Ways to Invest Your Money

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Tenants pay rent. After expenses, what you have is monthly, recurring mostly passive cash flow.  This is a benefit that helps millionaires expand their wealth.  There is only so much time in a day, so if you're only earning money by trading your time you are limited.  What truly builds wealth is creating multiple passive streams of income that is not connected to your limited time.

This is also something that differentiates real estate from investments in stocks.  Cash flow does not happen for the vast majority of stockholders.  Typically, you only make money when you sell the stock after and if the stock value has gone up.   

Sometimes properties lose value, but over the long term the value of real estate will nearly always go up. This happens while the loan is being paid down, so as your property gains value or equity, your net worth increases.

Sometimes appreciation is a product of growth in the market and sometimes appreciation can be “forced,” by making targeted improvements in a property. We typically buy rentals that are renting under market value for various reasons.  By rehabbing the apartments, we are able to start charging more rent and increase the value of the building.  This is called “forced appreciation”. When we sell, we recoup any appreciation in the market. Appreciation means higher net worth.

There are many tax benefits to owning property.  Many people aren’t aware of them, but they’re one of the best benefits to owning real estate.

The government long ago decided that it wanted to encourage property investment, so there are many benefits that help people substantially lower their taxes including depreciation, mortgage and property tax deductions, no self-employment tax on rental income and more.  Because of the many tax benefits, real estate investors often end up paying less taxes overall even as they are bringing in more income.

This is why many millionaires invest in real estate.  Not only does it make you money, but it allows you to keep a lot more of the money you make.  

The ability to leverage is one of the greatest benefits of real estate investment.  Millionaires understand that you are not limited to your own resources.  You can leverage the resources of others to build your wealth.

There are 4 ways to use leverage to enhance your real estate strategy and investment options.

• Re-finance

If your property has equity, you can do a cash-out refinance (pull out some of the equity from rent payment). The best thing about a cash-out refinance is that it is not a taxable event.  You have pulled out this income tax free. A savvy investor will use this cash-out refinance to buy more income properties and grow their wealth.

• You can leverage people’s time. 

If you passively invest in projects, you can leverage other people’s time. The active investor will find the deal and manage it, doing the work for you, while the passive investor provides the funding. All of these time-leveraging strategies give you more time while you collect profits each month. 

• You can leverage people’s experience. 

If you’re new and don’t have experience, you can leverage the experience of others. Some people have more time available, but not the experience, or vice versa. We are able to find deals with our experience to open doors and get brokers/lenders to take us seriously.

• You can leverage the property itself. 

The more units you have the more leverage you have. If you have two units and you lose a tenant, you’re making 50 percent of your income.  If you have 10 units, and you lose a tenant, you still have 90 percent of your income.  If you have a single-family home and are able to raise rent by $50 per month, you can make an extra $600 per year.  If you have a 100-unit apartment building, you raise rents $50/month that’s $5k/month or $60k/year income. Furthermore, based off of net operating income, these increases will significantly increase the value of the property. When you have more or larger properties you have economies of scale.

Principle pay down is a benefit enjoyed by real estate investors to build their net worth. As you pay down your mortgage (which is OPM/Renters) with interest, with each payment you pay back some principle and come closer and closer to owning the property free and clear. This is allowing you to build equity and wealth.

The doubly nice part about that is when you have a cash-flowing income property, your tenants are paying this down for you and helping your build your wealth and equity at the same time.

The legal structure will depend on the type of partnership:

• Short Term Loan- All private money is backed by a Promissory Note, Quite Deed, and/or 2nd lien position.
• Property Investment- To receive the full benefits of property investment a separate LLC will be set up with an operating agreement outlining and each partners rights and expectations.  A new bank account and accounting programs are set up and separate from any other property outside of the partnership. All profits will flow through the LLC and distributed in accordance with Operating Agreement.

If you choose to partner with us, you have the option to remain passive if you wish or we can provide training. You can choose all aspects of the process or select which area to learn. We have prepared PowerPoint training slides, one on one guidance, and/or of course learning through doing.

We have prepared PowerPoint training slides, one on one guidance, and/or of course learning through doing.

• Don't have money to invest but a desire to learn the industry? 
• Can you find the time to contribute to learning by doing?
• Are you highly motivated and a go getter?
• If you commit yourself, we can even provide a cut of the profits when putting deals together.