All Forum Posts by: Jorge Abreu

💥Reason 5 on Why the Wealthy Invest in Real Estate!

💥Unlike single-family homes, multifamily apartments is a business that is valued primarily by its Net Operating Income (NOI), not so much by the comparable sales of similar properties like in Single Family. Through physical and operational improvements, you can increase the value of the property by increasing NOI.

Most value-add syndicators look for opportunities to capture appreciation through capital improvements or through streamlining known operational inefficiencies with current owners. 
One of the first things you will want to look at when considering an investment with an apartment syndicator is the general partners plan to reposition, or force appreciation on, the asset. 🙌

There are three ways to force appreciation; 1️⃣ increase income, 2️⃣ decrease expenses or a 3️⃣ combination of both. Regardless of which approach is used, the result will be the same – an increase in NOI.

💲Let's look at how an increase in NOI will affect the value of the asset. Imagine we buy a 100-unit apartment complex for $5M that has a NOI at time of purchase of $250K, thus a CAP of 5% (NOI/Asset Value). Now say we invest $350K on improvements that garnish an average premium of $75/unit. This increases the NOI from $250K to $340K and thus brings the FMV (fair market value) from $5M to $6.8M (NOI/CAP = 340,000/.05).

👉Investing $350K for a $1.8M FMV increase, a $1.45M return, is a very lucrative move. As you can imagine, a decrease in expenses will affect the numbers in the same way by increasing the NOI.

👀Today we are covering the Ability To Invest Completely Passively👊

💥Possibly the most beneficial reason to consider investing in real estate syndications is that you have the ability to be a 👉passive investor. In most investments like these, the investor is completely removed from the asset, the management, or the operational perspective of the investment.

When you invest in syndicated investment, the syndicator/sponsor will handle all aspects of the deal such as, due diligence, locating a profitable property (or properties), hiring and managing the property manager, sending out quarterly reports, implementing the business plan, handling investor relations, and so on. Investors will pay the syndicator via by the performance of the deal with a split of the cash flow and appreciation.

In exchange for the sponsor fee, you are able to be completely passive as an investor. Once you fund the opportunity, the only thing you need to do is sit back, relax, and collect payments in the form of quarterly or monthly cash flow distributions and lump-sum payouts at refinance and disposition.🙌

Always vet the deal sponsors before investing as the performance of your investment will depending on their ability to perform.

Do I need to say more? 🙂

💥Some of the best real estate investment opportunities in the world are in commercial properties. However, the purchase prices for this asset class can range from $5,000,000 - $500,000,000! Because real estate syndications give you the ability to pool your funds with other investors, you are able to get exposure to this asset class, without a seven-figure investment.

When syndicators create investment opportunities like this, they typically allow investors to come in with a minimum investment 👉 from $25,000 - $100,000 to invest in these large scale deals.

This opens up the doors for investors to invest in opportunities that they would never otherwise be able to invest in. Once you start using this pooled investment model, you can get exposure to apartment communities, self-storage deals, mobile home parks and many other amazing cash-flowing opportunities. 👉 How about that?

👀Tomorrow we will cover reason 3 on the top 10 reasons the wealthy Invest in Real Estate!

On my last post, I listed the 10 reasons why real estate syndication is a great passive investment vehicle. Today, I am going more in-depth on "Diversification" and will cover all the reasons subsequently.

1) Diversification

💥One of the biggest reasons investors diversify their real estate investment portfolio is to mitigate risk exposure. The phrase “don’t put all your eggs in one basket” applies directly to this concept, as spreading your investment across a broad spectrum is how investors balance risk and reward in their investment portfolio. What I love best about investing in real estate syndications is that it’s relatively easy to build a framework around diversification by niche, region and sponsor.

Niche Diversification - Many investors consider investing in real estate syndications in order to get better diversification within real estate asset classes Typically each sponsor has a specialty in a specific type of asset class that they have a competitive advantage in. One should be cognizant of diversification in your real estate portfolio, so spreading investments amongst apartments, self-storage, mobile home parks, single family residential, commercial and raw land development is a great way to achieve this. You can also diversify within an asset class itself. For Instance, In Multifamily you can invest in new build A Class type deals and also invest in heavy value add C Class deals. You must understand asset cycles and trends. Some areas like office may not do so well in a down economy where more stable assets like apartments, self-storage and mobile homes may hold up nicely.

