Passive Income Via Real Estate Investing

There are two kinds of real estate investing: passive and active. Here, we are going to focus on those who earn a passive income via real estate investing.

When you become a passive investor, you become a limited partner in a deal. You provide private capital to an experienced, knowledgeable syndicator—like myself—who will use those funds to acquire and manage an apartment community.  

Gaining passive income through real estate is popular, in large part, because it is a low-risk approach. When you make these investments, you join an investment system that already exists, has been successful, and is run by a dependable syndicator with a proven track record. Just ensure that you understand the projected limited partner returns before investing, meaning the results are more certain. And, as long as the syndicator follows my Three Immutable Laws of Real Estate Investing, the project should exceed projected returns.

Partner with Experienced Syndicators

Passive income real estate investing can be risky because it requires you to place a lot of faith in your general partner. That person, along with his or her team, will be the one constructing the business plan.

This is why it is important to work with the right people. Since breaking into this industry, I have established myself as an investor you can trust. As I’ve gained control of more than $900,000,000 in real estate, I’ve helped people across the country gain the financial independence they seek through passive investing opportunities.

In this section of my blog, you will learn more about how to earn a passive income through real estate investing and how I seek passive investors for nearly all of my apartment deals. If you’re an accredited passive investor, please consider completing this form to potentially work with me.
Helpful vs. Hurtful

Lessons from Investment Markets of the Past

When I was a kid in the 1960s my parents weren’t broke, but we didn’t have a lot. Thankfully, we had enough. My Dad was an engineer at Boeing, and Mom was a bookkeeper. Lots of parents just like mine were trying to make it in the world. World War II and the Depression were far enough behind that the sting had faded; it was time to make their mark in the world. On Friday nights at [8:00], Louis Rukeyser was on TV for 30 minutes talking about the stock market with some of the world’s most influential Wall Street titans. If you are old enough to remember Rukeyser, you remember his show Wall Street Week in Review and the catchy tune with glam pictures of the New York Stock Exchange. Back then, Rukeyser was a big deal. There was no such thing as a TV clicker let alone the internet. Rukeyser, other TV media, and the newspaper were how people kept up with the world.

Times and markets have changed. While the methods of gathering investment information differ then vs. now – there is still a constant and that constant is: risk!


Learning from the 1970s market

Back in the ’70s, interest rates were a lot higher than they are now. During those years when I was setting the table and sitting next to Dad watching Wall Street Week, the Federal Funds rate was anywhere from 4% – 20%. If there was one aspect of the economy that characterized the 1970s, it was inflation. Persistent for most of the decade, it choked off much of the growth in our nation’s businesses. Paul Volker, then the chairman of the Federal Reserve, had to eventually take decisive action and raise the Fed Funds rate to near 20% to “slay the inflationary dragon”. Money tightened, interest rates spiked, and homeowners with adjustable-rate mortgages (ARMs) were jammed as their mortgage payments shot higher. Enter the recession as unemployment peaked above 10% due to restrictive Fed policy. Thankfully, it worked. From 1980-1983, inflation dropped from above 13% to under 4%.

During this time the stock market was in a horrible sideways bear market arguably caused by rising rates, and there was a point in 1982 where the stock market was priced the same that it had been in 1968. In that same era in downtown Seattle, there was a billboard on the side of the highway that read, “Will the last one out of Seattle please turn out the lights?” (think recession). With all this being said, if you were an investor in 1982, do you think you would have been excited to buy real estate or stocks at that time?

My best guess is that in rough economic conditions most of us would prefer to stay liquid. Bonus question what did you do with your stock portfolio in March/April 2020 with COVID? Buy, sell, or stay put? The answer to this last question tells you everything you need to know about your ability to buy low and sell high. That might sting a little. It does for me.

What is my point? When the Fed has literally had its thumb on the scale of the bond market for 12 years straight, knocking the natural cadence of our free markets onto its keister, there will be an equal and opposite reaction. Think Isaac Newton’s 3d law. Not to be overly dramatic, but it’s worth an internet search; it’s a thing! The “thing” of it is, we have yet to see the equal and opposite reaction. To get super granular here, the “action” began in 2008 when the Fed began flooding the bond market with liquidity. That liquidity injection has continued until this day and there will be a day of reckoning.


What will the reaction be?

What will the equal and opposite reaction be? I do not know. But let’s talk about that.

Rarely, if ever, investors are able to time the market with consistent success. What market? Any market. Stocks, bonds, oil, coffee, multifamily, syndicated second mortgage investments, or syndicated storage investments. Kahneman & Tversky, in 1979, nailed it with their Behavioral Economics study, Prospect Theory. In summary: when investing, the current environment subconsciously provides the framework for an expected outcome, and people generally have an aversion to losses. Why didn’t you and I both buy 200 shares of Amazon stock in March of 2020 when it was at $1,800 a share (vs. $3,000 today)? Because our perspective had been framed by the then current and volatile environment and we are loss averse. Now that the stock market has moved higher and is bumping its head on all-time highs, why have we been dragging our feet in selling some stock? We are, again, subconsciously framed by what we have experienced recently and wanting to squeeze a little more juice before dialing back our risk.

If COVID or some other life event has prompted you to evaluate risk and draft your own investment policy, I suggest three things. First, find the sum of your investments both liquid and illiquid less liabilities (home equity/debt not included) then multiply that number by your age with a decimal in front of it. If your number for example is 1,000,000 and you are age 50, the product is $500,000. That number represents the value of your investments you may want to have in conservative/stable investments such as bonds or bond surrogates. Could a syndicated multifamily investment be considered a stable investment? Yes!

Second, identify the annual cash flow you would like to have in retirement and divide that annualized number by 4, then multiply that number by 100. That’s your target net worth when you start playing full-time instead of working full-time. Your job is to grow your net worth to that number without taking excess risk (this is where you take a metric ton of salt and remind yourself what you paid for this advice)!

