching.com

https://www.facebook.com/creipartners

https://linktr.ee/creipartners

In this episode, Wayne talks to Ruben Greth. This is his second time on the show! Ruben has a popular podcast about raising money for multi-family syndications called the Capital Raiser Show, where he learns from the best multi-family syndicators in the country.  Ruben started in real estate by raising $625,000 of joint venture money from social media to buy small multi-family deals in Phoenix, Arizona. He is an expert in marketing, brand awareness, and capital raising.

In 2019, Ruben partnered with one of the top syndicators in the acquisitions of 190 units and has since become a fund manager who is building over $48 Million worth of subdivisions in Louisiana and Alabama and partnering with multiple select syndicators bringing equity, advisory and investor management.

Ruben is a managing partner of Legacy Acquisition, which is quickly becoming the premier build-to-rent and community builder in Arizona.

Introducing and welcoming Ruben Greth.

Relationships and partnerships matter: Wayne and Ruben are partnering on a build-to-rent community, and Ruben has a new partnership with Richard Wilson. Networking benefits all parties.

Ruben Update. He is now in the process of co-authoring a book and is working on capital raising for 3 deals. There are 100-unit, 150-unit, and 220-unit 506(c) deals in the progress. He is involved in the leadership of Legacy Acquisition and working on a mentorship coaching program.

Ruben mentions the concept of teaching other capital raisers how to extract themselves out of the capital raising model to have others run the operations for them while they kick back and enjoy life.

Compare yourself, in a positive way, to who you were 1 year ago instead of comparing yourself to other people. Avoid unhealthy comparisons through social media.

The power of vision boards and intention statements to track and reach goals. Write your goals down and review them as often as possible, daily if you can.

Ruben talks about the process of speaking books into existence. Pros and cons of different methods.

Wayne discusses 2 main book topics that he would like to write about: 1. Passive investing education 2. Successful asset management.

Re-defining Success: Loving what you do, working less (not more), being 3-5 times more productive, and helping people along the way.

2023 Goals in growth and scaling.

The current market landscape

An ABCD breakdown of multi-family subclass types.

The tough economic climate is forcing many investors to move into sub-niches such as: Built-to-rent, assisted living, RV parks, storage units, and mobile homes.

Market opportunities in built-to-rent development, whether vertical or single-family homes. Build-to-rent homes are beneficial for tenants, investors, and institutional buyers.

A synopsis of current built-to-rent market forces and opportunities.

Specific market is incredibly important for build-to-rent communities: Secondary, pro-growth cities facilitate on-time project completion with high desirability for renters.

Expected returns in a development project would allow you to double your money in a 5-year period.

Completion timing and renting rate differences for multi-family vertical and multi-family horizontal.

For people coming up in real estate syndication or asset management, Ruben recommends partnering with larger companies or funds to add value for all parties.

Partnering with a Managing Principal by bringing value to the table: Many prospective partners will ask, “How can I be of service to you?” Instead, up your game and ask, “What’s preventing you from scaling to 10x your current size?” Listen to the answer and find the way you can contribute and add value.

Ruben’s proudest moments of 2022: 1. Over 1.3 million Podcast Downloads 2. Partnership with Richard Wilson

Breaking Through limiting beliefs: Go out and do it, and don’t be afraid. Stop analysis paralysis and take some action in order to self-actualize.

Ruben Greth

https://podcasts.apple.com/us/podcast/the-capital-raiser-show/id1478498436

https://capitalraisershow.com/

https://legacyacquisitions.com/

https://www.linkedin.com/in/rubengreth/

CREI Partners

https://www.meetup.com/texas-multi-family-investor-meet-up/

https://www.passiveinvestorcoaching.com

https://www.facebook.com/creipartners

https://linktr.ee/creipartners

In this episode, Wayne talks to ‘’Raj’’ Venkatramani MD. Rajkumar Venkatramani (“Raj”) is a pediatric cancer researcher, oncologist, real estate investor, entrepreneur, founder, and manager at REIDOC Capital LLC. Raj went to medical school in India and trained in London, Illinois, and California. Raj has a master’s degree from the University of Southern California and an MBA from the University of Massachusetts. Raj owns and manages several rental properties in Houston and has invested in multi-family syndications for more than 5 years. He has invested both as a limited partner and a general partner in more than 1200 apartment units. Raj is passionate about helping doctors invest in apartment syndications. 

