“But those Woulda-Coulda-Shouldas all ran away and hid from one little Did.” – Shel Silverstein
How to Build Generational Wealth
I read an article recently that is part of a series focused on empowering millennial financial empowerment. This article explains how generational wealth is passed down in different ways and some communities face barriers.
In summary, the article explains that traditionally, generational wealth is passed down through: 1.Homeownership, 2. Life Insurance, 3. Trust Fund, and 4. Family Business. Obstacles in creating generational wealth are cited as income lag from generation to generation, student loan debt, pay inequality and institutional racism.
Despite the obstacles, Two (2) Key Steps to take in order to start building generational wealth are:
Financial Literacy is Key: “Ignorance is not bliss when it comes to money management and creating wealth. You don’t have to be an economist, but you — and your kids — should know the basics of budgeting, savings, retirement planning, and investing. You should understand the difference between assets and liabilities, and the importance of a budget worksheet and a good credit score.”
Build a Team that Helps Grow Your Wealth: “Creating wealth is like losing weight. You need a plan and a team that helps you along the way. Your financial plan needs to be adaptable as you age. And you need to consider children, marriage, divorce, retirement, and caring for aging parents.” Even though it is easy to start investing on your own with low minimum deposits and no fees, eventually as your wealth grows you will have to talk to accountants, estate attorneys, financial planners and other investment advisors to ensure your financial plan and investments adapt as your life changes.
While I do not provide tax, legal or investment advice, If you’d like to learn more about Financial Literacy or building your Wealth Building Team, please schedule a time to meet with me.
A-Rod pays $30M for Apartment Complex
Even ex-professional athletes realize the benefits of investing in multifamily real estate
A real estate investment company co-founded by Alex Rodriguez, the former professional baseball player and new part owner of the Minnesota Timberwolves and Lynx, acquired a 216 unit apartment complex in West St. Paul, MN for $30.25 million this month.
Quotes from the press release include:
“Demand for well-located apartment assets in the Twin Cities remains strong from local to national buyers considering the market’s impressive fundamentals and world-class economic drivers.”
“Workforce housing is one of the most compelling housing needs…It ideally fits our acquisition criteria, that of being in a strategic location, near a major employment hub.”
Invest in Real Estate with your Retirement Funds (and potentially without and tax penalties)
Yes, you read that correctly. And, no I am not talking about the real estate stocks available through your employer sponsored 401(k), mutual funds, etc .
In case you did not know, it is possible to utilize your retirement funds to invest in alternative investments, such as real estate! And if done correctly, this can also be accomplished without any tax penalties.
I had actually started in my own multifamily investment journey by utilizing some of my Rollover IRA and 401(k) funds, and moving it into a Self Directed 401(K). From there I was able to invest passively into a few great multifamily deals on my own and with industry colleagues. These days however, because of some recent proposed legislation that may bring many new limitations to Self Directed IRAs, many of my colleagues who are invested with their Self Directed IRAs are moving into a Solo 410(k) or QRP (Qualified Retirement Plan) which are currently not being targeted by this new proposed bill.
If you are interested in hearing more about this, I would be happy to get on a call or video conference. You can schedule with me by clicking here. Or if you would like to investigate on your own, check out these resources:
*This s not intended to sell any securities nor do we provide investment, legal or tax advise.
Why Switching from Single-Family to Multi-Family Investing Can Make Sense
One of the best ways to build your portfolio is to invest in real estate. It creates a source of passive income and with different property types to choose from, it offers variety for investors who are making a business out of their portfolio. For the average investor, it’s important to consider the capital needed to realize desired gains. Depending on the situation, owning commercial or single-family real estate may require more capital investment while potentially offering the same gains.
Of the three types of income — which you can define as portfolio income, earned income and passive income — passive income is the only income that doesn’t require a significant investment of time to earn it. So, what is passive income? IRS has defined passive income as any business activity which does not involve your direct participation. Once you put your investment into a rent-producing piece of real estate, the income you receive is your passive income. This income clock keeps ticking in your favor without needing to take significant action on a daily basis.
Single-Family Versus Multi-Family
One question facing real estate investors, especially new investors, is whether to invest in single-family units or multifamily units. In this current pandemic-induced uncertainty, the price volatility of an investment is of prime concern. A study of investment patterns and valuation has shown that when the economic situation improves, it is the asset value and income from multifamily investments that recover faster than many single-family units. Multi-family occupancy has held up since the Great Recession, while delinquency rates for multi-family loans remain low. A part of this trend can be attributed to the demographic profile shifting toward Millennials and the ‘Next Gen’ crowd, who prefer to rent (not own) multifamily units rather than single-family units.
One advantage of investing in multifamily units rather than single-family units is that it is much easier to get one loan versus several. If the investor intends to invest in five multifamily units, they will only need to secure one loan, instead of the process involved in investing in five different single-family units. The same holds true for insuring the property, too.
Real Estate Investment Trust
A real estate investor may have money to invest but may not have the time to manage their investment like they would have to with single-family properties. A real estate investment trust (REIT) is a common investment for new investors interested in single-family homes or multifamily properties. A REIT uses funds received from its investors to buy units. The REIT fund managers are professionals in this field but they often do not have a personal stake in the investments.
Real Estate Syndication
Syndicated deals present another option for investors. In this type of investment, management typically has skin in the game. They invest personally alongside investors. This is the key difference between the type of experience investors in syndication deals have versus REIT. Some models even enhance the risk mitigation by spreading it over several units, sometimes 100 or more. Part of the appeal is the ease of management which allows for investors to build their portfolio at a faster pace.
There are multifamily investment opportunities across the country, each with varying levels of potential to become leading areas. My team and I have been analyzing the Arizona, Texas, Atlanta, Tennessee, North Carolina and Florida markets. Wherever you invest, be sure to do your own due diligence on the deal sponsor(s), the market, asset type and class, projected returns, etc.
I am now an ADU Specialist
I recently received my ADU Specialist Credential and am assisting homeowners, investors and developers understand site eligibility, local regulations, development process/costs and the return on investment.
Accessory Dwelling Units (ADU) are also known as secondary units, in-law units, granny flats, backyard cottages, etc. No matter what you call them, ADUs are an innovative, affordable, effective option for adding much needed housing in California. They are self contained residential units on the same property as a single-family home or a multi-family building. ADUs must have a kitchen (or efficiency kitchen), bathroom, place to sleep and a separate entrance from the main property. You can use an ADU to house family or friends, or lease to a rent-paying tenant. New policies are making ADUs more affordable to build, in part by limiting development impact fees and relaxing zoning requirements. By design, ADUs are more affordable and can provide additional income to homeowners and often the rent generated from the ADU can pay for the entire project in a matter of years.
If you or someone you know might be interested in learning more how to help solve the current affordable housing crisis while also creating some additional and passive income, please contact me.