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 Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: Which Real Estate Niche Do the Wealthy Prefer?

Alina is the founder and managing partner of SAMO Financial, a boutique private equity firm specializing in helping a select group of people passively invest in commercial real estate. Which Real Estate Niche Do the Wealthy Prefer?

Experience

For over six years, Alina has been an equity partner in various multifamily private placements nationwide.

Her business motto has been articulated well by Warren Buffett: “Someone is sitting in the shade today because someone planted a tree a long time ago.”

Her passion is to teach others how to build wealth. As such, Alina is the founder of two meetup groups named “The Power of Passive Investing Through Real Estate,” which gather in New York and New Jersey.

In addition, she offers educational webinars in collaboration with various administrators of self-directed IRA companies. Topics revolve around aspects of getting started investing in real estate, particularly in syndications by using funds in solo 401(k) or self-directed retirement plans.

Alina has helped her clients acquire and invest in: over 1,200 apartment doors, over $10MM in funds focused on self-storage, and over $10MM in funds focused on mobile home parks.

It was a beautiful sunny spring afternoon about three or so years ago. I had a meeting set up at Starbucks with a potential investor, Stu. Why Starbucks? You probably guessed it—it offers a comfortable and semi-private setting for people to have a conversation and enjoy a Grande cup of expensive (yet mediocre) coffee. Consequently, Stu and I both opted for bottled water.

From a cursory look, Stu was a regular guy who blended in, which obfuscated just how much cash he has been sitting on for quite some time.

We exchanged the usual pleasantries and went through the normal banter about appreciating warmer weather so early in the spring. I inquired about Stu’s family. He described his family: his wife of 30-plus years and his two kids, both of whom were grown and lived on their own. So then I pressed on to ask Stu about his investment goals. He paused for a second, and then in his own quiet way inquired about my background.

As I shared my story, our conversation flowed as if we were old friends. I weaved in a few more questions about Stu’s and his wife’s professional journeys. He casually responded that in the past they both had worked at banks, but they retired early to enjoy life. I was simultaneously impressed and surprised since I don’t meet many retirees who prefer to diversify into new types of investments. Which Real Estate Niche Do the Wealthy Prefer?

Why the wealthy choose syndications

I decided to ask Stu directly: “If you are already enjoying your retirement, then you don’t really need more money to build your wealth, do you?” Stu basically agreed, and elaborated that his and his wife’s main goal was to continue building their wealth in order to help others re-create what they were able to retain and produce for their family.

Next, I asked about how they were able to build their wealth? He smiled and admitted that most of his family’s wealth had originally been built by his parents—mainly his father who had discovered real estate syndications long before home computers existed, and back when real estate syndications were called “private placements.”

At this point, Stu said that he didn’t quite understand how so many well-off people (like his family) have been able to take advantage of real estate syndications, while many other investors are missing the boat. “Certainly,” Stu mused, “there are risks associated with this type of investment just as there would be with any other, but the benefits far outweigh the risks.” So, Stu and I discussed the aspects that people should consider before investing in real estate syndications. They are conveniently identified and discussed below.

A true passive investment

Your job is to research and understand what syndication is, and then how to evaluate an offering; at that point, your work is pretty much done. So if an investor has a primary business or practice, or is a professional with a successful career, or is simply enjoying their life and doesn’t want to spend time dealing with tenants or toilets, then investing in syndications is the way to go!

Preserving your capital

While it depends on each specific investor’s strategy, many look to find ways to keep risks low and minimize losses. It is not uncommon for syndications to earn on average 8-10% of cash-on-cash return over an approximate five-to-ten-year period.

While the stock market targets around 7% annual return, it has many drawbacks. Most notably, the stock market doesn’t offer nearly as many tax benefits, and it is absolutely unpredictable.

Relying on calculated risk

When it comes to real estate investing, diligent underwriting is critical. Experienced syndication operators ensure that the risks associated with a particular investment are accounted for in their underwriting.

