All Forum Posts by: Michael Plante

While investing in the past 2 years, I have been threatened, I’ve caught mice with my hands, called the police on tenants, done cash for keys and many more interesting things. All this has taught me that I don’t want to be a landlord. However, I do know that I want to be a real estate investor.

Tax Benefits

First, being an investor in real estate gives great tax benefits. (Depending on the type of strategy you use) Some strategies require you to pay capital gains tax if you sell it before you have owned it for 2 years. (Flipping) But as a passive investor in a syndication, gives you the ability to use bonus depreciation. This can give you a majority of your investment as a loss via a K-1 statement all while receiving positive cash flow.

Appreciation

Second, is capitalizing on appreciation. Now there's 2 kinds of appreciation that you can use. Forced appreciation and market appreciation. Forced appreciation is when you increase the NOI of a commercial asset which directly affects the value of the asset. Then market appreciation is like the market we are in now in New Mexico and other parts of the US. There are too many renters coming into the market and with there being a shortage of apartments, that makes the rent go up.

Leverage

Third, is leverage. You are able to buy something that is worth, let’s say 100k, for only 25% down if you use a conventional loan. That’s only 25k. Now, I don’t know about you, but I can’t ask my financial advisor for 100k of Apple stock and only give him 25k and expect to get a 100k invested. That just won’t go over well. Sometimes, you don’t even need your own money. You can find someone who wants to partner with you and they will be the money.

Principal Pay Down

Fourth, principal pay down. When you get a mortgage on a rental property, you pay P&I. So every month, you pay down your principal loan amount. But it isn’t you paying that off. It is your tenant. Some loans that you can get IO (Interest Only) at the start of the loan. This means that you won’t be paying towards the principal. But these loans serve their own purpose.

Cashflow

Finally, cashflow. Which should be number one. This is the first thing we should be looking at as investors. If the market drops and the value of the property drops, you want to be sure you can pay the rent and hold it for the long haul while the market turns. This also is what gets you financial freedom so you can spend time with your family and give your time to charities and serving at your church.

With all this said, what should you invest in?? I think the answer is pretty clear and that is investing in commercial real estate as the operator or limited partner. As the operator, you get to be in charge of what the asset does. As the investor, you get to collect a check. Now what’s better than that?