Third, you need the number from step one to equal the number in step two. Maybe you are 29, have been maxing your 401K at work, and have grown it to $800k. Are you really smart, or were you just fortunate with your timing? Now that the Fed has inflated nearly everything (remember your ego is the most expensive thing you will ever own) it’s a wonderful time to reassess. Investors should focus on making incrementally helpful decisions, not hurtful decisions. Do not make huge or impulsive decisions, ever. Because bonds pay almost nothing currently, consider substituting part of your bond portfolio with a syndicated real estate investment. Individual position sizes of 2-10% of your net worth make sense to me. But don’t take my word for it, ask a trusted friend what they are doing. When making syndicated investments, plan to hold at least seven different investments. The law of averages will help you here, but take your time (several years) as you build that portion of the portfolio.


Don’t try to adjust by making big decisions

I started this article by sharing about the investment environment when I was young. Interest rates near 20% and the stock markets P/E ratio was less than seven. Now 40-some years later we have a near opposite environment. The stock market’s P/E ratio is near 30, rivaling the years 2000 and 2008, and interest rates are near zero. As investors, a balanced perspective is often the most helpful. To that end, I suggest reading Ray Dalio on a regular basis. If you are off track from your ideal financial plan, don’t try to adjust by making big decisions. Emotionally we can all be overly hard on ourselves because our crystal ball may look more like a shaken snow globe in the hands of a five-year-old during the holidays. All-or-none bets are scary, bad, and pure luck when successful. My proposition is this: make incrementally helpful and small but strategic changes to your portfolio. Keep in mind the age-old rule of thumb, that your age with a percent sign behind it is your ideal allocation to fixed-income investments. I again volunteer that syndicated real estate assets may be bond surrogates. You may be off track from your target asset allocation. If so, start this spring. Identify what your ideal investment allocation is and make incrementally strategic decisions. Eventually, you can adjust your allocation to reflect your risk profile, and there is nothing wrong with simply saving more.


About Ted Greene: 

Ted Greene is part of the Investor Relations team at Spartan Investment Group.  Spartan syndicates self-storage assets for investment. Ted has 24 years of experience in the financial services industry as an investment advisor and Chief Compliance Officer. Ted can be found on LinkedIn at or


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The Top 5 Questions to Ask Before Investing

Top 5 Questions to Ask Before Passively Investing

Ryan Gibson, CIO and co-founder of Spartan Investment Group, was one of the featured speakers at this year’s Best Ever Conference. In his presentation, he provided tips to passive investors about the most important questions to ask before investing with a commercial real estate operator. In this blog post, we will outline Ryan’s top five questions.


1. Are you an operator or syndicator?

One of the first things you want to know is the role the company you are investing with plays. They are either the operator or a syndicator.

The operator is the group who acquires and sells the investment, as well as implements the business plan. They may also raise a portion or all the capital required to close on the investment.

The syndicator might not actually operate the investment (although, operator and syndicator are oftentimes interchangeable). The syndicator may be a co-GP or owner of a fund who raises capital to invest with other operators.

Whether you are investing directly with an operator or indirectly through a syndicator, you want to know whether their compensation is aligned with the success of the project. That is, is the operator’s or syndicator’s compensation tied to the investment’s cash flow and value? Or it is based on something else, like an asset management fee, percentage of equity raised, etc.? Or it is a combination of both?

Since your return as a passive investor is based on the cash flow and/or value, you want the operator’s or syndicator’s compensation to be based on those same two metrics as well.


2. Tell me about a deal gone bad?

This is Ryan’s favorite question. Most of the material you receive about an operator and their investments will be 100% positive. No operator is going to include a section in their company or deal material about a time they lost money on a deal or when a deal went sideways. However, Ryan believes you can learn a lot about an operator from hearing about how they managed a difficult situation. It helps you judge their grit.

Additionally, if an operator says, “We have never had a deal go bad,” it indicates low experience or that they are lying.


3. What are your mission, vision, and values?

Having a well-defined mission, vision, and set of values is what Spartan attributed to being named one of the fastest-growing companies by Inc. magazine. The operator’s mission, vision, and values will tell you who they are and why they do what they do. The first thing you want to determine is whether they’ve defined their company’s mission, vision, and values because this indicates a higher level of credibility and professionalism. Then, you want to determine if their mission, vision, and values align with yours.

You will also want to make sure they don’t have a “say-do” gap – that they actually act on their mission, vision, and values. So, ask for a recent example of how they’ve recently used their mission, vision, and/or values to make a business decision.


4. Who is on the team?

The structure of their team will impact the success of their investments. The best operators aren’t a “one-person show” where one or a few individuals are wearing all the hats. They should have a deep bench of executives, directors, managers, analysts, assistants, and associates.

It is also beneficial if they are vertically integrated. The more work performed within the company and the less worked outsourced to third-party vendors, the better. That means in-house property management, compliance, construction, investor relations, marketing, underwriting, accounting, etc.

Another good thing to know is how much of the profits generated by the operator and their company is reinvested into hiring new team members and providing growth opportunities for their current team members versus how much is going into their own pockets.


5. What is your core business model?

This question may seem odd. Of course, their core business model is buying and managing office buildings, developing and managing self-storage facilities, adding value to apartment communities, etc.

However, this is not always the case. Sometimes, they may be buying office buildings, for example, while working a full-time, W2 job. Or they are focused on one aspect of the overall business model, like finding deals or raising capital. Or the majority of their income is derived from selling education or coaching. The point is, just because someone is involved in commercial real estate doesn’t mean it is their core business model.

Ideally, you are investing with a group who are full-time operators. They have a fully integrated company that buys, manages, and sells commercial real estate. It is okay if they are involved in other industries, like education, coaching, passive investing, etc., but it should be secondary to their core business model.


5 Questions to Ask a Commercial Real Estate Company Before Investing

When you are passively investing in commercial real estate, you are placing a lot of trust in the active operator. To ensure your capital is in good hands, here are the top five questions to ask before investing.

Are they responsible for acquiring and selling the investment and implementing the business plan, or do they play a smaller role? Also, is their compensation based on the performance of the deal?

Ask about a time a deal went bad to gauge the experience level, truthfulness, and grit of the operator.

What are their mission, vision, and values, and do they align with yours?

Are they a vertically integrated company that invests in attracting new team members and in the professional development of current team members?

Is their core business model operating commercial real estate?

