In this article, we’ll cover some tips for succeeding with your real estate investments despite a recession. Keep reading to learn how to make the most of your investments during a recession.

Invest in your existing properties

There are many reasons to invest in your existing properties during a recession. One reason is that the property is already paid for, so you don’t have to worry about obtaining new financing during an economic downturn. You also won’t have to worry about the hassle and extra time it takes to find a good property deal.

Another reason to invest in your existing properties is that you can increase the returns on your investment. You can increase the value of your property by enhancing the property and by increasing the occupancy rate.

Finally, investing in your existing properties is a good way to protect your investments. If the recession gets worse, home prices may decrease, but your property value is less likely to decrease if you’re actively making improvements.

Investing in your existing properties is a smart way to protect your investments during a recession. Not only will you see a good return on your investment over the long-term, but you’ll also mitigate any decrease in property value.

Continue learning the real estate business and networking with other professionals.

One of the best things you can do as an investor during a recession is to continue learning and networking. This will help you stay ahead of the curve and learn about new opportunities as they become available. It’s also a great way to build relationships with other professionals in the industry.

There are many different ways to learn about real estate:

Attend seminars and webinars

• Read books and articles
• Find a mentor
• Watch videos.
• Attend conferences an in-person meetups
• Take online courses.

Networking is also a great way to learn. You can meet other investors, real estate professionals, and lenders. These relationships can help you get deals done and learn about new opportunities. Networking can also help you build your real estate business.

It’s important to stay focused and continue learning and networking during a recession. This will help you stay ahead of the curve and be successful during these tough times.

Analyze your portfolio and make any necessary adjustments.

When it comes to real estate investing, it’s crucial to stay ahead of the curve. During a recession, it’s even more important to be proactive to protect your investments. Analyzing your portfolio and making necessary adjustments is one way to do this.

First, take a look at your overall investment strategy. Are you comfortable with the level of risk you’re taking on? Are you still seeing the potential returns you expect? If not, it might be time to make some changes.

Next, perform a stress test by considering how different scenarios could affect you for information purposes. For example, what would happen if interest rates rose? Or if a property remained vacant for 90 days? How would that impact your investments?

Making changes to your portfolio can be difficult, but it’s vital to always be prepared for the worst. By being proactive, you can help ensure that your investments are safe — even during a recession.

Create short-term goals that focus on your long-term success.

Creating short-term goals is important for long-term success in any industry, but it’s especially crucial for real estate investors during a recession. When the market is down, it can be difficult to maintain focus on the big picture when your investments are losing money. However, setting and achieving short-term goals will help you stay on track and continue to make progress toward your long-term success.

It’s essential to set realistic goals for yourself. When the market is down, it can be tempting to set extremely aggressive goals in order to try and make up for lost ground. However, this is often counterproductive and can lead to frustration and disappointment. Instead, set goals that you know you can achieve with hard work and dedication.

Furthermore, if you want to stay on track and achieve your goals, track your progress. This can be done in various ways, such as setting milestones and tracking your net worth over time. By tracking your progress, you can identify areas where you need to make adjustments in order to stay on track.

One of the best things about setting and achieving goals is that you get to celebrate your accomplishments! Be sure to take the time to celebrate each and every victory, no matter how small it may seem. This will help keep you motivated and encouraged as you continue working toward your long-term success.

Maintain success with your investments despite a recession.

Here at 23^rd Street Investors, we have a variety of options for you to help you learn about and invest in real estate so you can take advantage of the cash flow, equity, appreciation, and tax benefits. Below are a few resources to get you started.

Invest Now: If you’re ready to see investment opportunities and learn more about investing real estate, we invite you to join our Street Smart Investor Club.

Connect With Us: If there’s ever anything we can do to help you on your journey, feel free to email us at team@23rdstreetinvestors.com.

As real estate investors, we’re constantly riding the waves of market dynamics, and one of the most significant factors influencing our decisions is the movement of interest rates. Over the past 12 months, we’ve seen a rollercoaster ride in interest rates that has sent ripples through the real estate market, impacting everything from mortgage rates to property values. Let’s delve into what has happened and how it affects real estate investing.

The Rollercoaster Ride of Interest Rates

The past year has been a whirlwind for interest rates. At the onset, the Federal Reserve took aggressive measures to combat the economic fallout from the pandemic, slashing rates to historic lows. This move aimed to stimulate borrowing and spending, providing much-needed liquidity to the market. As a result, mortgage rates plummeted, reaching enticing levels for both homeowners and investors alike.

However, as the economy showed signs of recovery and inflation concerns mounted, the Fed began hinting at tightening monetary policy. Speculation grew around the timing of rate hikes, causing fluctuations in the bond market. Consequently, long-term interest rates, including mortgage rates, experienced upward pressure, albeit with intermittent dips and plateaus along the way.

Implications for Real Estate Investors

For real estate investors, fluctuations in interest rates have far-reaching implications:

1. Cost of Capital: Interest rates directly impact the cost of borrowing, which is a crucial consideration for investors leveraging their acquisitions. When rates are low, borrowing costs decrease, enhancing cash flow and overall returns. Conversely, rising rates can erode profitability unless offset by corresponding increases in rental income or property appreciation.
2. Property Valuations: Low interest rates typically fuel demand for real estate assets, as investors seek higher yields in a low-yield environment. This heightened demand often translates into upward pressure on property valuations. Conversely, rising rates can dampen investor appetite, leading to softer valuations and potentially attractive buying opportunities for savvy investors.
3. Market Sentiment: Interest rate movements can significantly influence market sentiment and investor confidence. Sharp increases in rates may trigger concerns about affordability and economic stability, leading to cautious behavior among investors. Conversely, declining rates can instill optimism and fuel demand for real estate assets.
4. Exit Strategies: Interest rate trends also shape exit strategies for real estate investments. Investors may need to adjust their timing and approach based on prevailing rate conditions. For instance, in a rising rate environment, it might be prudent to expedite exits if an investment has a variable rate to avoid future increases. For investments with a low fixed rate loan, the prudent approach would be to hold on to the property until values come back. Remember, you need to sell to someone who will be looking for a loan at today’s higher interest rates and, thus, will not be able to pay as much for the property.