Today, Raj answers questions about why doctors use commercial multi-family investing as a gateway to financial independence, and what motivates medical professionals to feel passionate about real estate investing.  

Topics on Today’s Episode: 

How Raj began investing in real estate. Education is key, and Raj is passionate about educating professionals in his field on how to properly vet real estate syndicators and make the right decisions.  

How to build relationships with syndicators to help doctors find the correct Real Estate Syndicator. 

What should doctors look for when vetting a sponsor?  

Why might physicians hesitate to invest? 1. No time for a learning curve 2. Fear of recession 3. Too good to be true 4. Stocks are easier 

Have you had the experience of an offer that is too good to be true? Past performance cannot guarantee future results. Covid also created unusual growth. 

Why real estate syndication is ideal for doctors? Top 3 Reasons: 1. Diversification 2. Tax Benefits 3. Higher Returns 

Doctors become high earners later than most professionals because of the length of education. Doctors are high-income earners but not necessarily wealthy. They have significant med school debt, and the health care system is enlarging so they expect lower W2 income. Furthermore, Doctors are motivated by the ability to have financial independence and focus more on helping patients and healing. Finally, covid has made doctors rethink priorities, most would like to be able to spend more time with family since death can come earlier than expected.  

Raj’s online course for passive investors: Doctor Syndication School (link below)  

How Raj balances w2 job, family, and syndication. 

With the current state of the economy, are there certain markets Raj is focused on? Texas and the southeastern US due to population growth, job growth, and landlord-friendly laws. Raj diversifies within this market by assessing each deal on its own merits. 

What to look for when underwriting a deal. Raj has become more conservative regarding rent growth and increase in cap rate or final sale price. 

What is Raj finding is one of the most overlooked aspects of real estate investing? Expenses are shifting due to inflation, as well as insurance details. 

Reach Raj through LinkedIn or other social media through searching ReiDoc Capital, feel free to reach out. 

Rajkumar Venkatraman

https://reidoccapital.com/ 

https://www.linkedin.com/in/reidoc/  

https://reidoc.mykajabi.com/ebook  

https://lnkd.in/gsiwPnHe 

https://reidoc.mykajabi.com/dss-landing-page  

https://www.creipartners.com/ebook/  

CREI Partners

https://www.meetup.com/texas-multi-family-investor-meet-up/

https://www.passiveinvestorcoaching.com

https://www.facebook.com/creipartners

https://linktr.ee/creipartners

In this episode, Wayne talks to Adam Carswell. Adam is a real estate investor and podcaster. He’s also a Linkedin power networker and a new media marketing maverick. Co-founder of RaiseMasters. He earned the title The Voice of Liberty as the MC at Libertyland national events. Additionally, he’s a cryptocurrency pioneer and a former semi-pro basketball player.

In today’s wide-ranging conversation, Adam begins by describing his real estate journey up to this point. Wayne and Adam discuss media marketing, the social media platforms that most contribute to success in commercial real estate, what people do right and wrong when nurturing investors, and what’s going on with cryptocurrency and NFTs. Listen in to hear more about Adam’s career and what he has to say.

What Adam’s real estate journey has been up to this point.

Media marketing and how it ties in at the commercial real estate level

Adam’s LinkedIn strategy

Hacks for LinkedIn

Social media platforms where there is the most success

The importance of YouTube as a platform

Adam’s thoughts on outsourcing and how to make it easier from a time commitment standpoint.

What people do right or wrong when it comes to nurturing investors

What’s going on with NFTs and blockchain, and how it fits into real estate

Adam’s proudest moment

Adam Carswell

https://www.linkedin.com/in/ixcarswell/

https://raisemasters.com/raisemaster

Onlinejobs.ph

Fiverr

Upwork

Libertyfund.io

CREI Partners

https://www.meetup.com/texas-multi-family-investor-meet-up/

https://www.passiveinvestorcoaching.com

https://www.facebook.com/creipartners

https://linktr.ee/creipartners

In this episode, Wayne talks to Nonna Pikiner, a real estate investor, about how to scale real estate in California. Through partnerships with reputable and experienced operators, Nonna has a real estate portfolio valued at almost $1 billion.