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Big-Picture Financial Strategies to Fuel Your Wealth-Building Machine

Big-Picture Financial Strategies To Fuel Your Wealth-Building Machine

The general consensus out there, and I think you and I would agree, is that school didn’t teach us bologna about managing personal finances. It’s been widely publicized that instead of learning physics and pre-calculus in high school, they should be learning how to balance a checkbook and spend within their means. 

It’s an institutional, generational problem that explains why our parents struggled to maintain middle-class status, not knowing any better than trading their time for money. Passive income wasn’t even on their radar, much less were concepts like infinite banking or syndications. 

Since you’re reading this post, I can tell you’re one of the lucky ones – the sole ostrich in the flock who daringly pulled his/her head out of the sand to seek a better solution. For that, I’m proud of you. Keep reading for the five big-picture concepts that have the power to catapult your financial situation to the next level. 

Personal Finance In Four Stages

One way of stepping back and seeing the big-picture cash flow journey is to break it down into “four pillars” as M.C. Laubscher from Cashflow Ninja calls it. He teaches cash creation, cash capture, cashflow creation, and cash control. 

In the first stage, Cash Creation, you pursue endeavors that create money. This includes getting a degree, finding a great job, creating connections with industry peers and seniority, starting your own business, finding a mentor, and hustling to make bonuses and get raises. You’ve got to earn an income to survive in this world, so this stage is critical to all the other stages. The funny/not funny story, though, is that this is where most people get stuck!

The next stage is called Cash Capture, and this is where you create a buffer between how much you bring home and how much you spend. This is where you’re continuously watching the budget and ensuring you’re saving a portion of your take-home income and hopefully increasing that percentage as quickly as possible. This “gap” between your income and your spending is where you seize the opportunity to capture cash and use it to fund your investments, purchases of appreciating assets, and your infinite banking strategy (I’ll explain this in a little bit.). 

Once you have emergency funds in place, generally have a grasp on your budget and savings, and are consistently capturing that gap, you move on to the cashflow creation stage. Now notice this is Cashflow Creation – very different from the first stage of working for cash. In this third stage, you learn how to use the money you’ve saved and the relationships you’ve nurtured to invest, generate additional cash flow, earn interest, and create income independent from your day job. 

Honestly, you’re probably in this third stage now, actively seeking investment opportunities and leveraging your earnings toward a diversified wealth-building machine inclusive of insurance policies, stocks, REITs, bonds, residential real estate, and appreciating assets like those found in real estate syndication opportunities

The final stage isn’t really a final stage at all (curveball!) but more of an ongoing life-long focus to protect and tailor your overall financial strategy in alignment with your goals. This Cash Control stage involves creating a will, pursuing estate planning, maintaining life and disability insurance policies, and ensuring your finances are set up for longevity. You didn’t learn this stuff in school, so it’s up to you to intentionally learn and refine your financial plan toward protecting your assets from creditors, taxes, and lawsuits and providing a legacy for your loved ones. 

I’m sure you’ve heard the phrase “making your money work hard for you” thrown around, and in a nutshell, focused action in each of these stages throughout your life will do precisely that!

Infinite Banking Strategy

This big-picture strategy also called “becoming your own bank” and “private family banking strategy” is where you use a whole life insurance policy to become your lender, borrower, and beneficiary all at once. This concept blew my mind when I first heard about it, so hang with me. 

Look at the typical bank. They accept people’s deposits in exchange for a “safe” place to store the cash promising minimal interest earnings. The bank loans that money out to others and earns a much steeper amount of interest off the loan. All along, if someone defaults, they are the beneficiaries via collateral, collections, etc. Why deposit your hard-earned cash into a bank for minimal interest and then borrow other money at a higher interest rate? It just doesn’t make sense! 

Here you flip the institution on its head, buck the system, and do your own thing. If you followed the four stages above, you captured cash and have significant savings ready to invest in creating passive cashflow. With this cash, you buy a dividend whole life insurance policy from a mutual insurance company. When written correctly, your policy will allow you to fully fund it quickly and borrow a large portion of that money from inside the policy within the first year. 

Now before your head spins, let me explain. When you fund the policy quickly, you become eligible for dividends and earnings inside the policy itself. When you borrow against your policy at a low rate, you’re still earning interest on the full value, AND you get to reinvest that borrowed money into a real estate syndication. 

Boom! You’ve taken $1 and invested it into two places at the same time, AND now you have an insurance policy too! There are many other details to this, which I’ll save you from right now, but just know this is one tax-advantaged option for creating a wealth-building machine.

Buy Your Time Back

Another wealth-building machine that’s often overlooked is your ability to recapture your most valuable resource – time. When you start out, your focus is to create cash, and it’s highly likely one might spend 40-60 hours a week doing so. 

That’s not a sustainable life/happiness model, though, right? At some point, you want to have captured enough cash and begun to invest in lucrative deals so that you could reduce the amount of time you have to put in and instead spend it doing things you enjoy.

This is where you buy your time back. Maybe that means hiring an assistant to keep you organized and run little errands for you, or perhaps that means hiring household services like laundry, a maid, and a landscaper. In all areas of life, I encourage you to explore the activities you do, their worth, whether you like doing them, and how much of your time and energy they take. When you conclude that specific actions are not worth your time or energy, hire them out and, in exchange, use your time to learn about and pursue the next level of wealth-generation. 

Another way you can fast-track your wealth-building machine is to intentionally surround yourself with people who inspire you. Find connections ten steps ahead of you, who are doing things you wish you could be doing, and then find ways to infuse their lives with value. Use your knowledge and expertise to support them and further develop a positive rapport with them. 

You’ve probably heard the quote by Jim Rohn, “You are the average of the five people you spend the most time with.” Well, recent research shows that who you are is even affected by your friends’ friends and those friends’ friends! This emphasizes how imperative it is to seek masterminds, mentors, and relationships with those you admire. 

When you surround yourself with these valuable connections and adequately nurture the relationship by infusing support into their lives, they will inadvertently share advice and higher-level concepts, giving you the “in” and accelerating your wealth-building journey with fewer mistakes. 

