Passive Real Estate Strategies: Investing in Syndications and Funds

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If you’ve been looking at investment decks lately, you might have noticed a typical return structure popping up more and more. In this post we’ll talk about how savings rates have influenced private placement returns & deal structures.


Key Highlights:

[0:47-1:46] Savings Account Rates Influence Real Estate Returns: Historically, savings account rates have been low, ranging from 0.01% to 0.2% from 2009 to 2020. However, since interest rate hikes in 2022, savings rates have increased, with some high-yield savings accounts offering up to 5% returns. This increase in savings rates affects how real estate operators structure their returns when the Federal Reserve raises the federal funds rate.

 [2:37-3:28] Investor Decision-making: The higher savings account rates create a dilemma for investors. They now have the option of investing in a 100% liquid and safe savings account with a 5% return or a private syndication or fund projecting a potentially higher return, let's say 15%, but with a certain level of risk and illiquidity. Investors must decide if the additional return from the private investment is worth the additional risk compared to the safety of a savings account.

[4:36-5:00] Impact on Deal Structures: To remain competitive with savings account rates, real estate sponsors have been forced to raise their preferred returns. Preferred returns are the percentage of upfront cash flow paid to investors. To strike a balance and attract investors, sponsors have introduced new hurdle structures, such as increasing preferred return projections by a point or two while adjusting equity based on Internal Rate of Return (IRR) achievements. For example, a sponsor might offer a 7% preferred return and 70% equity to investors until a 15% IRR is achieved, and then split equity 50-50 thereafter.

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Do you know what steps you should be taking to shield your investments from the crippling effects of lawsuits? Interested in asset protection but unsure how an LLC or trust could serve as a protective barrier for your wealth? 

In this episode, we have Scott Smith, an entrepreneur and asset protection attorney, to help you decode the complex world of asset protection and reveal the strategies you can employ to fortify your wealth in this litigious society. He explains why insurance is only partial protection against liability. He emphasizes why LLCs and trusts are necessary to shield investors from the risk of a lawsuit wiping out their portfolio. He provides tailored advice for different asset protection strategies depending on the type of assets the investor owns - ranging from syndications to series LLCs and anonymous trusts. 

Tune in now to learn about leveraging asset protection through an LLC!

[00:01 - 05:25] Opening Segment

• Introducing Scott to the show
• Asset protection is important for investors to understand to protect their assets from lawsuits
• Insurance only covers simple accidents and has limits, so other strategies are needed to be bulletproof
• Strategies depend on the type of assets owned, such as hub and spoke model for commercial buildings or series LLCs for single-family homes
• Anonymous trusts can help with conforming loans, and syndications have limited partner risk

[05:24 - 12:07] The Basics of LLCs and Grantor Trusts

• At a minimum, you need a single LLC to protect assets from lawsuits
• Lawsuits can take money from your personal bank account, brokerage account, and investments
• Combine grantor trust with LLCs for anonymity and legal protection

[12:08 - 22:28] A Step-by-Step Guide for New Investors

• The cost of asset protection is less than the cost of a single lawsuit, even being threatened
• Asset protection shields you from lawsuits that could cripple you emotionally and take years off your focus and intention
• Form an LLC in a state with charging order protection (Delaware, Texas, Nevada, Wyoming)
• Keep basic bookkeeping to show that money is separate from you
• Operate the LLC in a way that it will stand up if a lawsuit happens

[22:29 - 24:40] Closing Segment

• Connect with Scott through the links below

Quotes:

"Insurance is great, but it's only partial protection. It only protects you against simple accidents. They don't protect you against anything that you communicate to people in emails where they might lie and say that you defrauded them." - Scott Smith

"Don't give people the ability to extort you. That's what lawsuits are." - Scott Smith

Connect with Scott Smith!

Webs

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  • This bundle will help you strategize how long you can replace your active income with passive income and lay out the exact methods to get you there faster. (Spoiler: Most can get there within 3 - 7 years with the right plan in place)
• If you like our content, please give us a rating on the platform you’re listening on!
• Get in touch: [email protected] and let me know what topics you’d like me to cover or what guests I should have on.
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• Want to invest with us? Schedule a brief call here: https://calendly.com/justin-732/investor-call

Are you an investor looking to make the most out of your underwriting? Do you want to know one small detail that passive investors often miss that could prevent them from hitting their proformas early? 