Nonna identifies promising financial opportunities for investors with various experience levels. She helps them accumulate wealth through asset diversification, tax-efficient passive income, and capital preservation.

Willingness to Learn: How Nonna got started in real estate investing

8-Unit Property: Challenge of not knowing who is going to take out the trash

Refinance and Reinvest: Scale quicker in real estate with syndication

Nonna’s Strategy: Passive to active investing and listening via partnerships

Why Oakland, CA? Make multifamily properties perform in rent-controlled space

Section 8: Government help with housing, but landlords uncomfortable w/ government

Property Calculations: Review and evaluate cash flow, principal amortization, and value

Eviction Moratorium: People unable to pay rent and landlords not able to do anything

Smart Oak: Nonna’s next-generation multifamily real estate investment company

Mission: Buy, operate, stabilize, and exit multifamily rental properties with shares    

Nonna Pikiner

Nonna Pikiner on LinkedIn

SF Investor Social Club

Housing Choice Voucher Program – Section 8

CREI Partners

https://www.meetup.com/texas-multi-family-investor-meet-up/

https://www.passiveinvestorcoaching.com

https://www.facebook.com/creipartners

https://linktr.ee/creipartners

In this episode, Wayne talks to Keishia Kennedy, Founder, and Owner of Kennedy Remedy Investments, about how she balances a military career, family, and scaling real estate. 

Keishia is an Army veteran with six years of service in the Army National Guard. During her enlistment, she was a human resource specialist and deployed to Kuwait as part of Operation Enduring Freedom. 

Keishia began investing in real estate 11 years ago following her enlistment. In April 2021, she decided to take the next step on her entrepreneurial journey to focus on investing in commercial multi-family properties by founding Kennedy Remedy Investments.

Self-Taught: How Keishia got started in investing tax-free money into real estate assets 

Family Effort: Blessing to have someone you know and trust to help take care of the property

Veterans Administration (VA) Home Loan: Resource to purchase the home you reside in

Refinancing and Tax Benefits: Build equity and take capital/money to redeploy into deals

Lessons Learned: Be strategic with who you rent your property to and get better results

Contractor Issues: Be mindful when hiring and realize the cheapest is not always better

Team Sport: Rely on referrals, contracts, insurance, deadlines, materials, and family

Kennedy Remedy Investments: Why Keishia decided to focus on multifamily real estate

Partnership: Do due diligence and leverage to invest someone else’s money into deals

Roadblocks: Takes time to build a great relationship with someone for multifamily deals

Coach/Mentor/Mastermind: Invest in yourself to ensure others’ experience and referrals

Multifamily Mistakes: Don’t be too eager to invest in a deal, take time to do due diligence 

Keishia Kennedy

Kennedy Remedy Investments

Keishia Kennedy on LinkedIn

The Beginner’s Guide to Investing As a Limited Partner

Kennedy Remedy Investments on Facebook

Kennedy Remedy Investments on Instagram

CREI Partners

Wayne Courreges

Free Passive Investor eBook by Wayne Courreges

The Untold Stories of Real Estate Investing Podcast

CREI Partners on Facebook

In this episode, Wayne talks to Kevin Gardner, President of Multifamily Utility Solutions (MUS), about creating miscellaneous income through cable, internet, and other contracts. 

Kevin spent nearly 20 years with Comcast and was responsible for managing the team that negotiated telecommunications access agreements with multifamily property owners.

For multifamily property owners and their management companies across the country, Kevin’s experience has resulted in favorable contract terms and improved net operating income (NOI). In 2021, MUS’s clients increased their NOI by more than $4 million, resulting in an increase in asset value of more than $100 million.