Continuously Break Parkinson’s Law

Finally, the greatest, most valuable high-level advice I can provide is that you have to break Parkinson’s Law over and over again. Parkinson’s Law is the concept that the more income you have, the more you spend. 

You and I conceptually know that you have none to save or invest if you spend everything you make. However, this is the conundrum that most people find themselves in. Each raise or bonus allows them to afford something they’ve been eying and craving for a while, and eventually, they look back and wonder why it feels as if they can never get ahead. 

You, my friend, are ahead of the curve, though, and with the four cash stages, buying your time back, and infinite banking knowledge, you are destined to succeed. You’re keenly aware of how to thrive in that Cash Capture step and ensure your expenses are much less than your income. 

But that’s not enough! You have to continually refocus and reevaluate your cash capture strategies to ensure you always have more and more to invest, fueling your wealth-building machine. With each raise, cashflow check, and bonus, you have to remain conscious of the temptation to spend more and break that cycle again. 


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Scaling a Commercial Real Estate Investing Business with a Full-Time W2 Job

Scaling a Commercial Real Estate Investing Business with a Full-Time W2 Job

Our parents influence us in so many ways. In Brock Mogensen’s case, his Dad inspired a passion for real estate and active investing. Brock’s father owned two duplexes, and the money those properties brought in was a big help to the family.

These days, Brock is at Smart Asset Capital, which is based in Milwaukee. Its portfolio of commercial properties includes 18,000 square feet of office space, 20,000 square feet of retail space, and an apartment complex with 89 units. Those numbers are even more impressive when you consider that Brock has only been in real estate for two years.

Moreover, Brock has built up his real estate holdings while working a full-time W2 job. If you’ve ever thought that a regular job would leave you no time for active investing, Brock’s story should convince you otherwise.

Entering the Real Estate Market

When Brock was a college freshman, he came up with a simple plan: He’d save his money to buy a duplex as soon as he could. And that purchase would launch a side career as an active investor in real estate.

About two years ago, Brock accomplished his initial objective. He bought a duplex by house hacking it. Typically, a house hack is when you buy a multifamily home via a mortgage. You move into one of its residences and rent out the other units. With the rent money you collect, you pay off the mortgage until you own the place.

Once Brock owned this residential complex, he began to realize how many real estate options were available to him: wholesaling, flipping, syndication, and more. Ultimately, he chose syndication, which involves collecting funds from a group of investors to buy properties.

Once Brock decided on syndication, the real work began. He took courses and attended real estate events. He read books and listened to podcasts. Altogether, he spent about six or seven months consuming information about real estate and commercial investing.

After that, Brock felt confident about his chances in the real estate industry. He believed he had the analytical abilities and the knowledge to succeed.

Finding Partners

The next step was networking. Through the Bigger Pockets online community, Brock met a real estate professional he enjoyed talking to. They went out for coffee a few times. Despite their different backgrounds, the two had similar goals for the future. In fact, they could sum up their real estate plans in five words: “We want to go big.”

Not long after, a broker brought a deal for an 89-unit duplex to the attention of Brock and his partner. However, they realized it was too big for them given their relative inexperience. Brock also felt the price was too high.

Soon after that, Brock met his partner’s friend, a businessman with a large real estate portfolio and a management team in place. The three joined forces, and they decided to start a new company. Smart Asset Capital was born.

The First Deal

About four months later, Brock found that 89-unit duplex on the online real estate marketplace LoopNet. By this point, the owner wanted to sell it as quickly as he could, and Brock’s team made an offer. His group eventually bought it for $3.55 million, which was a real discount.

However, Brock’s second partner, the one with the largest portfolio, had doubts about this duplex at first. He thought the group didn’t have enough cash on hand to make it worthwhile. He also felt that, since Brock already owned a duplex, they should diversify and pursue a different type of building. But Brock was adamant in supporting this deal, and he finally persuaded his partner.

To finance this duplex, Smart Asset Capital raised $830,000 in private equity, which mostly came from Brock’s partners’ network of investors. Given his lack of industry connections then, Brock personally raised less than $100,000. Some of that money came from friends of his family.

The Smart Asset Capital principals soon closed the deal, and the 89-unit duplex was theirs. They then planned to make multifamily residences their core business.

In recent months, however, Brock and his partners learned about two outstanding properties that were on the market: one complex with 20,000 square feet of retail space and one with 18,000 square feet of office space. Thus, the Smart Asset Capital leaders changed course somewhat; they decided to close on those commercial properties.

As a result, the company now has different groups of assets. And its founding partners will continue to bid whenever a promising commercial investment opportunity comes along, regardless of its asset class.

The Secrets of a Thriving Partnership

At this point, you might be wondering what accounts for the success of the Smart Asset Capital partnership. Brock feels that, above everything else, one aspect is key: These three individuals balance each other extremely well.

Specifically, Brock brought his analytical abilities and talents for underwriting and reporting to the firm. For their part, his two partners have sales backgrounds and extensive industry connections; their investor databases contain long lists of names.

Brock feels that it’s vital for every businessperson to collaborate with people who have different strengths and different weaknesses. That way, the resulting group won’t be deficient in any area, and it will be powerful in many.

Indeed, on any given workday, all three Smart Asset Capital founders are able to focus on their strong points. Brock works largely on underwriting, investor relations, and asset management. His partners, meanwhile, concentrate on sales.

At the same time, these roles aren’t completely separate from each other. Brock gets involved in selling from time to time, and his partners help with the reporting tasks and asset management.

Not to mention, this partnership is equitable. The three men split their profits evenly; everyone gets 33.3 percent.

A Week in the Life of Brock Mogensen

Asset management is definitely complex, but Brock has an organized weekly schedule to handle it.

During the day on Sunday, Brock reviews his notes from the prior week and creates an agenda for the workweek ahead.

On Monday morning, Brock analyzes the company’s key performance indicators (KPIs). They include statistics such as tenant turnover rates, operating expenses, and revenue growth numbers.

Brock’s virtual assistant, a full-time employee, compiles the weekly KPI report and sends it to all the partners. At one time, Brock created this report himself, taking an hour out of his schedule every Monday morning to do so.

Then, on Monday night, the Smart Asset Capital founders hold a group call with their property manager. They rely on Brock’s agenda for their discussion points.

