All Forum Posts by: Paul Azad

Start with Jim Dahle's "white coat investor" website and Youtube channel and Reddit subthreads. He has tons on real estate investing. with a strong emphasis on tax minimization and asset protection.

You can own real estate directly, which is active ownership, or indirectly, which is passive ownership.

Owning it directly and actively can give you very high returns with the Leverage involved but requires quite a lot of work, quite a lot of your time, and quite a lot of your personal liability. So do your research, but also consider passive investing Visa V syndications or even equity reits, Which have historically outperformed the S and P 500 over 20, 30, fifty years and even outperformed direct, active ownership of real estate by 4 to 6 per cent. Passive real estate investing still requires enormous amounts of due diligence and monitoring. But you eliminate the liability risk from the equation. 

Good luck. And pay off those student loans as quick as you can. before they eat you up.

I doubt that the vast majority of the investors in Norada Capital Management's unsecured promissory notes were intending to invest in an illegal Ponzi scheme. But that is precisely what the company appears to be, or to be more precise, a feeder fund to the larger Ponzi scheme, which was Retail E commerce Ventures run by Tai Lopez and Alex Mehr, who, if you go to Norada Capital Management's website this very moment under team, is still listed as the number two advisor underneath Marco Santarelli. Mr. Alex Mehr, the owner and cofounder of REV which bilked investors out of $270,000,000 just a year and a half ago and discontinued distributions in November of 2022 and is now under SEC investigation and multiple lawsuits, and was paying 25% promissory notes with a business plan of online retail from a dozen bankrupt old brands despite having little to nothing listed for sale on the websites (the same dozen listed in same order on Norada site) to Norada Capital Management which then paid out 12 to 16% promissory notes to the unsuspecting investors here on BP above and in other threads. REV made 150mil in 2021, 60 mil in 2022, but lost 60mil in 2022 in expenses and had 200mil in debt before folding in 11/22. (it was never a legit business nor any intention of being one, think AMWAY/Herbalife) Norada still fundraising this minute on website and Marco pitching his promissory notes just 4 weeks ago on a webinar saying only 75% E-commerce, but the growth is in Off Broadway musicals....WTF!!!. All Ponzis keep running until they run out of investor inflows, never before. 

It is not whining for BP members to complain about a complete loss of capital and a former BP Darling Marco the turn-key real estate expert from going RadioShack-silent for a month. It is the least they can do to warn other potential investors who Marco is literally still apparently preying upon this very moment. 

Or maybe I'm way off base and the modern day Einsteins of Marco/Alex, and Tai were going to defeat low-cost on-line shops like Amazon/Wal-Mart and TEMU. Remember, those dozen bankrupt companies had already failed online once, hence they went bankrupt already. Their intentions seem clear ad Incipio.

Would have some concern, given their very rosy projections of NOI growth even in year one from 3 million to 3.4 million ,13%. however, Yardi data shows Atlanta rents are actually negative so far this year, by -.1%.

Also, some concern on the $5.3 million in transaction cost to acquire the property approximately 9% of the deal, obviously there won't be any money set aside for renovations given that the property is only a few months old, so this is all frictional cost to the investor. 

Also, would have some concern that they say replacement cost of this property is 50% higher than their buying it for. This property was just constructed a few months ago?  

Also, they're buying it just over a 5% ( noi 3 / 58) cap rate and planned to sell three years later at the same 5% cap rate, with the largest influx of new Class A multifamily to the Atlanta area ever in the next three years to compete against this Class A property, which should only continue to drive down rents or prevent NOI growth at the least.

Real Estate Is just a term? that describes the medium or the mechanism of the true underlying investing action. Real estate is just the wrapper around the actual thing you're doing which is Banking. IE capital allocation and leverage.

Without the leverage, real estate investing is actually not a particularly good investment. Take a look at the study from Amsterdam. by Piet Eichholtz 
Eichholtz_A-long-run-house-price-index.pdf (maastrichtrealestate.com)

basically a nearly 400 year study of the prices of the same homes along the best canals in Amsterdam since 1628, and the prices rose at about 2-3% or the historic rate of inflation there, same study has been retroactively and proactively studied in almost all countries on Earth and they all get same answers over long term, (Re rises with inflation rate) Now you can have short term bubbles like now in USA, but they usually deflate like the 22% drop from 1929-1935 or the 34% drop from 2006 to 2012, which many of us benefitted from. I guarantee it will deflate again, as it always has in past, or at least go flat for 10-20 years until incomes catch up. Why, because you need people to buy those houses, and people's incomes only rise at the rate of inflation. 

But imagine you don't pay cash but rather borrow so your 5k cash/closing-down payment to buy a 100k STR, then in year 1 it rises 2k - only a paltry 2%, but you make a 40% profit as you are levered 20:1, and that beats the best year for stocks ever.

So real estate is not actually about "real estate". It's about banking just like almost all businesses. You could be drop shipping from an Amazon warehouse business using leveraged inventory and doing the exact same thing or borrowing billions to buy NVIDIA GPU's to retrofit and add on to your own servers like my favorite business does, SMCI. Most businesses are about banking, but they have different wrappers around them. Good luck. 