Leveraging tax advantages

There is absolutely no doubt that real estate is one of the most intelligent ways to reduce your tax burden. This can be accomplished in a number of ways: depreciation, cost segregation, 1031 exchanges, Opportunity Zones, and tax-loss harvesting (just to name a few). And all of the aforementioned tax strategies may be utilized when investing in a variety of real estate syndications.

In general, real estate offers great tax benefits. It all comes down to hiring an expert CPA who is not only knowledgeable regarding tax compliance, but is also real estate savvy and can offer tax strategies to help you plan ahead.

Generating residual income

You review the offerings, make a decision as to which individual asset or real estate fund to invest in, subscribe, and wire the funds. That’s it; your work is done. Really? Yes, really! From this point on, you sit back and allow the operator to do their job, while you collect your monthly or quarterly dividends directly in your bank account.

Risks to consider

No investment is without risk. Here are some things to consider before diving into syndications.

No management decisions

When you invest passively in a syndication, you are essentially giving up your right to participate in the decision-making process for this investment. This comes with a bonus though: you’re investing as a limited partner, and hence your liabilities are limited to your original investment.

It’s not your typical liquid investment

If you buy a stock or a mutual fund (or anything on the stock exchange, for that matter), you technically can sell it any time you want. This sort of liquidity is not possible in real estate syndications. The way real estate syndications are structured, an investor basically invests and forgets about it until the deal has a capital event or the property is sold.

There is some flexibility, however, when it comes to investing in closed-ended funds. Closed-ended funds usually have a so-called “lockdown period”—which may be a year or two—after which you’re free to take your investment out.

Longer duration

If you plan to invest in a value-add type of project or even new construction, be prepared for the long haul. It may take a while for a project to go through its full cycle. A common underwriting period is usually five to seven years. So as long as you invest money on which you will not be relying within that time period, you are good to go.

Grow your wealth through passive investments

As one of my most favorite investors of all time, Warren Buffett, once said, “If you don’t find ways to make money while you’re asleep, you are going to work till the day you die.” So, the greater the number of these passive investments that are ongoing simultaneously, the better off you are. Not only are they generating passive income, but they are also helping you save on taxes.

Before leaving Starbucks and going our separate ways, I asked Stu if this was enough material for him to start spreading the word—so that more people could start taking advantage of the same strategy that well-off folks like him had for years. Stu looked at his notes, nodded, and thanked me.

After all these years, I still think back to that conversation with Stu about the incredible investing strategy that: one, generates passive income for you while you sleep; two, allows you to save on taxes; and three, in some cases, also makes a positive impact on communities. I hope you can take something from this and apply it to your own investing plans. Which Real Estate Niche Do the Wealthy Prefer?

The inspiration for today’s edition came from this original article: https://www.biggerpockets.com/blog/wealthy-invest-syndications?utm_source=Iterable&utm_medium=email&utm_campaign=Newsletter%20%7C%2005/18/21%20(Regular%20%2B%20Plus)

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit:

https://www.zillow.com/lender-profile/BillRappMortgageViking
https://www.blink.mortgage/app/signup/p/nexamortgageh/MortgageViking?campaign=MortgageViking

http://BillRapp.joinnexa.com
http://www.homesforheroes.com/affiliate/bill-rapp-1
https://www.billrapponline.com/
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https://calendly.com/billrapp

https://findamortgagebroker.com/Profile/BillRapp45753

https://findamortgagebroker.com/Company/NEXAMortgageLLC54887

 Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: What $27 Trillion In Debt Looks Like!

Visual Capitalist has released another analysis filled with their usual nifty visuals that puts the sheer quantity of the government’s rapidly increasing debt into perspective. What $27 Trillion In Debt Looks Like!

The rapidly climbing chart actually looks better than it is because, as you can see, 2020 is broken out into quarters and doesn’t even go all the way until the end of the year. Indeed, the chart appears to be exponential, which is not a good thing when it comes to debt. After all, what can’t go on forever, doesn’t.