This episode reviews the concept of lost to lease and how it can impact underwriting. We cover what loss to lease is, how it affects cash flow, and how to strike a balance between capturing large loss to lease and vacancy. We also look at how operators may project to burn off large loss leases over two or three years to avoid higher vacancies in the early years. 

Tune in for a deep dive into this important concept and learn how to maximize your underwriting opportunities.

[00:01 - 03:08] Understanding Loss to Lease and Vacancy Rates for Passive Investors in Underwriting

• Loss to lease is the difference between what the sponsors feel market rents are and what the actual rents are
• A big loss to lease can often mean huge opportunities for a property as it can capture additional rent
• There needs to be a balance between capturing large losses to lease and vacancy that many passive investors don't pull into question when analyzing a sponsor's underwriting
• If pushing all tenants at once in one year, expect to see higher vacancy rates across the property for that year
• Alternatively, some operators may project to burn off large loss leases over a two or three-year period

Quotes:

"We'd expect to see a slightly higher vacancy across the property for that year. Or some operators would like to avoid higher vacancies in the early years, so they may project to burn off large loss leases over two or three years. Now, this is a huge determination of strategy." - Justin Moy

Get in touch: [email protected] and let me know what topics you'd like me to cover or what guests I should have on.

If you like our content, please give us a rating on the platform you're listening on!

• Download our RETIRE WITHIN 10 Bundle: https://www.RETIREWITHIN10Bundle.com/
  • This bundle will help you strategize how long you can replace your active income with passive income and lay out the exact methods to get you there faster. (Spoiler: Most can get there within 3 - 7 years with the right plan in place)
• If you like our content, please give us a rating on the platform you’re listening on!
• Get in touch: [email protected] and let me know what topics you’d like me to cover or what guests I should have on.
• Check out our investing firm: https://www.PresidentsClubInvestors.com/
• Want to invest with us? Schedule a brief call here: https://calendly.com/justin-732/investor-call

Diversify your portfolio in today's episode with Reid Kirchenbauer! Hear about Reid's decade of experience researching Asia as one of the world's top-performing investments. He shares his journey to real estate investing, beginning at a young age when he realized he could turn his money into more with investments. He also talks about why he believes that the Asian markets are like Tokyo in the 1970s and 1980s, with people moving from rural areas to cities, and projects these markets to double in population by 2030. 

Join us as we explore the potential of investing in emerging markets!

[00:01 - 07:29] Investing in Asia: Reid's Journey to Real Estate Investing

• Reid's background and career
• Thailand is on the radar for potential investment, with Bangkok seeing more tourists than Paris or London
• Investment strategies vary by country: Thailand only allows foreigners to own condo units freehold; Malaysia has easier regulations; Vietnam has 90-year leaseholds
• In Thailand, people typically invest in condos and walls in developments
• In some countries, it is possible to form a joint venture company with 51% ownership of the property

[07:30 - 15:35] Understanding the Impact of Local Economy and Public Transportation 

• Policies implemented can impact the locals either positively or negatively
• Investment in certain countries is typically a longer-term play with a cash flow of 2-6%
• Being local matters to keep track of public transportation developments which dictate population booms
• Investing overseas is recommended for those with a diversified portfolio in the US

Quotes:

"I just saw people moving in from rural areas into the cities. I considered it as the equivalent of getting in on Tokyo's real estate market in the 1970s, 1980s." - Reid Kirchenbauer

"Investing overseas is something that I suggest for people who already have a diversified portfolio in the US." - Reid Kirchenbauer

Connect with Reid!

Website: www.InvestAsian.com 

Want to invest with us? Schedule a brief call here. 

Get in touch: [email protected] and let me know what topics you'd like me to cover or what guests I should have on.

If you like our content, please give us a rating on the platform you're listening on!