Navigating the Terrain

Given the dynamic nature of interest rates, successful real estate investing requires a proactive and adaptive approach:

• Stay Informed: Monitor economic indicators and central bank policies to anticipate potential interest rate movements. Stay abreast of market sentiment and adjust strategies accordingly.
• Risk Mitigation: Maintain conservative underwriting standards and factor in interest rate sensitivity in investment analyses. Consider implementing interest rate hedges or exploring fixed-rate financing options to mitigate exposure to rising rates.
• Diversification: Diversify across asset classes, geographies, and investment strategies to spread risk and capitalize on varying market conditions. A diversified portfolio can help cushion the impact of interest rate fluctuations.
• Long-Term Perspective: While interest rates play a crucial role in short-term decision-making, adopt a long-term perspective when evaluating real estate investments. Focus on fundamental factors such as location, demand drivers, and income potential to build resilient portfolios.

Conclusion

The past year has been a testament to the volatility of interest rates and their profound impact on real estate investing. By staying informed, mitigating risks, and maintaining a long-term perspective, investors can navigate the terrain effectively and capitalize on opportunities amidst shifting market dynamics. As we continue to monitor interest rate movements, let’s adapt our strategies and position ourselves for success in the ever-evolving real estate landscape.

​

Living abroad is no longer just a strategy to stretch retirement savings. It has become a lifestyle choice for remote workers looking for adventure, cultural exposure, and a way to accelerate their wealth building.

Traveling isn’t traditionally associated with saving money. We may think of spending a luxurious week at a resort in Hawaii, or a fun-filled week at Disney World with the family. We have to save money to travel in this way.

Digital nomads have found an alternative path to travel. They leverage their location-independence, or freedom from showing up at an office every day, to select cheaper destinations to live and visit. Or at least the financially savvy digital nomad will elect to leverage this powerful tool in building their wealth. It is, of course, possible to spend every last paycheck sent while traveling as a digital nomad. 

How Can Real Estate Investing Create More Opportunity For Digital Nomads

Every digital nomad eventually faces the reality that constantly traveling while also trying to get work done is a tough balance to maintain. Most co-work space conversations surround what exciting adventures are on the horizon – not on exciting work projects.

Digital nomads quickly discover that having passive income and a growing base of appreciating assets would support their travel dreams more than trying to squeeze in 40+ hours of work in beautiful destinations. 

While traditional real estate investing in residential properties often requires investors to be physically present, passively investing in real estate syndications allows digital nomads to grow their wealth, build passive income streams, and even provide tax benefits that put travel dollars back in their pockets. 

How Can Digital Nomads Build Wealth Faster

The traveling remote worker actually has a few advantages when it comes to investing passively in real estate. By leveraging these aspects of the digital nomad lifestyle, it could be possible to reach that full financial independence even sooner than you would if you were to live and work in a single location.

Leverage The Power Of Lower Cost Of Living

Digital nomads can leverage the power of saving more by living in countries with a significantly lower cost of living. Remote workers receiving an income from a company in America may find that they can save more than half of their paychecks each month while living in countries where the cost of a home or apartment is a fraction of that in America. Along with that may be lowered costs for groceries and transportation.

By saving more every month and investing that into real estate early, wealth building becomes exponentially easier. Opting to spend even just a few years living in a country with minimal expenses could accelerate the growth of their real estate portfolio, shaving years off their timeline to financial independence.

Invest Where It Makes Sense, Not Where You Live

Passive investing in real estate syndications also allows digital nomads to invest in real estate projects from anywhere in the world. They can invest in a project in a different city or even a different country without having to physically be there. This provides them with the flexibility to work and travel on their own terms without the hassles of maintaining a property or hosting potential tenants a vacant rental.

This freedom allows digital nomads to invest in the best markets rather than the one where they live. They can live in places where it may be cost prohibitive to purchase a rental property, but put their money to work in markets where cash flow is steady and reliable. 

Scale Quicker To Find More Freedom Faster

Passive real estate investing allows digital nomads to scale their investments without having to actively manage multiple properties. They can invest in multiple syndications or funds, and the income generated from these investments can be reinvested to grow their portfolio further.

Add in an accelerated savings rate and scaling a real estate portfolio of passive investments can quickly lead to freedom from having to work. 

Conclusion 

Digital nomads can benefit from passive investing because they know the value of having passive income to live life on their own terms. They’ve already taken the step toward living a life full of travel and adventure, which is a major hurdle to overcome in designing a life of intention. Adding in real estate investing and they could quickly find more freedom and security to live their ideal travel life.

Investing in real estate can be a lucrative way to build wealth, but deciding where to invest can be a challenge. Many investors began investing in real estate using single-family homes. As they accrued more properties, they also likely implemented a property manager to take over management tasks. 

However, even with property management, many single-family home investors find themselves wanting to scale up, or do more investing, but are tired to the work it takes to add these properties to their portfolios.

They inevitably look toward multifamily properties.

While both options have their advantages, there are several compelling reasons to scale up from single-family investing to multifamily investing. In this blog post, we’ll explore those reasons and help you make an informed decision about your investment strategy.

Reason #1: Higher Potential Returns

One of the primary reasons to invest in multifamily properties is the potential for higher returns. Multifamily properties typically generate more rental income than single-family properties because they have multiple units. This means that even if one unit is vacant, there are still other units generating income. 

Expenses are also spread out across many units. Costs associated with landscaping or management are less per unit compared to single family properties, which can mean a higher NOI, or Net Operating Income.

Reason #2: Less Risk

Investing in multifamily properties can also be less risky than investing in single-family properties. With single-family properties, if the tenant moves out, the property is vacant, and the investor is responsible for covering all expenses until a new tenant is found. 

With multifamily properties, however, the risk is spread across multiple units. If one tenant moves out, the investor is still generating income from the other units. 

Additionally, multifamily properties can be less susceptible to fluctuations in the housing market. While single-family properties may be affected by changes in the local housing market, multifamily properties are influenced more by the local rental market, which tends to be more stable.