Throughout the week, Brock continually checks out the company’s account on AppFolio, a leading property management software program. That way, he can keep track of the KPIs and make sure nothing seems out of the ordinary. In addition, he takes copious notes, some of which he’ll later turn into questions for the property manager or discuss in meetings.

In fact, Brock feels that analyzing real-time data is the most important part of real estate investing. Incorporating this data into models effectively and accurately allows for effective management and planning.

Running a Real Estate Company as a Part-Time Gig

Many people are surprised to learn that, while managing a real estate company and overseeing its properties, Brock works a full-time marketing job. But Brock is used to juggling a packed schedule. When he closed his first deal, he was in an MBA program and taking three classes.

Will Brock ever leave his marketing career to become a full-time real estate investor? He still isn’t sure. He likes having two income streams. If, however, the real estate cash flow hits a certain target someday, he says he’ll certainly consider leaving the other job.

Also worth noting, although he has a steady income as a W2 employee, Brock keeps large reserves of cash in the bank. That way, he has enough funds on hand to keep his real estate business going in the event of an economic disaster or a period of financial uncertainty.

Brock says that many people with W2 positions hold themselves back, believing they don’t have time for business ventures on the side. Or a W2 employee might simply use that job as an excuse to not be an active investor. Perhaps that person is a little afraid to get started.

Do you have a full-time job? Are you looking to become an active investor in real estate during your spare time? If so, Brock recommends that you take the two initial steps he took. First, choose a specific aspect of real estate investing and really study it, just as Brock studied underwriting. Next, find partners to collaborate with, people who are authorities in areas where you lack expertise.


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How to Manage Your Apartment Property Manager

As the asset manager of an apartment investment, one of your main responsibilities is to oversee the property management company.

Here is a blog post where we outline all the GP’s duties after the acquisition.

This blog post will address five frequently asked questions about interacting with and managing the property management company after you’ve acquired a deal and assumed your position as the asset manager.

For all of the FAQs, your property management company may or may not be onboard (for example, they may not send you every report that you ask for), which means you must set expectations with them BEFORE finding a deal. You need to ask the right questions based on the FAQs below when conducting property management interviews.

1 – How often do I interact with the property management company?

You should have monthly performance calls with your property management company at minimum. During the stabilization period (i.e., when you are performing renovations), the calls should be on a weekly basis. Once the asset is stabilized, you can continue the weekly calls, change to monthly calls, or have calls on an as-needed basis.

The weekly performance calls should include you and the onsite manager at a minimum, and ideally the regional manager as well.

During the calls, you will review property reports and key metrics (more on these two things below).

2 – What reports should I expect from my property management company?

You will get what you ask for. If you ask for nothing, you will likely receive nothing or just the bare minimum.

The reports you want to receive on a weekly basis are:

  • Box score: summary of leasing activity, including the number of move-ins and move-outs and unit occupancy status (vacant-leased, vacant-not leased, vacant-ready, notice-leased, notice-not leased, model, down, other use)
  • Occupancy: physical occupancy (percentage of total units occupied) and economic occupancy (rate of paying tenants)
  • Occupancy forecast: the projected occupancy based on future occupancy status (i.e., units that are occupied, units with expiring leases that are leased, and vacant units that are leased)
  • Delinquency report: list of resident delinquent (i.e., past due) amounts
  • Leasing reports: summary of leasing activity (traffic information, leasing information, concession information, marketing information, projection information)
  • Accounts payable: summary of money owed to vendors (including to the management company)
  • Cash on hand: the asset’s liquidity

The reports you want to receive on a monthly basis in addition to the weekly reports above are:

  • Income and expense statements: detailed monthly report with all income and expense line items, as well as the dollar and percent variance compare to the budget
  • Deposits: summary of security deposit information (balance, forfeits, returned checks, refunded)
  • General ledger: summary of all financial transactions
  • Balance sheet: summary of assets, liabilities, and capital
  • Trial balance: summary of all debits and credits
  • Rent roll: summary of all unit information (occupancy status, market rent, current rent, move in, lease start and end, other fees, deposit)
  • Expiration reports: summary of expiring leases
  • Maintenance reports: summary of maintenance issues and costs

Again, make sure you set reporting expectations with your management company BEFORE you have a deal.

3 – How do I obtain these reports?

The simplest way to obtain these reports to is to ask your management company to create custom reports using their management software and have them sent to your email on a weekly/monthly basis.

Another option is to ask for access to their management software so that you can have real-time access to these reports.

If your management company doesn’t use a software or if you don’t like the look of their reports, you can create your own custom spreadsheet and ask your management company to update it on a weekly/monthly basis. Click here to download a free Weekly Performance Review tracker.

4 – What metrics should I focus on the most?

The most important metric to track is the cash flow relative to the projections you presented to your investors. Track the forecasted vs. actuals on the income and expense report, focus on the line items with the greatest variance, and create a strategy to bring those line items back on track during your weekly performance calls.

For the value-add business plan, the number of units renovated relative to your forecasted timeline and the rental premiums demanded are important during the first 12 to 24 months because both will have a large impact on your cash flow.

Additionally, certain metrics, like leasing metrics, capital expenditure costs, and total income, may vary from your projections during the value-add portion of your business plan. For example, the total income may be lower than forecasted after owning the asset for 3 months due to a higher number of move-outs than anticipated. Or, you spent a larger percentage of your capital expenditure budget in the first three months because you are ahead of schedule. So, the key metric during the value-add portion of the business plan is the forecasted vs. actual rent premiums for renovated units.

Other metrics to track that may be the cause of a high income and/or expense variance are the turnover rate, economic occupancy, average days to lease, revenue growth, traffic, evictions, leasing ratio and other metrics from the reports outlined above.

Again, the best strategy is to track the variance on the income and expense reports, strategize with your management company to identify the cause by reviewing the other reports and come up with a solution if needed.

5 – What other things do the best asset managers do?

First, look at your property management company as a partner and screen them accordingly. Are they someone you want to work with for a long-time? Does their track record speak for itself? What are the tenants saying about them? How professional are they when speaking with a potential tenant (you can role play as a potential tenant to find out)? Are they willing to change if needed? Do the employees like working at the company? Are they engaged on social media?