• Download our RETIRE WITHIN 10 Bundle: https://www.RETIREWITHIN10Bundle.com/
  • This bundle will help you strategize how long you can replace your active income with passive income and lay out the exact methods to get you there faster. (Spoiler: Most can get there within 3 - 7 years with the right plan in place)
• If you like our content, please give us a rating on the platform you’re listening on!
• Get in touch: [email protected] and let me know what topics you’d like me to cover or what guests I should have on.
• Check out our investing firm: https://www.PresidentsClubInvestors.com/
• Want to invest with us? Schedule a brief call here: https://calendly.com/justin-732/investor-call

Are you looking to diversify your portfolio? Are you a passive investor just starting out or with limited cash? This episode discusses Real Estate Investment Trusts (REITs) as a great option for passive investors. Justin will review both public and private REITs, discussing their pros and cons. Learn about the two types of REITs, where they can be listed, how liquid they are, dividends, entry points, performance history, and more. Tune in to understand how REITs fit into real estate investment portfolios and what other options might be available for investors with more cash and higher return profiles. Join in as Justin explores the potential of REITs in building a diversified portfolio and learn how to get started in real estate investing!

[00:01 - 06:03] Start Investing in Real Estate Investment Trusts (REITs) for Passive Portfolio Diversification

• Real estate investment trusts (REITs) are great tools for passive investors, especially those just starting out or with lower cash to invest
• Two types of REITs: public and private
  • Public REITs are listed on the public markets, 100% liquid, and usually have higher dividend payouts
  • Private REITs are investments in the real estate itself, illiquid, and usually have a minimum entry point of a few hundred dollars
• REITs are nameless and faceless to the investor due to fractional investing

Quotes:

"Public REITs are stocks; they tend to react to the stock market. When the markets are down, public REITs tend to take a hit as well, even if the properties within that REIT are doing very well." - Justin Moy

"One of the most important aspects of getting started in real estate is just starting that process. So REITs make for a great tool to get in the game and get your money working for you." - Justin Moy

Want to invest with us? Schedule a brief call here. 

Get in touch: [email protected] and let me know what topics you'd like me to cover or what guests I should have on.

If you like our content, please give us a rating on the platform you're listening on!

• Download our RETIRE WITHIN 10 Bundle: https://www.RETIREWITHIN10Bundle.com/
  • This bundle will help you strategize how long you can replace your active income with passive income and lay out the exact methods to get you there faster. (Spoiler: Most can get there within 3 - 7 years with the right plan in place)
• If you like our content, please give us a rating on the platform you’re listening on!
• Get in touch: [email protected] and let me know what topics you’d like me to cover or what guests I should have on.
• Check out our investing firm: https://www.PresidentsClubInvestors.com/
• Want to invest with us? Schedule a brief call here: https://calendly.com/justin-732/investor-call

Mike Abramowitz dives into his journey from being $130,000 in debt and a 400 credit score to becoming an accredited investor. Hear how he managed to recover and diversify his investments across hard money lending deals, syndication deals, real estate investment trusts, and more. Mike also explains infinite banking strategies that allow you to double dip on cash and learn about different asset classes, such as apartments, car washes, and mobile home parks. Moreover, he explores ways to quickly double his money with higher risk tolerance, such as value add deals in residential real estate, bootstrapping back up, and leveraging businesses for passive income. 

Tune in now to learn effective investing strategies from Mike's journey of financial hardship to success!

[00:01 - 10:23] Opening Segment

• Mike shares how he recovered after being near bankrupt
• He is leveraging the infinite banking strategy to fund his syndication deals
• Treating insurance policy as a savings account, growing at an average of 4%
• Doubling up on cash by investing in other deals with 8-12% returns

[10:24 - 20:02] How to Vet Deals and Create a Money-Making Machine

• Passive is giving money and not time
• Investment is both art and science
• How Mike used intuition and followed advice from lifestyle investors
• Real estate can be used to achieve different goals, such as playing defense against inflation

[20:03 - 25:53] Doubling Your Money Fast and How to Take on Higher Risk

• Risk tolerance and lifestyle should be taken into consideration when looking to double money quickly
• Bootstrapping up requires living off of ramen and PB&J and getting rid of possessions
• The best investment may not be in real estate but in yourself

[25:54 - 27:43] Closing Segment

• Connect with Mike through the links below

Quotes:

"Passive is me giving you money and none of my time, and then my money works for me, without me working for that money." - Mike Abramowitz

"Create a machine that makes you more money consistently. That's the most important thing, not like getting a chunk of money and then hopefully you make more money and become rich off that one chunk." - Mike Abramowitz

Connect with Mike! 

