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Creating Financial Freedom Through Passive Real Estate Investing · The Academy Presents podcast

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  Did you know that 90 % of the world's millionaires
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  invest in real estate? Well, I'm Angel with the
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  Academy Presents Real Estate Investing Rocks,
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  and I'm here to help you if you want to go for
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  your piece of that pie. Are you new? Are you
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  new to this and you just don't know where to
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  start? It's okay. Are you someone that has invested,
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  but you feel stuck, you feel like you've lost
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  momentum, you don't know where to really head
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  from here? Are you a seasoned real estate investor
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  who is doing great but maybe you just want to
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  hone a few skills here and there? This is the
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  place for you. The Academy Presents Real Estate
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  Investing Rocks podcast will connect you with
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  industry experts so that you can save time, avoid
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  costly mistakes, and begin living the life you've
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  dreamed of all through real estate investing.
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  You're already taking the first step. just by
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  joining us here today. Okay, so now let's take
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  the example from earlier and talk about what
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  it is like if you want to live off of your investment.
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  So I am in that situation right now. I want to
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  live off my investment. I don't want to go to
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  work. So our same example, so kind of same similar
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  investment examples, but one million invested.
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  So now you can grow in your portfolio, you are
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  in a good place. So one million invested, same
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  5 % distribution, five year 2X return. But this
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  time, we are not reinvesting the distributions
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  and we are not contributing more to the investment
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  because we're living off of this, right? We're
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  living off of our investment. But also, we have
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  the same $1 million in the stock market. And
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  we want to live on the same amount that we would
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  get from real estate syndication. So we are assuming
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  that we will get drawings from the S &P 500 in
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  order to equal the distributions from real estate.
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  So we're going to take a look at three example
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  years. So year one, end of year one, you're pretty
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  much equal in your invested amount. In syndication,
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  you get $1 million. In SMT, you get a little
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  bit more than that because it gets grown. But
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  distributions, you have $50 ,000 from real estate,
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  and you get $17 ,000 from the standard dividends
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  from S &P 500. That means that you need to draw
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  in that year one additional $33 ,000. So you
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  need to deplete the S &P 500 in order to equal
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  the S &P 500. Now year six, and I'm taking year
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  one, six, and 11, mainly because with five years,
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  because this is when your investment goes full
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  cycle, there is a lot of ifs and buts. So I just
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  took six years. So in year six, your real estate
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  portfolio is now at 1 .75 million. Your distributions
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  have gone by 50%. Now you're at 87 and a half
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  thousand a year in distributions alone again.
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  tax -free. On the S &P 500, your portfolio has
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  also grown to $1 .4 million, but now your distributions
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  have grown as well, but now you're actually taking
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  out another $64 ,000 a year in order to equal
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  that $87 ,000 that you're hopefully living off
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  of. And in year 11, In year 11, you are now getting
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  to a really substantial portfolio. Your portfolio
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  is at $3 million. Your distributions are at $150
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  ,000 a year. your portfolio in S &P 500 is much
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  lower. You're at 1 .75. And honestly, in kind
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  of like year 14 -15, your S &P 500 actually starts
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  going down while the syndication investments
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  are still going up because I'm still assuming
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  that you're reinvesting what you get on sale.
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  So you're still growing. So I have a question.
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  So this is you're just living off the distributions
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  and on the capital event. or on the cell, you're
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  reinvesting that but living off the distro. Correct.
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  So distribution still continue to grow because
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  now when you reinvest, your invested amount is
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  larger, so your distributions grow. It's a snowball
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  effect. It just, it works. Now, this is all great
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  and this is my plan. All right, this is my plan.
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  I want to also mention a couple of the not so
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  great part, because I don't want to be just all
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  rosy, because all of these are possible distribution
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  paths. I have three investments right now that
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  are causing distributions. They are still feeling
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  like they're going to make it and they don't
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  feel like they're going to do capital calls.
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  But capital calls are also possible. Capital
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  calls are when basically the sponsor is spending
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  more money than they're making out of the property.
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  So there needs to be more funds in order to sustain
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  the property and not default. There are lots
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  of capital calls happening right now. Worst case,
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  you can get one to foreclosure and not get your
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  money ever. Be cautious of those things, think
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  it through. Learn and really, really evaluate
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  the investments and the sponsors you're investing
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  in because really, at the end of the day, a sponsor
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  is going to make or break an investment. With
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  all of that, Hopefully, it was very educational
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  for you. I have three recommendations to end
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  with. First of all, is learn. I am speaking as
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  a passive investor. I'm not speaking as an active
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  investor, so my recommendation is for passive
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  investors, but I do truly believe that active
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  investors should also read this book. It's The
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  Handoff Investor by Brian Burke. It's amazing
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  book going from the beginning to the end about
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  investing in specifically real estate syndication
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  more on the multifamily side, but really, really
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  amazing book. Second thing I would encourage
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  you is play with my calculator, play with a fire
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  calculator just so you can start getting an idea
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  of what is your fire number, but also so you
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  can understand a little bit more what can syndication
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  do for you. And finally, invest. My only regret,
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  and I hear that from every single person, the
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  only regret is not starting early enough. So
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  invest. If you feel more comfortable, invest
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  something smaller so you can learn. But start
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  investing because the longer you invest, the
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  faster you're going to get to your financial
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  independence. Now, in the beginning, I promised
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  you guys cat techs. Those are my three cats and
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  that I am happy to go into Q &A. Thank you. Awesome.