Next, the best asset managers always look ahead. You should evaluate the market, evaluate the competition to compare your property to, track and maximize income growth and expense decline, and ensure tenant satisfaction by checking reviews, social media, and hosting community events.

Also, even though the property management company is your partner, you should watch them like a hawk. Most people focus on the front-end activities, like finding deals, sourcing capital, whether they need to form an LLC, etc. Fewer people focus on the back-end activities, like asset management, which take years and decades to do. So much of the asset’s success and your company’s ability to scale is dependent on your property staff and property management company, so you have to watch them like your career depends on it, because it does. If things don’t work out, don’t be afraid to part ways.

Lastly, visit the property at least once a month in-person. If you invest out-of-state, a great strategy is to ask someone local to mount a GoPro on their vehicle and drive the property on your behalf.

How to Manage Your Apartment Property Manager

Set up frequent phone calls with your property management company, starting with weekly calls.

Request the proper weekly and monthly reports to see how well or poorly the property management company is implementing your business plan. Track the most relevant KPIs, like cash flow variance, number of units renovated, rent premiums, etc.

Properly screen the property management company upfront and continuously evaluate their performance.

Visit the property in person to make sure the reports match reality.


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How a Passive Apartment Investor Interprets a Schedule K-1 Tax Report


Apartment syndications remain an appealing investment for passive investors due to the myriad of tax benefits—the foremost being depreciation.

Fixed asset items (a long-term tangible piece of property or equipment that is used in operations to generate income and is not expected to be consumed or converted into cash within a year) at an apartment community reduce in value over time due to usage and normal wear and tear.  Depreciation is the amount that can be deducted from income each year to reflect this reduction in value.  The IRS classifies each depreciable item according to the number of years of its useful life.  It is over this period that the fixed asset can be fully depreciated.

A cost segregation study identifies building assets that can be depreciated at an accelerated rate using a shorter depreciation life.  These assets are the interior and exterior components of a building in addition to its structure. They may be part of newly constructed buildings or existing buildings that have been purchased or renovated.  Approximately 20% to 40% of these components can be depreciated at a much faster rate than the building structure itself.  A cost segregation study dissects the purchase/construction price of a property that would normally be depreciated over 27 ½ years—and identifies all property-related costs that can be depreciated over 5, 7, and 15 years.

If the expense of the construction, purchase or renovation was in a previous year, favorable IRS rulings allow taxpayers to complete a cost segregation study on a past acquisition or improvement and take the current year’s deduction for the resulting accelerated depreciation not claimed in prior years.

You can learn more about how depreciation is calculated, as well as the other tax factors when passively investing in apartment syndications, by clicking here.

Each year, the general partner’s accountant creates a Schedule K-1 for the limited partners for each apartment syndicate deal. The passive investors file the K-1 with their tax returns to report their share of the investment’s profits, losses, deductions and credits to the IRS, including any depreciation expense that was passed through to them.

Click here for a sample Schedule K-1.

There are three boxes on the K-1 that passive investors care about the most.

Box 2. Net rental real estate income (loss). This is the net of revenues less expenses, including depreciation expense passed through to the LPs. For most operating properties, the resulting loss is primarily due to accelerated deprecation. On the example K-1, the depreciation deduction passed through to the Limited Partner is $50,507, thereby resulting in an overall loss (negative taxable income).

Box 19. Distributions. This is the amount of equity that was returned to the limited partner. On the example K-1, the limited partner received $1,400 in cash distributions from their preferred return of distribution and profits.

Just because the LP realizes a loss on paper does not mean the property isn’t performing well.  The loss is generally from the accelerated depreciation, not from loss of income or capital.

Section L. Partner’s capital account analysis. On the sample K-1, the ending capital account is $48,093. However, this lower amount doesn’t reflect the capital balance that the limited partner’s preferred return is based on. The $48,094 is a tax basis, not a capital account balance. Thus, this limited partner wouldn’t receive a lowered preferred return distribution based on a capital balance of $48,094. From the operator’s perspective, depreciation doesn’t reduce the passive investor’s capital account balance.

The capital balance is technically reduced by the distribution amount above the preferred return (i.e., the distribution from the profit split), which is a portion of the $1,400 in the “withdrawals & distributions” box. However, operator’s deals are structured in a way so that the LPs continue to receive a preferred return based on their original equity investment amount, with the difference made up at sale.

The majority of the other accounting items on the K-1 are reported on and flow through to your Qualified Business Income worksheet.  The net effect of these items will be unique to each investor based on their specific situation and other holdings.

If you want to learn more about each of the individual sections and boxes, click here to review IRS instructions for the Schedule K-1.

To better understand your own tax implications on any investment, it is important to consult a professional who has an understanding of your overall finances so that they may give full tax advice.  Therefore, always speak with a CPA or financial advisor before making an investment decision.

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What Financial Reports to Send to Passive Apartment Investors

After closing on an apartment syndication deal, one of the responsibilities of the general partners (GP) is to provide the limited partners with ongoing updates on the investment.

Here is a blog post where we outline all the GP’s duties after acquisition.

One aspect of this passive investor communication is providing financial reports on the asset. Not all general partners provide financials to limited partners. However, when they do, there is an increase in trust between the GPs and LPs, which is the number one reason why passive investors chose to invest with one operator over another.

The purpose of this blog post is to outline the process of providing your investors with deal updates by sending them financial reports.

What Financial Reports to Send to Passive Investors

The reason to send passive investors financial reports, aside from increasing transparency and trust, is so that they know what is going on with the investment. The information provided in monthly or quarterly recap emails is a good start, but a spreadsheet with hundreds of data points paints a more detailed picture of the asset’s operations.

Ultimately, how often you send financial reports and the types of financial reports you send is up to you and the preferences of your investors.

The two most relevant financial reports to send to passive investors are the rent roll and the T-12.

A rent roll is a document or spreadsheet containing detailed information on each of the units at the apartment community, along with a variety of data tables with summarized income. The rent roll provides passive investors with a current snapshot of the investment’s revenue.