Biden just pandering for votes, this is pertinent excerpt from the White house press release

FACT SHEET: President Biden Announces Major New Actions to Lower Housing Costs by Limiting Rent Increases and Building More Homes | The White House


"President Biden is calling on Congress to pass legislation presenting corporate landlords with a basic choice: either cap rent increases on existing units to no more than 5% or lose valuable federal tax breaks. Under President Biden’s plan, corporate landlords, beginning this year and for the next two years, would only be able to take advantage of faster depreciation write-offs available to owners of rental housing if they keep annual rent increases to no more than 5% each year. This would apply to landlords with over 50 units in their portfolio, covering more than 20 million units across the country. It would include an exception for new construction and substantial renovation or rehabilitation. The policy is a bridge to rents stabilizing as President Biden’s plan to build more takes hold."

basically, he is as pretending to ask a Republican Congress to pass a bill that would tell all investors no accelerated depreciation unless you cap rents at 5%/yr, obviously would never be taken up by congress and could never get 67 votes in Senate either, so just a PR stunt for votes Shortly before an election. It is a sign of his political desperation at this point down 10pts in multiple polls. We should likely expect more like this to come. 

I've studied Rent Control, which is just a subtype of Nixonian Price Controls, and they are always a bad idea, they always produce the opposite of the intended outcome, with run down "slums" as they are unprofitable to maintain at submarket rents, If you read the whole letter, Biden actually has a better idea later down, which is a massive govt' push at fed and state level to increase production of new housing stock at all levels, using tax breaks, incentives to developers, thus eventually lowering rents or at least slowing rise to let incomes catch up. When you study this area in economic texts and in academic papers, there is quite a lot of govt intervention on behalf of all sides (tax code isn't 12,000 pages for no reason and it usually isn't helping the renters)

Let The free market act as it normally does, there are more multifamily units coming online this year and next year than ever before in US history, despite rising insurance and property taxes and construction and labor costs, as the potential for profit is too juicy to ignore, but The developers and investors also bear the risk of loss. So they should be justly and appropriately compensated. A free market is a system of gains and losses. Whenever we subsidize either one, we tilt the system out of balance.

Quote from @Dean Valadez:

Quote from @Adam Bearup:

Hello BP community, I'm interested to learn what most investors do with the portion of rental income commonly set aside for cap ex, repair, and vacancy costs. Does it go straight to the bank? Invested in CD's or a money market account? It makes sense that this money be liquid to use at a moments notice, but it'd also be nice to get a return on this money, wouldn't it? Best regards, Adam Bearup

 Hi Adam,

I am new to investing and am wondering this myself. Since it has been 7 years since your original post, I am wondering what you ended up doing?

Or, if others in this thread are still investing their CapEx funds into the same vehicle.

Do investors separate their CapEx from their Reserves? If so, do they both go into interest-bearing vehicles? If the two are lumped together, I assume that lump goes into an interest-bearing vehicle?

Lastly, how is this done? Right now, my properties are owned by my LLC's. There aren't high-interest money market accounts for businesses and most, if not all, high-yield money markets are for personal accounts. Does my LLC pay me and then I put that into the MM account? Do I then pay from my personal back to my LLC when I need to use that money for CapEx or maintenance reasons? (I would be concerned about 'piercing the corporate veil' if I intermingle personal with business, but am not sure if the above example is intermingling or not.)

I think if you set up a brokerage account with the same bank that your business checking account for the LLC is at, you can simply move the money from the checking account into the brokerage account and then purchase something. like USFR, which pays 5.4% in T bills with zero risk of loss or BKN which pays 5.7% in tax free Municipal bonds if able to tolerate some risk (this gives me a >9% tax effective rate on my cash). And then whenever you need cash sell those from the brokerage and transfer that portion of money back to the checking account. As long as you don't put any funds into the brokerage account from anywhere else other than the LLC checking account then you should be fine. Both Bank of America and JP Morgan Chase have their own brokerages now in house that can handle that, so you just point and click to move the cash. Don't accept less than about 5.4% from anywhere, anything less is ridiculous.

Quote from @Dave Hagen:

Quote from @Dave Hagen:

I forgot to include that government spending is propping up the economy.