Free consultation: va.betterthanrich.com 

Free resource: www.automatedelegatesystemize.com 

Want to invest with us? Schedule a brief call here. 

Get in touch: [email protected] and let me know what topics you'd like me to cover or what guests I should have on.

If you like our

• Download our RETIRE WITHIN 10 Bundle: https://www.RETIREWITHIN10Bundle.com/
  • This bundle will help you strategize how long you can replace your active income with passive income and lay out the exact methods to get you there faster. (Spoiler: Most can get there within 3 - 7 years with the right plan in place)
• If you like our content, please give us a rating on the platform you’re listening on!
• Get in touch: [email protected] and let me know what topics you’d like me to cover or what guests I should have on.
• Check out our investing firm: https://www.PresidentsClubInvestors.com/
• Want to invest with us? Schedule a brief call here: https://calendly.com/justin-732/investor-call

Do you know the number one point of due diligence that can prevent you from investing in a deal that might require a cash call? If not, then this episode is for you!

In this episode, Justin discusses the importance of debt service coverage ratio (DSCR) in commercial real estate investing. He covers what DSCR is, why it is essential to understand when investing in a property, and how it can help prevent cash calls and other worst-case scenarios for passive investors. Justin also talks about the minimum requirements that banks typically have for DSCR and a bonus metric to check on to solidify this due diligence step. Finally, He discusses why you should require specific standards for DSCR and how it can help protect your investments. 

Tune in to learn more about DSCR and how it can save you from costly cash calls!

[00:00 - 04:32] Protect Yourself from Cash Calls: Understanding DSCR for Your Real Estate Investment

• Cash calls are one of the worst-case scenarios for a passive investor
• Debt service coverage ratio (DSCR) is the ratio of cash flow or property needs to have to support its loan
• Most banks will require, at the very least, a 1.2% DSCR
• Having a strong DSCR will help prevent cash calls or forced sales
• Be aware of the DSCR on the property you're investing in and require specific standards

Quotes:

"Debt is the number one killer of commercial real estate deals, and DSCR is something you need to understand." - Justin Moy

Want to invest with us? Schedule a brief call here. 

Get in touch: [email protected] and let me know what topics you'd like me to cover or what guests I should have on.

If you like our content, please give us a rating on the platform you're listening on!

Justin welcomes Maria Zondervan, a 25-year veteran of the real estate industry. She talks about how investing in real estate can be a challenge, especially when managing small properties, and why it's essential to learn by making mistakes on one's investments before investing with other people's money. Maria also shares how she found a good property manager for her investments after firing the first one who failed to meet the contract's agreed-upon standards. She also discusses her new venture, Valhalla Villas, which provides housing for autistic adults to give them social skills, a community atmosphere, and employment opportunities that many autistic adults need. 

Join us as we explore these different strategies and more with Maria!

[00:01 - 06:04] Opening Segment

• Introducing Maria to the show
• Her strategy was primarily lease options, which were new at the time
• Investors may not have the capital to buy a hundred units right away but can start with smaller properties

[06:05 - 14:22] Evaluating Deals and Finding the Right Property Manager for Maximum Returns

• Learning about your properties before investing in other people's money is a smart thing to do
• Investing as a limited partner in deals and helping others get into this realm
• Evaluating 100 offers before choosing one to go in with
• Looking at the team, market, goals, acid classes when considering deals
• High-growth areas may not have good cash flow but more appreciation at the end

[14:23 - 21:27] Valhalla Villas and the Benefits of a Forever Hold Investment

• Looking at the debt before the deal is more important than the projected returns
• When looking at a team, identify who are the key players and who will be doing the work
• Valhalla Villas is a new venture to provide housing and services for autistic adults
• Investors can pull their money out and leave it to their children as an income source

[21:28 - 22:40] Closing Segment

• Connect with Maria through the links below
• Final words

Quotes:

"Not everybody can go out and buy a hundred units right off the bat. You're not going to get in with the good brokers until you prove yourself a little bit." - Maria Zondervan

Connect with Maria!