Your risk as a passive investor is also less. You enter the team as a limited partner, which means you have limited liability if anything were to happen at the property. Be sure to read your legal documents carefully and speak with your attorney to fully understand your liability risks.

Reason #3: Greater Control

Investing in multifamily properties can also provide greater control over the investment. With single-family properties, the investor is at the mercy of the local housing market. If property values decline, there’s not much the investor can do other than wait for the market to improve. This is because the value of a single-family home is based on comparables, or the value of similar properties in the same vicinity.

With multifamily properties, however, the investor has more control over the value of the property. By implementing value-add strategies such as renovations, upgrades, and property management improvements, investors can increase the value of the property and generate higher returns. The value of a multifamily property is based on the NOI, or Net Operating Income. If the NOI increases, so does the value of the property – no matter what is happening in the neighborhood.

Reason #4: Easier Financing

Financing a multifamily property can also be easier than financing a single-family property. Multifamily properties are typically viewed as commercial properties, which means they can be financed with commercial loans. Commercial loans often have lower interest rates and longer repayment terms than residential loans, making them more affordable and easier to manage.

Even better, as a passive investor in a real estate syndication, you don’t have to deal with any lenders or qualification processes. In single-family investing, you have to qualify for a new loan with every subsequent property, and are eventually limited in the total number of loans you can have at all. This process is also not known for being smooth and easy, to say the least. 

Reason #5: Economies of Scale

Additionally, multifamily properties benefit from economies of scale. For example, expenses such as landscaping, maintenance, and property management can be spread across multiple units, resulting in lower costs per unit. This can lead to higher net operating income (NOI) and cash flow, which can translate into higher returns for investors.

Conclusion

While investing in single-family properties can be a great way to get started in real estate investing, scaling up to multifamily properties can provide even greater potential returns, less risk, greater control, and easier financing. If you’re ready to take your real estate investing to the next level, consider exploring the multifamily market and taking advantage of the benefits it offers. 

As a passive investor in a real estate syndication, you can take advantage of all the benefits of multifamily investing with none of the headaches associated with being a landlord. 

​Most investors have some familiarity with the big 3 traditional types of investing: stock market investing, REITs, and real estate. Many will only be familiar with the type of real estate investing that involves sacrificing your time as a landlord.

However, you’re here because you’ve discovered passive real estate investing in real estate syndications. So how does this type of real estate investing compare to stocks and REITs?

In this article we’re going to dive into the pros and cons, benefits and risks, advantages and disadvantages of these 3 types of investing.

Stock Market Investing Compared To Passive Real Estate Investing

We’ll start with looking at how investing in passive real estate investments compares to growing your capital in the stock market. From there, we’ll take a look at REITs specifically and see how they stack up against real estate syndications.

Long-Term Returns and Continuous Cash Flow

When assessing traditional assets like stocks or bonds, you typically encounter one-time cash payouts. However, in real estate syndications, you have the opportunity to invest in properties that generate positive cash flow without the need to sell them. This ensures a continuous stream of income, allowing you to keep the cash flowing over the long term.

Immediate Income through Real Estate Cash Flow

While stocks may pay dividends, few provide returns above 4%, barely keeping up with inflation. In contrast, real estate investors seek cash-on-cash returns of 7-10% or more, surpassing the meager 4% return offered by stocks.

With real estate syndications, you can enjoy immediate income through cash flow, sometimes starting in the first quarterly distribution. You’re then able to either use that income immediately or redeploy it in other investments to compound the growth.

Becoming an Expert Made Easy

Becoming well-versed in your desired real estate asset class or market doesn’t require a degree and can easily be achieved as a passive investor. By utilizing public information, such as population and job statistics, area rents, economic conditions, and real estate market trends, you can swiftly gain insights and identify potential markets to invest in and evaluate an asset.

Once a passive investor feels comfortable evaluating a market and a particular investment offering, it is easy to rinse and repeat.

It is much more challenging to become an expert in an individual company’s business plans for investing in the stock market. Most investors rely upon a financial planner to do the heavy lifting of identifying stocks to purchase that will out-perform the market. This seemingly solves your problem. However, this often comes with hefty (and hidden) fees that will greatly diminish your portfolio value over the long term.

The Ability to Inspect Real Estate

When investing in real estate, you have the advantage of inspecting the property before making a purchase, even as a passive investor. You can literally go to the property and do a “secret shop” to see the facility and experience the building as a tenant would experience it. You can also inspect the property, or the business plan and market, virtually. Most real estate investors become familiar with basic market evaluation tools, like population growth or job growth statistics. You can also perform basic searches for crime in the region, or other mentions of the property online. Most real estate syndications will additionally have extensive due diligence performed to ensure your capital preserved over the holding period.

On the contrary, scrutinizing every aspect of a company to validate its stock valuation is virtually impossible. By investing in real estate syndications, you gain the confidence of having personally assessed the property, ensuring that it aligns with your investment goals.

Straightforward Valuation of Real Estate

Unlike intangible assets with subjective valuations, real estate is comparatively easier to value due to its inherent comparability. Even if you lack expertise in property valuation, the process is not daunting, and there are numerous resources available to assist you in understanding if properties are over or under valued for a given market.

By utilizing online data, comparing properties to similar ones in the area, assessing overall conditions, and asking questions to the sponsor, you can derive a reasonably accurate ballpark understanding of the property values in your market.

Opportunities for Value Addition in Real Estate

Outside of corporate roles in public companies, it is challenging to significantly influence stock value. However, real estate offers ample opportunities to add value to your assets. Just as flippers enhance property value by making repairs or renovating properties to meet current buyer standards, a real estate syndication can greatly increase in value with specific upgrades and renovations.

Even better than a rental property, these upgrades often lead to direct increases in rent, which in turn increases the net operating income. This amount is used in the valuation of commercial real estate, unlike residential properties which are valued based on other houses in the area (called comparables or comps). With real estate syndications, you have the freedom to actively participate in value-adding activities.