At least regarding the deficit, however, things are projected to improve and get back to a more “normal” deficit. Unfortunately, it is still not projected to get anywhere near a balanced budget anytime soon. Indeed, over the past 35 years, we only had a positive surplus for a very short while in the late ’90s.

The debt, on the other hand, has grown enormously both in real terms and as a percentage of GDP. And Visual Capitalist notes:

“U.S. debt was relatively moderate between 1994 to 2007, averaging 60% of GDP over the timeframe. This took a drastic turn during the Global Financial Crisis, with debt climbing to 95% of GDP by 2012.

“Since then, America’s debt has only increased in relative size. In April 2020, with the COVID-19 pandemic in full force, it reached a record 122% of GDP. This may sound troubling at first, but there are a few caveats.”

The government debt has effectively doubled over the past 15 years.

And of course, as every borrower knows all too well, this amount of debt comes with very large interest payments that continue year in and year out as the debt grows larger. “For FY2019, this was approximately $327 billion,” per Visual Capitalist.

Components of the federal debt

The piece by Visual Capitalist also notes where all of this spending goes. A full 62.2% of spending, or $2.735 trillion, goes to mandatory spending, including things like health programs ($1.1 billion), social security ($1 billion), and income security ($301 billion).

30.4%, or $1.338 billion, goes to discretionary spending, which includes things like transportation ($100 billion) and education ($72 billion). But by far the most goes to the military, at $677 billion (which accounts for 37% of the entire world’s military spending). And again, there’s that pesky $327 billion that goes toward debt service.

I should note that this doesn’t include state and municipal government spending, which is where most of the spending for things like education comes from. What $27 Trillion In Debt Looks Like!

The inspiration for today’s edition came from this original article: https://www.biggerpockets.com/blog/charting-americas-debt?utm_source=Iterable&utm_medium=email&utm_campaign=Newsletter%20%7C%2004/13/21%20%5BRegular%20%2B%20Plus%5D

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit:

https://www.zillow.com/lender-profile/BillRappMortgageViking
https://www.blink.mortgage/app/signup/p/nexamortgageh/MortgageViking?campaign=MortgageViking

http://BillRapp.joinnexa.com
http://www.homesforheroes.com/affiliate/bill-rapp-1
https://www.billrapponline.com/
https://twitter.com/BillRappRE
https://mortgageviking.billrapponline.com
https://highcostarea.billrapponline.com
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https://www.youtube.com/channel/UCsF3Rh4Akd1OAOAgTmzgqQg

https://www.greaterhoustonreview.com/mortgage-broker-houston/

https://calendly.com/billrapp

https://findamortgagebroker.com/Profile/BillRapp45753

https://findamortgagebroker.com/Company/NEXAMortgageLLC54887

 Bill Rapp here with the Heartfelt and Hot in Houston Blog, and this is our newest segment: Hidden Value of Distressed Properties!

 Are you sick and tired of being outbid for investment real estate in this overheated market? Or even worse, are you overpaying for real estate just to deploy capital and get in the game? Hidden Value of Distressed Properties!

If you’re on the first path, you may be settling for dismal returns and missing out on real estate’s amazing tax benefits and appreciation. And you may be subjecting yourself to the whipsawing stock market or dismal yields in bonds. Or enjoying a lumpy mattress stuffed with cash.

If you’re on the second path, you might be on the tracks of an oncoming freight train. It may work out. I hope it does. But hope isn’t a sustainable business strategy for most of us, at least in my experience.

I’m writing today to propose a better path. A powerful path that could…

* give you access to deals others miss.

* protect you from downside risk.

* provide income and growth others only dream of.

* pave a path forward for your success in any market or economy.

Notice I didn’t say it was easy. Nothing good is easy. At least that’s what the old-timers say.

Also, notice I didn’t say it would work in every asset class. I believe the principles apply to every asset class, but certain types of real estate lend themselves to this type of thinking and action. Others, not so much.

Intrinsic vs. extrinsic value

Warren Buffett told us that price is what we pay, but value is what we get. Discerning the difference is the key to what I’m about to lay out.