Website: www.BlueVikingsCapital.com 

Download our FREE ebook, The Definitive Guide To Passive Real Estate Strategies.

Check out our Multifamily Syndication Group, and sign up for our NEWSLETTER.

Want to invest with us? Schedule a brief call 

Are you a passive investor? Do you want to understand the rent growth projections of an investment property but need to know how? Tune in to this episode and learn the trick that will help you quickly and effectively assess the rent roll of a multifamily property. Justin discusses the importance of due diligence regarding rental income and how to identify rent growth trends rapidly. Plus, he'll explore what to look for when sellers or brokers advertise higher lease amounts and whether those are realistic expectations for your returns. This trick allows you to maximize your returns and make more informed investment decisions. Take advantage of this - join in to discuss rental rights and how to assess them quickly!

Key Highlights:

[00:00 - 03:50] Quick Checks to Do When Analyzing a Multifamily Rent Roll

• Due diligence on the rent roll is essential for passive investors
• A quick check to understand rent growth projections of a property
• Check if the highest lease amount achieved is a trend or one-off
• Ask if the highest lease amount came with any concessions
• Check websites like apartments.com for movement specials

 Key Quotes:

"Concessions are not a bad thing. But you need to understand the full scope of how new rental rates are being projected, and if it's truly a proven increase in market rents." - Justin Moy

Download our FREE ebook, The Definitive Guide To Passive Real Estate Strategies.

Check out our Multifamily Syndication Group, and sign up for our NEWSLETTER.

Want to invest with us? Schedule a brief call here. 

Get in touch: [email protected] and let me know what topics you'd like me to cover or what guests I should have on.

If you like our content, please give us a rating on the platform you're listening on!

Dave Foster, a 1031 exchange expert, and serial real estate investor, joins us to share his tax-saving strategies for real estate investors. Learn about the primary residence exclusion rule that allows people to move and buy and sell houses every two years for a profit of up to $500,000 tax-free, as well as how 1031 exchanges can convert deferred tax to tax-free gain when selling a primary residence after five years of ownership and two years of living in it. Dave also explains why the 1031 exchange is a powerful tool for both investors and the economy, encouraging industry growth while still resulting in increased tax revenue. Finally, he advises on how to plan for retirement by transferring investments into properties intended for retirement. 

Tune into this episode now to learn more about maximizing your tax return!

[00:00 - 08:15] Maximizing Your Tax Returns

• Dave Foster is an expert in 1031 exchanges, a qualified intermediary and consultant who shares his tax-saving strategies with investors
• 1031 exchange allows you to sell real estate with built-in profit and purchase new real estate without paying tax on that profit
• Leveraging the 1031 exchange can amplify your returns significantly over time

[08:16 - 17:44] Unlock the Benefits of 1031 Exchange

• Congress put in their exchange to allow farmers to grow America's agribusiness
• President Biden wants to get rid of the 1031 exchange, but it would lead to a loss of several billion in tax revenue
• The exchange allows investors to defer taxes when buying and selling investment real estate
• Four Ds of 1031 investing: Defer, Defer, Defer, Die

[17:45 - 24:55] Eliminate Your Biggest Expense: Learn How to Defer or Convert Tax-Free

• Primary residence exclusion allows up to $500,000 of profit tax-free
• 1031 exchange allows for deferred taxes until death
• Post-2008, if buying a property as an investment and converting it to a primary residence, the gain is prorated
• Tax strategies can eliminate or reduce the most significant expense of an average American

 Key Quotes:

"Every real estate investor has a silent partner. And his name is Uncle Sam. And unless you're careful, Uncle Sam's going to do better than you." - Dave Foster

"Every day you defer the tax, you make the money off the tax. And then you make money off the money you made off the tax." - Dave Foster

Download our FREE ebook, The Definitive Guide To Passive Real Estate Strategies.

Check out our Multifamily Syndication Group, and sign up for our NEWSLETTER.

Want to invest with us? Schedule a brief call here. 

Get in touch: [email protected] and let me know what topics you'd like me to cover or what guests I should have on.

If you like our content, please give us a rating on the platform you're listening on!