Investing passively in real estate syndications presents a host of advantages, including long-term returns, continuous cash flow, easy valuation, inspection opportunities, and the potential for value addition. Embrace the world of real estate syndications and unlock the potential for financial growth and control over your investments.

Non-Traded and Publicly-Traded REITs: Understanding the Risks and Rewards

Non-traded REITs, also known as non-exchange traded REITs, offer investors an alternative to traditional stock exchange investments. These are private offerings, and can be harder to access for the everyday investor. As they do not trade on a stock exchange, investors may face challenges finding buyers or sellers when they want to transact.

Publicly traded REITs are open to any investor and are listed on major stock exchanges. You may invest in them directly, through mutual funds, or via exchange-traded funds, quickly and easily online.

REITS can have benefits when compared to traditional real estate investing and passive investing in real estate syndications. However, it is essential to be aware of the risks associated with these investment vehicles as well. Let’s take a look at both.

Confusing Liquidity

For a publicly traded REIT, you can buy or sell shares of your REIT at any time. However, for non-publicly traded REITs, which are some of the most lucrative, capital is less liquid. These often have minimum investment periods of 7 years or more. However, REIT managers may even limit the withdrawal of capital beyond that. Certain events or market conditions may cause a REIT to block withdrawals, or essentially render your liquid capital illiquid at the drop of a hat. One such time was during the interest rate increases in early 2023 when so many investors went to cash out of their shares at the same time.

However, it is essential to understand the fees associated with REITs, as there may be some associated fees if you elect to withdraw your funds early.

Real estate syndications are accompanied by a business plan that often defines holding the asset for a certain amount of time (often 5 years), during which your money is locked in, or illiquid.

Distribution Requirements And Tricky Loopholes

REITs are legally required to return 90% of their taxable income to you, the shareholder. This is why they can offer a higher yield compared to the rest of the stock market. However, they sometimes do distribute in tricky ways that may not reveal any distress they may be experiencing.

For instance, REITs may sometimes pay dividends using funds from other investors rather than property-generated income. This practice can impact the REIT’s cash flow and potentially decrease the value of shares.

The Hidden Fees Of REIT Investing

Savvier stock market investors know to look for the expense ratio of any fund they’re investing in. Often, the fees of these funds (in the ballpark of 1-2%) can significantly hinder your portfolio’s growth.

For REITS, fees are also a consideration. Non-traded REITs often charge upfront fees ranging from 9% to 10%, and sometimes as high as 15%. Additionally, if the REIT has an external manager, these fees can further reduce investor returns. Understanding the fee structure and management practices is crucial before investing in a non-traded REIT.

There are fees associated with real estate syndications, but they are baked into the underwriting and projections for the deal. In other words, the return projections (such as the 8% preferred return or 1.8x equity multiple you’re seeing in the investment summary) already include those fees.

Publicly Traded REITs: Risks to Consider

While publicly traded REITs offer a safer investment option compared to their non-exchange counterparts, it is essential to be aware of the potential risks associated with these investments.

Interest rate risk is a significant consideration for publicly traded REITs. When interest rates rise, the demand for REITs often decreases. This can cause a cascade of difficulties for managing the properties inside a REIT or even allowing full withdrawals of capital. Remember what I mentioned in the above paragraph on liquidity?

Investors tend to gravitate towards safer income plays, like U.S. Treasuries, when interest rates are high. Historically, REITs have not performed well during periods of rising interest rates.

Real estate syndications can also be impacted by rising interest rates. You can mitigate this risk by taking a look at the debt source for any potential investment offering. Is there an interest rate cap that will prevent rising interest rates from eating into your cash flow? Or is there fixed-rate debt on the property that won’t be impacted by rising rates?

The Big Tax Disadvantages Of REITs

Lack of tax advantages is one of the biggest downsides to REITs, and the biggest reason to grow your capital through syndications instead.

Although not necessarily a risk, it’s important to note that REIT dividends are taxed as ordinary income. This means that the tax rate on REIT dividends is the same as an investor’s income tax rate, which is typically higher than dividend tax rates or capital gains taxes for stocks. This can make your tax bill bigger.

Real estate syndications, on the other hand, have the potential to decrease your tax liability. When you invest directly in any property (real estate syndications included), you receive a variety of tax deductions, the main benefit being depreciation (i.e., writing off the value of an asset over time).

Oftentimes, the depreciation benefits surpass the cash flow. So, you may show a loss on paper but have positive cash flow. Those paper losses can offset your other income, like that from an employer.

When you invest in a REIT, because you’re investing in the company and not directly in the real estate, you do get depreciation benefits, but those are factored in prior to dividend payouts. There are no tax breaks on top of that, and you can’t use that depreciation to offset any of your other income.

Conclusion

It is up to you and your specific investing goals to determine which type of investing is right for you. You may prefer a mix of the asset classes described in this article, or be drawn to one in particular.

By understanding the risks associated with investing in REITs, the stock market, and real estate, investors can make informed decisions that align with their investment goals and risk tolerance. As with any investment, thorough due diligence, proper research, and seeking advice from experienced professionals can contribute to making prudent investment choices.

Medical professionals work incredibly hard, with their minds, bodies and hearts. We’ve seen this even more as they’ve showed up to care for patients through a global pandemic, during extreme natural disasters, and more incredibly intense events.

It’s no surprise that these people need to take a vacation more than most.

Running a practice and caring for patients, especially when dealing with operational stresses of managing a business, doesn’t leave much space for traveling more and spending quality time with friends and family. Yet, these individuals may need it more than most.

As a doctor, dentist, or nurse, It’s easy to get bogged down by the daily demands of your work, leaving little time for leisure or travel. Fortunately, there’s a solution that can help you reduce your workload, prioritize your well-being, and achieve greater financial freedom: passive income from real estate investing. 

Real estate investing does more than build wealth. The passive income, tax benefits, and equity growth can allow doctors and dentists, among others, to travel more and maintain a healthy well-being. 

But how? In this article, we’ll explore the benefits of using passive income from real estate investing to travel more, even as a medical professional, and show you how even medical professionals who own their own clinics can take the time to travel more.