A T-12 is a document or spreadsheet containing detailed information about the revenue and expenses of the apartment community over the last 12 months. Also referred to as a trailing 12-month profit and loss statement, the T-12 provides passive investors with current and historical revenue and expenses.

A best practice is to send financials at least once a quarter.

How to Obtain Financial Reports

The first step in the process starts before you even have a deal. Most likely, the financial reports will be generated by your property management company. When interviewing property management companies, make sure you set expectations. First, ask them what type of property management software they use and if it can generate custom financial reports. Ideally, they provide you with a sample rent roll and T-12. If they do, how detailed are the reports? Is the T-12 broken down into specific line items? Does the rent roll list out all of the important metrics?

Here are examples of how detailed a rent roll and T-12 should be.

Assuming they generate the right reports, the next question to ask is “will you send me financial reports upon request” and “what is the lead time?” In doing so, you will know if they are willing to send you financial reports and how quickly (or slowly) you can expect to receive them.

How to Send Financial Reports to Passive Investors

One approach is to include links to download the financials in the monthly or quarterly recap emails.

Create a Dropbox folder for each of your properties. Each quarter, upload PDF versions of the rent roll and T-12 to the property’s respective Dropbox folder and include the links in the recap email. For example, include a sentence like, “Also, you can download the quarterly financials (current rent roll and profit and loss statement) by clicking here,” and the wording “clicking here” is hyperlinked to the financial reports.

Another more advanced and efficient option is to upload the financials to an investor portal. Rather than linking to the financials in your recap emails, you can direct the passive investors to the portal.

Before sending the financial reports, make sure that your resident’s and investor’s personal information is removed. Sometimes, the investor distributions will be included at the bottom of the T-12. Only include the line items above the net operating income. Also, make sure you remove the variance column from the T-12. Your property management company’s software may include a column that has the difference between the actuals and the project (i.e., the variance). To avoid confusion, remove the variance column and only send to investors upon request. Consider removing the names of residents for the rent roll too.

How to Handle Passive Investors’ Questions About Financials

Like any questions received from investors, if you know the answer, reply in a timely fashion. If you don’t know the answer, reach out to your property management company.

The most common question you will receive from investors will be about how the T-12 actuals compare to the projections you provided in the PPM. If you are not hitting your projections, speak with your property management company to determine why there is a variance and what is being done to solve the issue. The best responses to investor’s questions include a diagnosis of the issue as well as the solution which should already be implemented.


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How to Provide Best-In-Class Customer Service to Your Multifamily Residents

Multifamily investing offers the opportunity to profit tremendously when you sell your property, and a well-managed property will also throw off regular income throughout your ownership period. As a commercial real estate investor, you have devoted a tremendous amount of time, energy and money into the purchase of a great property. You want to do what it takes to optimize your return on investment, but successful commercial real estate investing involves more than buying and maintaining properties. Your tenants are the lifeblood of your investment, and they should receive just as much care and attention as property upkeep and number crunching.

Get to Know Your Tenants as People

While your multifamily property is a financial investment to you, it is the place that your tenants call home. Each of your tenants has unique factors to consider related to their lifestyle, finances, interests and goals, and these are often entwined with their living experience in vital ways. When you get to know your tenants as people rather than as names on a lease, you can offer them a higher level of customer service. In the process, you may decrease turnover and improve online reviews. These factors directly feed into a healthy bottom line. How can you serve your property’s residents as customers rather than solely as tenants?

Be More Than a Rent Collector

Your property’s residents will be more likely to renew a lease and to recommend your property to their friends and family members when they feel valued and respected. In many cases, the relationship between a tenant and a landlord is purely financial, and it is entirely dictated by the terms of the lease. You must abide by the terms of the lease, and you must ensure that rents are collected in a timely manner. However, your relationship with your residents should extend beyond the monthly rent collection process. For example, you can send tenants birthday cards or call to check on their unit’s condition periodically. Small gestures like these can go a long way toward developing a positive relationship with your tenants.

Be Proactive

The top brands today stay on top of their customers’ needs, and they anticipate behavior when possible. Your multifamily property is a business, and your tenants are your customers. With this in mind, you need to nurture relationships and proactively anticipate your customers’ needs. For example, reach out to your tenants a few months before their lease expires to give them renewal options. Implement a loyalty program that rewards renewals, transfers and referrals. A high turnover rate at your multifamily property can dramatically erode profits, so creating a reward system that encourages renewals can be cost-effective for your business. At the same time, the benefits of the reward system likely will be appreciated by your customers.

Support Your Residents’ Goals

While some residents may move out of an apartment building that is poorly managed, others will vacate for reasons that are not related to property management at all. For example, they may need a larger space or may be ready to purchase a home. When your tenants decide to vacate, avoid creating stressful and unnecessary roadblocks. Consider collecting moving boxes and other materials from new tenants and offering these to tenants who are vacating as part of your service. Offer to do a walk-through before the tenants vacate so that they can recoup as much of their deposit as possible. You should support your tenants just as much when they are vacating as you did when they were moving in.

Approach Rent Increases Transparently

For the majority of your tenants, their monthly rental payment may be their largest expense. An unexpected increase can create immediate stress and anxiety, and this may be followed by a kneejerk reaction to look for a new and more affordable place to live. From your perspective, maintaining rents at market rates is essential in order to optimize profitability. How can you maintain market rents while also retaining happy tenants? Create a small report for your tenants that shows current market rents in the area. This report should substantiate the rental increase at the time of renewal. If you launch a rewards program for loyal residents, consider outlining any savings that they may enjoy by renewing their lease. This type of detailed and customized report could actually help your tenants to feel positive about renewing their lease at a higher rate.

Be Readily Available

Tenants commonly reach out to their landlord or property manager because they have a complaint or a repair issue that requires prompt attention. In many cases, tenants are provided a single phone number to call for assistance, and landlords may let those calls go to voicemail to screen them for urgency. To tenants, the inability to quickly and easily reach you when they need assistance with their home can be stressful. More than that, it could create the impression that your tenants are a bother to you. To counter this, offer multiple communication channels. In addition to a phone number for verbal communication, offer text communication, an email and a website. Make a point to always answer the phone when a tenant calls and to respond to all other methods of communication promptly.