What Can the US government do, But keep spending to prop up the economy and to keep our military strong and our number one status in the global financial system. Dave, to quote your father, Tom Hagen, Consiglieri to the Corleone family. "with the money they earn, They can buy more Police and political power".  (watch first 30 seconds)  This line is the Real Politik that defines any Nation State

Scene from Godfather One with Tom Hagen and Vito Corleone and Santino discussing business. - Google Search

    Government spending Is definitely propping up the US economy, and the real estate market for now, too. But that's precisely what got us out of the great financial crisis and why the US economy has boomed over the last 15 years compared with Europe and Asia. Sometimes you've got to spend money to make money.          
   America is only 4% of the global population, and yet represents 26% of global GDP, and the US Dollar over 92% of all international financial transactions. I believe this success is due to three reasons.
Number one : rule of law. No country treats every plaintiff and defendant with as much fairness and judicial process as the United States does, and no one is above the Law. 
Number two : One life, One vote. No country endeavors to allow every man and woman, even many convicted felons the right to have an equal vote to the wealthiest person in the country.
Number three : Freedom of speech and conscience. This is essential to make the other two legitimate and real.
All three combined are the three pillars that hold up American civilization and are its true underlying power and greatness. And what gives us a competitive edge over almost everyone else.
    Even a taxicab driver who speaks 3 languages in Mauritius could have his money confiscated, any business he slowly built seized by the government, be arrested for political speech, or his family threatened for his not voting a certain way. 
Europe is a nursing home where Dreams can't be remembered any longer, China is a prison where Dreams are beaten and jailed (Jack MA), and India an abattoir where Dreams are veiled behind colorful silks then slaughtered by crony capitalism. 
America always remains, its greatness rests upon these 3 pillars, a chance for anyone to come here and Dream, Dream away
(sorry, but after the shooting last night, I felt a little Rah, Rah Murika! today, even as an ACLU card carrying, bed wetting liberal, that saddened and angered me last night. We need to persuade each other of our ideas, then vote in fair elections, then Dream our Dreams like Americans always have!)

Quote from @Pradeep Patel:

Don’t time the market! Buy it when you are ready. Who cares if it’s going to crash or not if you are going to rent it out&or live in it?

 Who cares? many Americans who bought in 2006 were negative equity until 2022, and that was from a moderate 34% pullback in U.S. residential from GFC, the Price you pay affects the Value you get.

Who knows? but the economic data keeps coming in and pointing toward an aggressive slowdown and probable Recession. 

1) Today the BLS data showed Unemployment Rate now at 4.1% from 3.4% last year, which for first time has broken The Sahm Rule (FED economist Claudia Sahm), who developed a simple shorthand rule years ago that whenever unemployment rises by 0.5% over the 3month avg low within the last 12 months then >95% chance of an impending recession. That got violated today.

2) The M2 money supply has shrunk by >4% in last 2 years, anytime it goes negative in last century, that has a 1:1 correlation with Recession. (Dr Steven Hanke/John Greenwood - Johns Hopkins Economics Dept)

3) Inverted Yield Curve now for >2 years, high correlation with Recession, not perfect, (Campbell Harvey 1986)

4) Our Real GDP was measured in last year's 3rd quarter at 4.6%, then in 4th quarter at 3.6%, then this year's 1st Quarter at 1.3%, and current St.Louis Fed NowCast has it running at 0.76%, so definitely slowing down fast.

average time between recessions in last century has been about 8-10 years (Business Cycle), our last recession was 2008-2009 the Great Recession, but we printed Trillions in last few years so we likely have pushed out the Recession like a dose of Heroine to an addict, we may just be pushing out the inevitable withdrawal

If we do have a Recession, it will definitely affect residential and commercial Real Estate but not equally and not at the same time. The thousands of parts to the economy all have their own cycles, and they don't perfectly overlap. Trucking seems to be sliding into recession, and downtown Office CRE has been in recession for 2 years? Multi-Family? while Data Centers are booming, they all move at different speeds

Recessions like a Fever are necessary to burn away the inefficient allocations of capital that go on during the recovery and expansion phases

Doubtful for a full RE Crash, but would be nice for the average American young family to be able to buy the average size starter home again, it's been awhile :)

Quote from @David Kanarek:

Apparently I am not alone in my thinking.

See: 

https://www.facebook.com/groups/1161232915077076 

or

https://www.biggerpockets.com/forums/960/topics/1196567-norada-capital-management-suspending-payments?highlight_post=6803139&page=1#simplified-forums__discussion__replies-container

Looks like you have 73 members of the Facebook group already. Hopefully. y'all can form an LLC and hire a bulldog attorney for a class action suit to at least try to get financial documents from Norada Capital Management. to find out what exactly went wrong. You need the type of attorney that the boogeyman checks under his bed for at night before he goes to sleep, and may need to offer 35 to 40% contingency fee. Looks like Norada was getting 25% fees on money they loaned to REV e-commerce company to invest in their online old brand revitalization campaign. Whatever that meant. And REV Stopped distributions in late 2022 so it seems inevitable that Norada would have to stop and should have at least notified all investors as of September, October of 2022 that it no longer had an income stream. Much less advertising as of just a few weeks ago for their Norada notes, offered up to 23% for amounts over 200K. (It's one of those. What did they know? And when did they know it situations?) I think there are law firms suing REV, like Silver law group etc, they could fold y'all into their suits?

Silver Law Group Investigates Retail Ecommerce Ventures

good luck

PS. if they did nothing untoward, they should have explained things in more detail in their EMAIL halting the distributions, or responded to the hundreds of posts on BP in last 2 weeks, especially since Marco regularly reads and posts here