Common Objections From Doctors And Dentists To Traveling More 

As a medical professional working in someone else’s practice or managing your own practice, it can be hard to think about traveling more. You are used to working countless hours, making high-level decisions, and have to continue paying the bills at home and in your business.

Each of the following objections are absolutely valid. However, every limitation starts with a limiting belief, or an idea that prevents you from seeing a solution. Let’s take a look at these common reasons why traveling more can be daunting for doctors and dentists, and see if we can find the limiting belief. 

#1 Objection: My Responsibility Is Too Great 

As the owner of a medical practice, you have a lot of responsibility for your patients, staff, and the overall success of the practice. If you left to travel, how would it all get done? This idea can make it difficult to take extended time away from work, as you may worry about the impact of your absence on the practice and the loss of income from not working.

This is an objection common among business owners. The truth is that every business can be built to run without the daily input from the owner. In fact, that is why most of us start businesses to begin with. 

By investing your income into passive real estate investing, your wealth continues to grow and your income can even be replaced by cash flow. As you develop systems to delegate management duties, you’ll begin to find that your true responsibility is to live your life with intention. If that means taking more time to relax and travel, then your business will likely benefit from your prioritization of your own health. Your patients may even get better care as a result of you traveling more.

#2 Objection: I Have Too Many Financial Obligations At Work And Home 

Owning a medical practice can be expensive, with overhead costs that must be paid regardless of whether or not you’re working. This can make it challenging to justify the expense of traveling, especially if it means taking time away from work and potentially losing income.

Being wealthy is really about having time. You likely became a doctor or dentist partially for the financial security promised in the medical field. Now that you have reached a higher income bracket, you may find that your health has been sacrificed to maintain your financial obligations.

Getting your money to work for you is the first and most important step in releasing your financial obligations from their control over you. The cashflow from real estate can eventually replace your income and the tax benefits can reduce your tax bill – putting more money back into your pocket. Real estate investing can provide freedom from the financial stress of earning a high income and running your own business.

#3 Objection: My Workload Is So Big That I Can’t Take Meaningful Time Off 

Running a medical practice can absolutely be a demanding and time-consuming job, leaving little room for leisure activities like travel. You may feel overwhelmed by the workload and worried about falling behind on important tasks if you take time away from work.

First, recognize that taking time away from work is not a sign of weakness, but rather a necessary part of maintaining your health and well-being. Remind yourself that you deserve time to relax, recharge, and pursue your personal interests.

Consider using time management strategies such as blocking off specific times for patient care or administrative tasks, prioritizing urgent tasks, and scheduling regular breaks throughout the day. This can help ensure that you make daily shifts that open your mind to the possibility of taking larger blocks of time off.

With real estate investments supplementing your income, you can reduce the financial burden of taking time off so that you can focus on shifting your workload.

Finally, Plan your travel well in advance, delegate tasks early, and communicate your plans with your staff and patients. This can help manage expectations and ensure that everyone is on the same page.

#4 Objection: My Personal Values Are To Help Other People First 

As a healthcare professional, you may feel a strong sense of duty to your patients and your community. It is probably why you became a doctor or dentist to begin with. You may worry that taking time away from work to travel could be seen as neglecting your responsibilities or betraying your professional values.

However, what type of care are you providing when you are stressed about running your business, paying high taxes, or neglecting your physical and mental health? Probably not great. 

Your patience deserves care from a medical professional who is living life to the fullest.

This may mean that you need to shift your belief about how much time you need to spend delivering quality care to patients. Perhaps by prioritizing your own health and travel goals, you can serve others even better? Along the way, you may find your own relationships and health improve.

Use The Lever Of Real Estate Investing To Travel More

Overall, it can be challenging to balance the demands of owning a medical practice with the desire to travel more. However, with careful planning, delegation of duties, and a strong support system, it’s possible to achieve both personal and professional goals.

By investing in real estate you are adding a significant lever to many of the challenges with traveling more for medical professionals. Passively investing in real estate can reduce the financial stress associated with business owners and high-income professionals. This happens through ongoing cash flow, appreciation of assets, and significant tax benefits – something every high income earner can use more of.

It’s important to address these objections and concerns in any discussion of the benefits of traveling more as a doctor or dentist. It may be daunting initially, but living your life with more intention can have positive ripple effects in the way you show up for your patients, your family, and yourself. It is possible to overcome every one of these limiting beliefs. Start with learning more about how passive income can give you more of your freedom back and you’ll start to see other objections to traveling more dissolving.

For real estate syndicators looking to finance the acquisition or refinance of a multifamily property, a HUD loan can be an attractive option. The U.S. Department of Housing and Urban Development (HUD) offers a variety of loan programs for multifamily properties, including both market-rate and affordable housing. 

In this blog post, we’ll explore what a HUD loan is, how it works, and the benefits and drawbacks of using one in a multifamily real estate syndication.

What is a HUD Loan?

A HUD loan is a mortgage loan that is insured by the Federal Housing Administration (FHA) and offered by HUD. HUD loans are designed to encourage the development and preservation of affordable rental housing by providing financing for multifamily properties that meet certain criteria. HUD loans are typically issued by private lenders, such as banks or mortgage companies, and are insured by the FHA, which means that if the borrower defaults on the loan, the FHA will pay the lender the outstanding balance.

“These are agency backed loans, they are very long-term and they are fixed. So on the good side, if you develop a multifamily property and get a HUD loan, it’s 40 years of fixed rate interest, and 40-year amortization. And, if you go from 20, to 25, to 30, to 40, that type of amortization really increases cash flow.” says Tom Burns, real estate developer and author.

How Does a HUD Loan Work?

HUD loans are available for both acquisition and refinancing of multifamily properties. To qualify for a HUD loan, the property must meet certain criteria, including:

• Being a multifamily property with at least five units
• Being in good physical condition and well-maintained
• Being located in an area with strong rental demand
• Meeting certain affordability criteria for certain types of HUD loans

Once the property meets the criteria, the syndicator can apply for a HUD loan through a lender that is approved by HUD. The lender will underwrite the loan and determine the terms, such as the interest rate, loan amount, and repayment term. If the loan is approved, HUD will insure it, which means that the lender is protected in the event of a default.