Comcast: How Kevin got started in multifamily investments and settled into cable niche

Profit-Sharing: How Kevin’s contracts work for multifamily tenants and property owners

Buy in Bulk? You buy and pay for 100% of your unit whether amenity is used or not

Bulk Agreement: It’s a fixed expense, so find out if there’s a contract via financials

Right of Entry: Compensation given for permission/authorization to be on the property

100: When to add revenue to NOI with new or renewal agreement/contract opportunity

Future of Cable: Streaming is inevitable but broadband pipe is critical to have for access

FCC Ruling: Protect consumers and not eliminate or limit their choices for financial gain 

Links and Resources: 

Kevin Gardner

Multifamily Utility Solutions

Kevin Gardner’s Email: [email protected]

Kevin Gardner on LinkedIn

Federal Communication Commission (FCC)

CREI Partners

Wayne Courreges

Free Passive Investor eBook by Wayne Courreges

The Untold Stories of Real Estate Investing Podcast

CREI Partners on Facebook

In this episode, Wayne talks to The Kitti Sisters—Palmy and Nancy—about how to mitigate risk for both passive and active investors. The Kitti Sisters discuss their journey of owning over 11 apartment projects with more than 2,600 doors.

Palmy and Nancy are first-generation immigrants who were reliant on one income stream despite owning successful fashion manufacturers. The income they worked so hard for dried up. They had to find a different way to financial freedom.

The Kitti Sisters became entrepreneurs, real estate investors, and apartment syndication experts. They are dedicated to teaching others how to live their lifestyle dreams without having to manage apartment complexes or find tenants.

Backstory: Why Palmy and Nancy transitioned from world of fashion to real estate

Why real estate syndication? To escape daily grind for stability, reliability, and scalability

Why start small?! Takes too much time, money to buy houses, make comfortable living

Why apartment syndication? From flipping business to passive investors for cash flow

Hurdles: Culture, not immigration status was challenge to buy large, multifamily assets

Inflation: How Kitti Sisters underwrite with federal loan rate changes, supply challenges

Multifamily Markets: Consider cap rates, affordability, supply, demand, other variables

Risk Mitigation: Any investment comes with risks, try your best to mitigate known factors

Additional Asset Classes: Diversify in multifamily but concentrate to build wealth

Kitti Sisters

https://thekittisisters.com/about

https://www.facebook.com/thekittisisters

https://www.instagram.com/thekittisisters/

CREI Partners

https://www.meetup.com/texas-multi-family-investor-meet-up/

https://www.passiveinvestorcoaching.com

https://www.facebook.com/creipartners

https://linktr.ee/creipartners

In this episode, Wayne talks to Christopher Nelson, Co-founder, and Principal of Wealthward Capital, about building successful teams and passionately protecting sensitive investor data.

Wealthward Capital is a private equity investment firm that invests in cash-flowing, institutional-grade assets and has acquired more than 3,000 multifamily units. 

Christopher focuses on meeting with operators and finding the next investment. When not seeking opportunities, he educates investors on building thriving passive income portfolios.

Also, Christopher is a technology executive, real estate investor, educator, and author. He has built professional services practices, run small businesses, and took Splunk (SPLK) through an Initial Public Offering (IPO) to grow it to a billion-dollar company. Christopher is known for building strong partnerships, win-win negotiations, and finding opportunities where others are not looking.

How Christopher shifted from a tech background to getting started in real estate

What Christopher would have done differently to scale faster and smaller

Onboarding Process: Press and push as much as possible with operators

Project Communication: Builds trust with operators and passive investors

Mentors and Masterminds: Where you tell personal brand stories and solve problems

Cyber Security: New frontier of crime where email, devices w/out passwords aren’t safe

Investing in 2022: 

Equity vs. Cash Flow: What is more important right now?

Do you want investments and partnerships where capital is cycled in 2-3 years? 

What kind of hold period are you wanting with asset classes?

Christopher Nelson

linkedin.com/in/christophercnelsonwealthward.com

https://www.wealthward.com/

Wealthward_CAP

CREI Partners

https://www.meetup.com/texas-multi-family-investor-meet-up/

https://www.passiveinvestorcoaching.com

https://www.facebook.com/creipartners

https://linktr.ee/creipartners

https://www.passiveinvestorcoaching.com/enrollnow