Edified Equity Podcast Episode 19: Saving Doesn't Work - BUT is the Answer Real Estate?

Show Notes:

Welcome to the Edified Equity Podcast!

My Name’s Dino and Here we will focus on all of the unique Benefits associated with being a Passive Equity Investor in an Apartment Syndication.

You can learn more about us on the Web, iTunes, Stitcher, FB, YouTube, & our Award Winning Blog on Bigger Pocket. All associated links will be in the show notes.

Associated Links!

Edified Equity Website:

http://www.edifiedequity.com/

Edified Equity Podcast iTunes:

https://itunes.apple.com/us/podcast/dino-pierce/id1381283719?mt=2

Edified Equity Facebook Group:

https://www.facebook.com/groups/MultifamilyPassiveCashFlow//

Saving Doesn't Work - BUT is the Answer Real Estate?

With the exception of a handful of people very few get rich off of a salary alone, and those that do oftentimes need help offsetting tax consequences but that’s for another article. Truth is… most go through their entire life without understanding there is a surefire way to financial freedom. They never get to experience the power of combining others’ money, track record, and experience as a formidable tool and money multiplier.

Saving, alone, doesn't work! Saving for the Pile of Cash is Problematic. Many are working on building this pile of cash and plan to live off of it through retirement. The problem with saving, alone, as the path to amass true wealth is that we live in an inflammatory setting. Inflation has a huge impact on the value of savings. You should save but again saving, in and of itself, is undoubtedly a losing game as it offers zero leverage and suffers from the devastation of inflation. The combined impact of inflation and supposed attained interest earned by a savings account, even with compounding interest factored in, is negative.

So the answer is real estate right? Well… Even if the average person gets the real estate bug (it’s contagious - it’s contagious) and spends years living below their means, reducing expenses, and saving in hopes of acquiring a single family rental (SFR) so they can earn passively; however, one miscalculation on expenses, vacancy, taxes, market rent, capital expenditures, or maintenance can push them into the red. Even if they were successful, how many single family rentals would it take to get them to experience the cash flow life that they are after? Is it possible? Is this scalable? Is this another JOB?

The possibilities and scalability changes instantly when a passive equity investor partners with and rides on the back (experience and track record) of a trusted, dependable, proven team of Operators. The 100% vacant, or occupied, status of a single family rental is instantly leveraged into a 50, 100, 200, or 300+ unit multifamily apartment community that will throw off cash flow and appreciate while the Operators execute the business plan. More doors equate to less risk. A vacancy rate of 5% to 10% matters much less to the income available for distribution than does 1 door being vacant on a single family rental; when you turnover a unit it equates to 100% vacancy and absolute zero for income. Furthermore, when the Operators underwrite they should be underwriting with more vacancy than expected therefore this is already factored in to the Net Operating Income (NOI).

Along the lines of scalability is costs of maintenance and renovations. It will cost less to renovate an apartment community because we can leverage the discount achieved by relationships in place with our contractor or management company and purchase mass material as opposed to paying retail for the materials needed to fix-up and maintain one single family rental.

Believe it or not, door for door, 50 or more doors can support property management and do so at a lower cost than 1 door can. Actually most SFR owners try taking on the management themselves because professional management eats away at the NOI. Smart move? If you want experience as a property manage