Benefits of Using a HUD Loan in Multifamily Real Estate Syndications

There are several benefits to using a HUD loan in a multifamily real estate syndication, including:

Lower interest rates

HUD loans often have lower interest rates than conventional loans, which can result in lower monthly payments and higher cash flow.

Longer repayment terms

HUD loans can have repayment terms of up to 35 years, which can provide greater flexibility and lower monthly payments.

Non-recourse financing

HUD loans are typically non-recourse, which means that the lender cannot pursue the borrower’s personal assets in the event of a default.

Preservation of affordable housing

While not all HUD loans involve affordable housing, certain types of HUD loans, such as the Section 221(d)(4) program, are designed to preserve and improve affordable housing.

Drawbacks of Using a HUD Loan in Multifamily Real Estate Syndications

While there are many benefits to using a HUD loan, there are also some drawbacks to consider, including:

Lengthy Application Process

HUD loans can take longer to process and close than conventional loans, which can delay the acquisition or refinance of the property.

Strict Underwriting Criteria

HUD loans have strict underwriting criteria, which means that the property must meet certain standards for physical condition, location, and affordability.

Fees and Expenses

HUD loans can have higher fees and expenses than conventional loans, including upfront mortgage insurance premiums and annual mortgage insurance premiums.

What Does A HUD Loan Mean For A Passive Investor?

For a passive investor considering a real estate syndication that includes a HUD loan, there are a few key takeaways to keep in mind.

First, a HUD loan can be a positive sign for the syndication as it can provide lower interest rates, longer repayment terms, and non-recourse financing. This can result in greater cash flow and a more secure investment for the passive investor.

Second, it’s important to understand that the application process for a HUD loan can be lengthy, so the syndication may experience delays in closing the acquisition or refinance of the property. Additionally, the strict underwriting criteria for HUD loans means that the property must meet certain physical condition, location, and affordability standards. As a passive investor, it’s important to ensure that the syndication has carefully evaluated the property and is confident in its ability to meet these standards.

Finally, it’s important to consider the fees and expenses associated with a HUD loan, which can be higher than conventional loans. These fees can impact the overall return on investment for the passive investor.

In summary, a HUD loan can be a positive financing option for a real estate syndication, but it’s important for passive investors to understand the potential benefits and drawbacks and to carefully evaluate the syndication’s ability to successfully navigate the HUD loan process.

Conclusion

A HUD loan can be a valuable financing option for real estate syndicators looking to acquire or refinance a multifamily property. With lower interest rates, longer repayment terms, and non-recourse financing, HUD loans can provide attractive terms and greater flexibility. However, the application process can be lengthy, and the underwriting criteria can be strict, so it’s important to weigh the benefits and drawbacks carefully before deciding if a HUD loan is right for your multifamily real estate syndication.

​In the intricate world of commercial real estate investments, few factors hold as much sway as interest rates. These rates can be the tide that either lifts or dampens the fortunes of investors. 

For passive investors looking to grow and protect their capital in commercial real estate and alternative assets, comprehending the influence of interest rates is helpful. 

In this article, we’ll dive into how high-interest rate environments can ripple through the commercial real estate market and share insights on mitigating their potential impacts.

Understanding the Ripples of High-Interest Rates

In commercial real estate, the ebb and flow of interest rates can be a game-changer. This first section unveils the intricate dance between high-interest rate environments and the commercial real estate market. Interest rates can act as a powerful lever, affecting leveraged returns, construction dynamics, property acquisition, and even yield targets. 

1. Leveraged Returns and Borrowing Costs:

Leverage is a cornerstone of many real estate investments, amplifying returns. However, when interest rates climb, the cost of borrowing money to develop or purchase properties increases. This elevated cost creates a double-edged effect – developers and investors face pricier leverage, leading to lower potential returns and a subsequent dip in demand for new projects.

2. A Slowdown in Construction and Development:

As interest rates soar, the construction and development of new properties often experience a slowdown. Developers become cautious, hesitant to shoulder the heightened financial burden and project risks that accompany elevated interest rates. Consequently, the momentum of creating new real estate assets can be dampened.

3. Impact on Asset Acquisition:

The impact of high interest rates extends to acquiring new assets. Increased borrowing costs make it more expensive for investors to secure funds for acquisitions. This scenario leads to a reduction in purchasing power and potentially fewer investments. The simple equation holds: higher debt payments mean diminished returns on each dollar invested.

4. Yield Targets and Property Values:

Investors in commercial properties typically have specific yield or cash-on-cash return targets. When interest rates climb, meeting these targets becomes challenging. To compensate, the only lever left to pull is a decrease in property values. The cumulative effect of reduced demand, fewer construction projects, and less competitive bidding can transform a seller’s market into a buyer’s market.

Navigating High-Interest Rates as an Investor

As a passive investor ready to invest, proactively navigating the impact of high-interest rates is essential. The following strategies could help to empower investors to remain resilient in the face of interest rate fluctuations. Explore the art of structuring deals with foresight, prioritizing stable cash flow, focusing on markets with economic robustness, and diligently monitoring the broader economic landscape. By embracing these strategies, you can more confidently steer your investments toward success.

1. Mindful Deal Structuring

When evaluating potential investments, assess whether the deal remains viable under the current interest rate environment. Consider if a planned refinance when borrowing costs drop could make sense for your strategy.

2. Stable Cash Flow Focus

Prioritize properties that generate consistent cash flow, particularly those leased to creditworthy tenants or situated at higher cap rates. These properties are better positioned to cover the interest rate spread and cushion against potential impacts.

3. Market Resilience

Invest in markets with robust economic fundamentals. These regions tend to withstand market swings more effectively, offering greater resilience against interest rate-induced volatility.

4. Economic Climate Monitoring

Stay attuned to the broader economic climate and interest rate projections from the Federal Reserve. These insights can reshape your underwriting strategy, ensuring it remains adaptable to changing market dynamics.