The price of an asset reflects its extrinsic value. The intrinsic value is the often overlooked and typically unknown value locked within the asset. It takes a skilled eye to spot the latent potential in that asset and a skilled hand to extract that value.

Thousands of real estate assets are performing “fine.” They are operating exactly as designed, and their owners are quite satisfied with them. And these owners are elated that the rising tide of an overheated market can fetch them top dollar when they sell.

Now, if you are a savvy buyer with an eye for intrinsic value, you may be able to see the potential of the asset that is being completely overlooked by the seller who’s done things his way for decades.

You can’t change the cap rate, and you probably won’t talk this owner down to a lower price. And you can’t get this property from a bank that repossessed it.

In this overheated market, you will probably pay full price. But if you can see the hidden value and know how to extract it, you can make a fortune for yourself and your investors. Yes, even after paying full price.

An ancient Rabbi told the story of a valuable treasure hidden in a field. A man discovered this treasure and buried it again. Then he went and sold everything he had and bought that field. This is what I’m talking about in this post.

The extrinsic value changed dramatically. But the intrinsic value remained the same. It took our operating partner to see this value and extract it on behalf of investors.

I believe this strategy can work well for all types of real estate. But after being involved in many asset classes over 20+ years, I see a few issues that stand out.

First, I believe this works especially well for commercial real estate assets. Why? Because appreciation can be forced. The value is based on a math formula. The value can be raised by increasing the numerator and compressing the denominator (when possible). Often dramatically, as we’ve seen.

The commercial real estate value formula: Value = net operating income / cap rate.

Secondly, I recommend you choose an asset class with a fragmented ownership base. One that has a large percentage of unsophisticated owners and operators who don’t have the knowledge, resources, or desire to increase income and maximize revenue.

These owners have greatly profited from the rising tide that raised all boats in the past decade and never dreamed of the price they could now receive for their run-of-the-mill asset.

Third, I recommend you seek off-market deals. This certainly isn’t necessary for the strategy to work, as we see in case study #1 above, but it sure helps. And finding off-market deals is a game for the obsessively passionate, full-time real estate strategist, for the most part.

So, what if you’re not full-time in real estate? Can you still get these benefits? Certainly. I have never run a self-storage facility and never managed a mobile home park. As a professional passive investor, I make good money from passively investing in these assets through professional syndicators.

This may be the era of overheated real estate. But if you know how to find deals like this or know someone who does, it’s a fabulous time to invest. As it always is. Hidden Value of Distressed Properties!

The inspiration for today’s edition came from this original article: https://www.biggerpockets.com/blog/hidden-value-distressed-properties?utm_source=Iterable&utm_medium=email&utm_campaign=Newsletter%20%7C%2004/08/21%20%5BRegular%20%2B%20Plus%5D

If you are seriously considering moving right now you need to take action right now and talk to a reputable Real Estate & Mortgage Broker today, please call 281-222-0433 or visit:

https://www.zillow.com/lender-profile/BillRappMortgageViking
https://www.blink.mortgage/app/signup/p/nexamortgageh/MortgageViking?campaign=MortgageViking

http://BillRapp.joinnexa.com
http://www.homesforheroes.com/affiliate/bill-rapp-1
https://www.billrapponline.com/
https://twitter.com/BillRappRE
https://mortgageviking.billrapponline.com
https://highcostarea.billrapponline.com
https://commercial.billrapponline.com
https://doctorvideo.billrapponline.com
https://sba.billrapponline.com/
https://veteransvideo.billrapponline.com
https://fha203h.billrapponline.com
https://privatemoney.billrapponline.com
https://rei-investor.billrapponline.com
https://manufacturedhousing.billrapponline.com
https://www.houstonrealestatebrokerage.com/
https://www.youtube.com/channel/UCsF3Rh4Akd1OAOAgTmzgqQg

https://www.greaterhoustonreview.com/mortgage-broker-houston/

https://calendly.com/billrapp

https://findamortgagebroker.com/Profile/BillRapp45753

https://findamortgagebroker.com/Company/NEXAMortgageLLC54887