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  Thank you so much. This was awesome. Now I do
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  have a question on the chart that was like four
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  slides up maybe where you showed that one. Now
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  if there is say a refi in the middle, would you
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  reinvest that money also? Yes, I would. I would
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  reinvest mainly because I also feel that once
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  you get into that financial independence, you
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  need to be disciplined with the money you're
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  spending. If you have a plan to spend 50 ,000
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  a year, don't go and spend 60, or if you won't
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  spend 60, but make sure that your portfolio is
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  going in the right direction. If you're spending
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  60, Honestly, you probably do want to have diversification
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  with stocks and real estate because real estate
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  is not liquid. You can't just go and say like,
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  oh, this year I want to take 10 ,000 back. No,
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  you wait until it's done. But me personally,
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  I would reinvest those proceeds unless you plan
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  to not from the beginning. OK, so here's another
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  one I'm going to throw out. And Sandy and I talked
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  about this too. But there was a speaker at the
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  event that we were at a few Saturdays ago where
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  he said that if you are giving distributions
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  right now, you are irresponsible. As a passive
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  investor, what are your thoughts on that? Because
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  we invest on both sides. We invest LP and GP
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  in our active deals so that we know what our
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  investors are getting. We know what they're feeling.
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  But we're sitting both sides. How do you feel
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  as strictly a passive investor when those distributions
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  are paused? So the answer is it depends, mainly
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  because you might have two situations. If you
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  had fixed debt, if you don't have any like really
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  capital events coming like refinance or interest
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  only ending that was not accounted for as part
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  of the plan. If you're in that situation and
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  your property is performing, there is absolutely
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  no reason to stop distributions. I will feel
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  weird if my sponsor is stopping distribution
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  considering that everything is going to plan.
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  But if you are in a situation where you're not
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  going to fix that, you know that your interest
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  is going to be increasing, you know that you
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  might need to have more reserves for that, then
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  I will feel weird if you're not stopping distributions.
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  But the only thing I ask as a passive investor
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  is let me know and let me know in details and
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  let me see the plan of like, what's your plan?
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  Like how much money you will need? When are you
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  stopping distributions? How much reserves you
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  will have? What is your plan for those reserves?
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  How long can you survive on those reserves? And
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  hey, if you refinance to a fixed debt right now,
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  even though the interests that are high, would
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  the debt be covered? Because if the debt is covered,
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  then okay. do that, stop distributions, wait
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  until the property is, because I mean, most of
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  the time your NOI should be growing each year,
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  wait until your property's NOI is growing and
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  restart the distributions. So for me, it's more
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  on the, it depends and it's really on those two
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  sides. No, that's awesome. Yeah. So anyway, I'm
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  writing all this down because we sit on the GP
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  side and we've been in a situation where we have
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  paused we've paused distributions we had some
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  unexpected expenses come up and it is it's fixed
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  debt but we had to replace all the gas lines
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  on the property that was a very big expense that
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  it just simply was not planned for and even if
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  we're able to get some of it covered with a draw
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  debt service goes up and There's just other things
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  that happen with it, and we still have to front
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  it. So there's some things that happen there.
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  But I like the idea of, well, not really the
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  idea. I like what you said about, just let me
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  know what's going on. And as an LP investor,
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  because we're LP investors too. We're LP investors
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  too, and we want to know what's going on. Just
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  let us know. We're going to understand if you
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  had to replace all the gas lines at your property.
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  We're going to understand if a big fire came
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  in and destroyed half of the crop. We're going
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  to understand those things. But if you just fall
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  off the earth and there's no more communication,
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  that gets very scary. But so this is why though
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  is also important. So not necessarily in the
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  Well, building stage but kind of at the stage
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  which is this illustration where you're living
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  off of it. It's important as a passive investor
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  to be diversified in real estate and its permutations
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  but also having some extra money, like having
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  stocks, right? If your distributions are not
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  there, you can start depleting your stock. And
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  maybe when distributions return, maybe you can
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  go and replenish your S &P 500 investment. But
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  you have that flexibility. If you're purely in
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  real estate and all of your sponsors stop distribution,
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  you have no money to live off. And that's scary.
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  When we got into multifamily about, I guess about
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  five years ago, and we knew we were gonna go
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  active side, there were so many people in the
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  space that were like, get rid of all your residential
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  stuff. If you're going multifamily, go full multifamily.
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  And Jason and I talked about it for a really
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  long time because we were like, our roots are
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  in residential. That's where our roots are. We
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  came from families that invested in residential
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  real estate. We invested in residential real
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  estate. We've been in it for 20 years and we
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  made the decision to not liquidate it and There
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  have been times when it's been the cash flow
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  from those residential properties that's helped
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  us float through So I'm really glad that we didn't
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  get rid of them because it's it's another level
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  of diversification for us Hold on Yeah. So, you
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  know, Prolet, I just want to thank you for being
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  here and your presentation was amazing. I really
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  love your calculator too. And I'm excited to
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  continue playing with it and seeing what all
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  it can do because I want to know when we can
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  like cover our girls' tuition with those passive
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  investments because school is crazy and we're
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  not even in college yet. Yeah, I know. Thank
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  you for having me. And I always am very excited
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  when people go and play with the calculator and
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  see what it is. Because I remember when we first
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  talked about it and we're talking about like,
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  oh, 50 % is not that much investing in real estate.
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  But then we took a look in the long term. And
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  I remember you were saying like, oh, wow. So
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  I'm hoping it's helpful for other people as well.
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  So thank you so much for organizing the summit.
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  And thank you for having me. Oh, absolutely.
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  And guys? we've got tons more to come if you
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  want to stay on this side there is a ton of information
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  here if you want to come join us on the live
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  side remember it's going to take one of two ways
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  you can become a VIP subscriber or you can get
• 14:53
  that VIP upgrade ticket or if you know a speaker
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  you might be able to get a sneaky way to get
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  over that way too but we would love to have you
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  on the live side but this side is great too so
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  whichever you decide until next time