Harmony Heights: A Hypothetical Example

Let’s take what we’ve learned and apply it to a fictitious example of how rising interest rates can impact a multifamily investment.

In the vibrant city of Harmonyville, Texas, the Harmony Heights Apartments have proven to be a favored investment opportunity. The elegant complex, nestled amidst the city’s rich culture, was acquired by investors with an astute vision for growth. With a floating-rate loan secured at the inception of the investment, the property was poised for success, aligned with the prevailing market conditions.

Fast forward a few years, and a new challenge emerges – rising interest rates. 

As economic dynamics shift, the floating rate loan that initially brought flexibility now presents a fresh set of considerations. With each increase in interest rates, the loan’s servicing costs begin to escalate, subtly impacting the bottom line.

Despite the increased expenses, Harmony Heights Apartments remain a sought-after residence, boasting impressive occupancy rates and consistent rental income. The property management team’s diligence in maintaining tenant satisfaction and preserving rental levels continues to pay dividends. The asset’s performance remains strong, showcasing the enduring demand for quality housing in Harmonyville.

Yet, the impact of rising interest rates cannot be ignored. As servicing costs rise, there is a delicate balance to uphold. While there is still cash flow to support property operations and fulfill debt obligations, there is a need to reduce investor distributions. Owners are also looking ahead at potential preferred equity financing to creatively refinance the property.

In this scenario, proactive communication and transparency emerge as guiding principles. The investors are well-informed about the market dynamics and the implications of the interest rate adjustments. A revised distribution strategy is presented, ensuring that while the distribution might experience a temporary adjustment, the property’s overall health and value preservation remain uncompromised.

In a worst-case scenario, where interest rate fluctuations challenge the property’s operational viability, a well-prepared contingency plan is in place. The sponsor may choose to either bring on a source of preferred equity, or do a capital call to existing limited parter investors. This strategic approach safeguards the investment and aligns with the investors’ shared vision of growth.

Despite the challenge posed by rising interest rates, the property continues to thrive. This scenario underscores the significance of proactive management, adaptable strategies, and investor communication. 

Conclusion

High-interest rates wield significant influence over the commercial real estate landscape, exerting their impact on leveraged returns, construction, property acquisition, and more. While these rates can induce short-term fluctuations, a judicious approach can mitigate potential negative effects. Focusing on stable cash flow properties and resilient markets, alongside astute deal structuring, empowers investors to navigate the complexities of high-interest rate environments. Remember, commercial real estate is a long-term venture, and wise strategies will enable you to ride out the tides of short-term fluctuations.

If you’re a passive investor looking to invest your extra income without being a landlord, investing in multifamily real estate may be an attractive option for you. Multifamily real estate refers to buildings that contain multiple units, such as apartment complexes. 

Investing in multifamily real estate can provide several benefits, such as stable cash flow, long-term appreciation potential, and tax advantages. However, not all multifamily real estate investments are created equal. 

In this post, we’ll discuss some of the most relevant value add strategies in multifamily real estate today that you should consider before making an investment.

First, let’s review a few things.

What is the value-add strategy in real estate syndications?

The value-add strategy in real estate syndications involves identifying underperforming or undervalued properties and implementing strategies to increase their value. 

This can include renovating existing units, improving property management, adding amenities, and making capital improvements. The goal of the value-add strategy is to increase the property’s net operating income (NOI) and cash flow, resulting in higher property values and therefore returns for investors.

Types of Value Add Strategies Relevant In Today’s Market

The most relevant types of value adds that operators should be using in this market depend on the specific property and market conditions. Some properties will respond well to certain amenities, while others may not. An experienced operator will understand market demands and be able to anticipate where best to invest capital to see an increase in NOI.

However, some common value-add strategies include renovating and upgrading existing units, implementing energy efficiency measures, improving property management, and adding amenities that meet the demands of current and potential tenants. 

Operators should also consider repositioning the property, such as converting an apartment complex into a condominium or adding additional units to a building, if market conditions support it. 

Let’s dive deeper.

Renovations and Upgrades

One of the most common value add strategies in multifamily real estate is to renovate and upgrade existing units. This can include updating kitchens and bathrooms, installing new flooring or appliances, or adding new amenities, such as a fitness center or pool. By improving the quality of the units, property owners can increase rental rates and attract higher-quality tenants, resulting in higher cash flow and property value.

Repositioning

Repositioning involves making significant changes to a property, such as converting an apartment complex into a condominium or adding additional units to a building. By repositioning a property, investors can take advantage of changing market conditions or demographic trends, such as an increase in demand for high-end condominiums or a shortage of affordable housing.

Management Improvements

Improving the property’s management can also be an effective value add strategy. This can include implementing new marketing strategies to attract tenants, streamlining the leasing process, or reducing operating costs through energy efficiency measures. By improving the management of the property, investors can increase occupancy rates and rental income, resulting in higher cash flow.

Capital Improvements

Capital improvements refer to larger-scale renovations or upgrades, such as replacing the roof or HVAC system, that can improve the property’s overall condition and longevity. By making capital improvements, investors can increase the property’s value and attract higher-quality tenants, resulting in higher cash flow and property value.

Alternative Uses

Finally, investors can consider alternative uses for a property, such as converting an apartment complex into a hotel or a senior living community. By considering alternative uses, investors can take advantage of changing market conditions or demographic trends, resulting in higher cash flow and property value.

Unique Amenities

As technology begins to infiltrate every aspect of our lives, tenants may come to expect different types of amenities at apartment complexes. This could include keyless entry, smart lockers in fitness areas, smart thermostats, and other tech-based amenities. 

Value-Add Strategies That No Longer Work

Value-adds that no longer work include strategies that are no longer relevant to current market conditions or tenant demands. For example, adding a swimming pool to a property may have been a significant value-add in the past, but if the property is located in an area where tenants prioritize other amenities, such as a fitness center or communal workspace, it may no longer be an effective strategy. 