Geographic Diversification - Another form of diversification within real estate syndication is geographically. Actively investing out of state can work, but passive investing through syndication deals is ideal for out-of-state investors looking for better value in top markets. Some of the best deals are out of state in growing markets. It can be very difficult trying to be an active out of state investor due to competition, relationships, market knowledge, etc., but if you align yourself with a reputable, successful operator in that local market you can gain access to some great deals you otherwise wouldn’t have had access to.

Sponsor Diversification - Vet sponsors carefully and don’t stay married to one sponsor forever. Ensure they are growing their depth with key management for continuity and that they are staying true to their philosophy and model, which should always remain conservative and tested. When you invest with multiple sponsors you gain a perspective that allows you to sniff out the good deals from the bad deals since you’ll see so much more deal flow.

👉 Next week's post will be on "Access To Large Investment Opportunities!" I hope you are enjoying the information!!

Absolutely Brock!🙌

Thank you Joe Archbold! 🙌

💥Real estate has been a staple in many of the wealthiest portfolios for decades and it's considered a great option for alternative investments & growing wealth. Real Estate is a limited commodity that has a proven track record of lucrative returns, the offer of diversification, and resilience to economic recessions, especially cash flowing properties. One may hold a number of real estate assets from land to single family homes, multifamily, storage and more.

👉 One type of asset structure that is often over looked, is real estate syndication, specifically for large multifamily apartments, raw land development and self-storage facilities. Being a good real estate operator takes lots of time, education, and networking. You also have to learn to either love or out source the property management piece of it. Not every investor has the time or desire to search and underwrite hundreds of properties to find the hidden gems to acquire. By getting involved with trusted real estate syndication partners, others can gain access to deal flow and the ability to invest in high quality real estate assets without the hassles of property management.

👀 Here are the top 10 reasons why real estate syndication is a great passive investment vehicle.

1) Diversification

2) Access To Large Investment Opportunities

3) Ability To Invest Completely Passively

4) Tax Deferred Status

5) Forced Appreciation

6) Risk Reduction

7) Economies of Scale

8) Consistent Returns & Historically Less Volatility Than Stock Market

9) Leverage

10) Great Inflation Hedge

💪I'll be taking a deep dive into each one of these reasons separately. Look out for my next posts!

👀 Traditionally, investors have focused on generating the highest possible returns or beating the market, while staying within their comfort zones in terms of risk. My preference to wealth management is goal-based investing, which emphasizes investing with the objective of reaching specific life goals.

Whichever approach you prefer, the important thing is to do something, and not just leave your financial health to chance‼

Are you investing to: Build a nest egg for retirement? Buy a vacation home? Create an income stream during retirement? Start a new business? Leave a financial legacy to your family? Do all of these?

👉 Arrange your goals by the time horizon for achieving them. Do some research and take advantage of financial and retirement calculators available to put a value/cost on each of your goals.

💥 After you define your goals and figure out how much money you need and when, the next step is to reverse engineer an investment strategy that will make it happen. An investment strategy is basically a plan of attack that guides your decisions based on your goals, risk tolerance, and future needs for capital. Some keys to making a sound investment strategy:

📌 Start now. Seriously. Stop putting it off

📌 Know what your looking for so that you are anchored by the must-haves and not distracted by the nice-to-haves

📌 Take advantage of the power of compounding

📌 Think twice before investing in anything with high costs/fees

📌 Diversify your investments.

👉 I hope you find these tips helpful!! Good luck!!🙌

Multifamily continues to attract the most investment volume of any property type, with 3Q21 hitting a record high 💲78.7 billion, representing a 192.1% increase year-over-year. 💥

This record-setting pace will result in an all-time year record volume for 2021, reinforcing that the pandemic has only strengthened investor demand.🙌

The highest level of cap rate compression and price per unit growth has occurred in fast-growing non-major markets, particularly in the Sunbelt‼

Source: US Capital Markets

👉What do you think will be the outlook for Multifamily investments in 2022?

🔽A drop in lumber prices has invigorated demand for commercial building projects, especially for multifamily product, Sherwood Lumber chief operating officer Kyle Little told CNBC last week.

💥A drastic runup in lumber prices earlier this year created a challenging environment for builders, but the industry appears to be well on the path to recovery from the sell-offs of the first half of 2020. Little told CNBC that the current lumber prices make “absolute sense” when viewed against that backdrop.

👉The price of lumber hit $480.40 per thousand board feet the previous week, a low watermark since July 2020, and CNBC reports that lumber prices should hit their 13th consecutive week of loss this week.

This is some great news, don't you think?