Similarly, strategies that do not comply with current laws or regulations, such as adding additional units without proper permits, are also not effective and can lead to legal and financial consequences. It’s crucial for operators to stay current on market trends, tenant demands, and regulations to implement effective value-add strategies.

Conclusion

In conclusion, investing in multifamily real estate can provide several benefits for passive investors, but not all multifamily real estate investments are created equal. By understanding the most relevant value add strategies in multifamily real estate today, you can make an informed investment decision that meets your financial goals and risk tolerance. 

As always, it’s crucial to understand the elements behind any real estate syndication you may be evaluating. Schedule a call today to chat with one of our investment professionals. We’d be happy to answer any questions you have about the business plan and strategy behind any deal, present or past.

Real estate investments and estate planning are two concepts that may seem unrelated, but they can actually work together to help individuals and families achieve their financial and personal goals. 

Some may say that they are two essential components of building a lasting legacy.

Real estate investments can be an important part of an overall investment portfolio, providing a steady stream of income and long-term growth potential. Estate planning, on the other hand, involves making decisions about how one’s assets will be managed and distributed after death or incapacitation. By understanding how real estate investments and estate planning work together, individuals can ensure that their investments are protected and that their assets are distributed according to their wishes.

In this article we’ll cover what is estate planning, how real estate investments fit into an estate plan, tax implications and other issues that arise during the process.

Before we begin, it is essential to consult with an estate planning-focused legal advisor to develop your estate plan documents. Your legal team will not only be able to create the documents, but also advise you on the best path to holding your real estate portfolio so that it can be included in your estate planning documents.

Pro Tip: Be sure that any estate planning documents are not only created, but funded. This means that any assets you hold are included in the document, or transferred into ownership of the document. For instance, with a living revocable trust, properties should be owned by the trust itself for the easiest ownership transfer.

What Is Estate Planning?

Estate planning is the process of creating a plan for the management and distribution of your assets after you pass away. It typically involves creating legal documents such as wills, trusts, and powers of attorney. Estate planning is important for everyone, regardless of the size of their estate, as it can help ensure that your wishes are carried out and that your assets are distributed according to your wishes.

One important aspect of estate planning is protecting your real estate investments. Real estate is often a significant part of a person’s estate and can be subject to various legal and tax issues. By incorporating real estate investments into your overall estate plan, you can help protect your assets and ensure that they are distributed according to your wishes.

How Real Estate Investments and Estate Planning Work Together

Real estate investments and estate planning work together in several ways. For example, incorporating real estate investments into your estate plan can help minimize taxes, avoid probate, and provide for the transfer of property to heirs. In addition, estate planning can help ensure that your real estate investments are properly managed and maintained, both during your lifetime and after your passing.

For example, you may choose to create a trust to hold your real estate investments. By doing so, you can transfer ownership of the property to the trust, which can help avoid probate and minimize taxes. The trust can also provide for the management and maintenance of the property, ensuring that it is properly cared for and generating income for your beneficiaries.

Why Avoid Probate?

Real estate investments that go through the probate process can be costly and time-consuming, which can be a burden on your heirs. Probate is the legal process by which a court oversees the distribution of your assets after you pass away. During probate, your assets are typically frozen until the court determines how they should be distributed. This process can take months or even years, depending on the complexity of your estate.

For real estate investments, the probate process can be particularly burdensome. Real estate is often subject to complex legal and tax issues, and the probate process can exacerbate these issues. In addition, the costs associated with probate can be significant, including court fees, attorney fees, and other expenses.

By avoiding probate for your real estate investments with certain types of estate documents, such as a trust, you can help ensure that your heirs receive their inheritance in a timely and efficient manner. This can help minimize the financial burden on your loved ones and ensure that your assets are distributed according to your wishes. One way to avoid probate for your real estate investments is to create a trust, which can help transfer ownership of the property outside of the probate process.

Common Real Estate and Estate Planning Issues

There are several common issues that real estate investors face when it comes to estate planning. One common issue is transferring property to heirs. Without proper planning, real estate investments may be subject to probate, which can be time-consuming and costly. Additionally, the transfer of property to heirs may be subject to gift or estate taxes.

Another common issue is dealing with tenants after death. If you own rental property, it’s important to have a plan in place for the management of the property after your passing. This may involve naming a property manager or executor in your will, or creating a trust to hold the property and provide for its management.

As a Limited Partner in a real estate syndication, passing down your real estate can be easier since you aren’t acting in any management capacity. Ownership typically passes through to heirs as either part of an LLC, Trust, or directly to beneficiaries as the new owners. 

Of course, as with any legal matter, working with an experienced estate planning attorney is essential to be sure your assets will transfer easily. You can create a plan that meets your unique needs and helps ensure the long-term success of your real estate investments.

Tax Implications In Estate Planning With Real Estate

Real estate investments can have significant tax implications, both during your lifetime and after your passing. Estate planning can help minimize these taxes by utilizing strategies such as trusts, gifting, and charitable donations. 

For example, a properly structured trust can help avoid or minimize estate taxes by removing the property from your taxable estate. Additionally, gifting property to heirs during your lifetime can help reduce your taxable estate, and charitable donations of property can provide significant tax benefits. However, it’s important to work with an experienced estate planning attorney and tax professional to ensure that you’re taking advantage of all available tax benefits and minimizing your tax liability.

Conclusion

Real estate investments can be a valuable part of your overall investment portfolio, but they also require careful planning and management. Incorporating real estate investments into your estate plan is an important step to ensuring that your assets are properly protected and distributed according to your wishes.

Estate planning can help minimize taxes, avoid probate, and provide for the transfer of property to heirs. It can also help ensure that your real estate investments are properly managed and maintained, both during your lifetime and after your passing. By working with an experienced estate planning attorney, you can create a plan that meets your unique needs and helps ensure the long-term success of your real estate investments.

If you haven’t already, now is the time to start thinking about your estate plan and how your real estate investments fit into it. Whether you’re a seasoned real estate investor or just starting out, proper planning can help ensure that your investments are protected and your wishes are carried out. Remember, seeking professional advice for both real estate investments and estate planning is important, and can help you make informed decisions for your future.