Cross-Sell with Your Other Properties

Do you own more than one multifamily property? The apartment that a tenant lives in today may no longer meet their needs, but one of your other properties could be a better fit. If you have provided excellent customer service to the tenant throughout his or her residency period, the tenant may be happy to consider relocating to one of your other properties as long as the property meets their current needs. Likewise, consider extending the rewards for your referral program to all of your properties. These practices will help you to maintain higher occupancy rates overall, and the increased options can bolster customer satisfaction.

Ask for Reviews

Your existing tenants will directly impact your bottom line from multifamily investing long after they move out. This is because potential tenants often read online reviews from past tenants to learn about important factors like property management responsiveness, rent increases, property maintenance and more. Because unhappy tenants may be more likely to post reviews than tenants who have loved living in your property, soliciting feedback from satisfied tenants is essential. Consider asking tenants to leave reviews at different stages in their experience. For example, you may ask for feedback about the move-in process after they get settled. You may also ask tenants to leave comments when they renew a lease or after they move out. In addition, use feedback from negative reviews to make improvements.

As is the case with other types of businesses, you will not be able to please all of your tenants at all times. However, because success from multifamily investing is intricately linked to tenant satisfaction, it is essential that you develop a sound customer service policy that touches your tenants throughout their experience. Properly managing tenant relationships may require more time and energy than you initially anticipated. Consider hiring a reputable property management firm if you are challenged in this or other critical areas of commercial real estate investing.

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Recognizing the Risks in Real Estate

In my previous blog, I outlined the 5 main risk classes of real estate. In this follow-up blog, I want to outline some scenarios where those risks materialize.


Because Core assets are newly built assets in strong markets, these exhibit the least risk. However, when we look at where the returns are truly derived, we can find that there is risk. Core assets draw a bulk of their return from cash flow. So, the risk materializes from impacts to that cash flow.

Back in the financial crisis of 2009-2011, Core assets were hit particularly hard as companies and people started cutting expenses. In the multifamily space, there was a lot of uncertainty about employment at all levels of an organization. Because of this, the high earners that would typically live in the nicer apartments began looking for ways to cut living costs and moved into cheaper, Class B properties.

With the onset of COVID, a different scenario happened with the complete upheaval of the professional workforce moving to work from home, sometimes indefinitely. As a result, Core multifamily projects are experiencing higher vacancy rates and reduced rental rates as city center residents move to the suburbs for more affordable, larger units.

Core Plus:

Similar to Core, Core Plus asset returns are primarily driven by cash flow. Therefore, the same examples listed above still hold true. Although, these assets present a couple unique risks as well. Core Plus can either be a newly built property in a Class B area, or a Class B property in an A or B area.

When talking about Class B areas, by way of comparison, your rents will be lower than new construction in a Class A area. Your tenant base will likely have a lower income than in Class A areas, and therefore likely have a slightly higher risk of layoffs or impacts to earnings.

Beyond the slight increase in tenant risk relative to the typical Core asset, you often have an older asset. While these assets are remodeled with most deferred maintenance addressed by the prior owner, there is additional capital expenditures relative to new construction. The maintenance costs with the Core Pluss asset are higher than Core, and there is the increased chance of large ticket repairs.

Value Add:

Value Add assets generate their returns from both cash flow and appreciation. The same risks that effect cash flow outlined above can occur with Value Add assets as well. Similar to Core Plus, since these assets are dated, they tend to be lower rent options and therefore may see a higher-risk tenant base.

Value Add assets tend to require a reasonably significant amount of capital to be spent to renovate the property. Therefore, construction costs become a risk. Whether this be timeline or cost, both can affect the returns of the asset. A real-world example of this is the current situation with COVID, which is causing a significant increase on construction material costs. While the Value Add operator is typically not doing major construction relative to redevelopment or new development, these cost overruns can still impact investor returns.

Often times, a significant portion of the overall return of the asset comes from appreciation, which carries its own risks. Markets can shift dramatically over an operator’s hold period, meaning the asset cannot be sold at a favorable price. Often in multifamily syndications, approximately half of the overall return to the investors comes from profit at sale. Market shifts effecting the long-term value of the asset can create significant volatility in the overall returns.


Opportunistic deals or Redevelopment deals create the most risk of any existing class. Since these assets often are cash flow negative through significant vacancy and require significant capital to bring back to leasable, the risks are immeasurable. From unexpected construction costs to longer lease up timelines, there are many moving parts and little to no revenue to offset these potential issues.

Real world examples of these risks include the current increase of all construction materials. Geopolitical issues have been known to effect steel and drywall costs dramatically in a short amount of time. Other renovation risks and cost overruns happen all the time simply by opening up walls and realizing major systems are not to code.

Real risk, also, comes with the overall timeline of an opportunistic investment, specifically as it related to changing tastes of your tenant base. While changes in taste tend to evolve over time, the COVID pandemic has proven that sometimes demand can shift quickly. The longer you have an asset with little to no income, the more pronounced the effects of those shifts can be. Examples of changing tastes range from location preferences to amenities on the property to paint colors.


The riskiest of all asset classes is development. Again, the same risks are true for Development compared to Opportunistic assets. However, there are some risks that Opportunistic assets won’t encounter; primarily, entitlements.
Entitlements, in general, are all of the sign offs and approvals you need. If you want to change the use of a plot of land, you either need it rezoned or a variance. If you want to put 200 apartment units in an area, you need approval from the sewage department to confirm the sewer system can handle the additional demand, or from the school district to determine if all the new residents will have space in classrooms. You need approval from neighborhood councils, that your design fits into the look and feel of the neighborhood.

At the end of the day, all of the approvals needed to put a new building up create significant risk, as not receiving a single approval can stop a development in its track. While seasoned developers will not acquire a property until they are reasonably confident all approvals can be obtained, if the approvals are not obtained, it can dramatically affect the value of the property, as future developers may be less inclined to even pursue the property knowing the prior developer was not able to obtain the necessary approvals.

As outlined, here and in my prior blog, all investments come with risk. Our job, as investors, is to pursue investments where we feel the risks associated are worth the reward.

About the author:
Evan is the Investor Relations Consultant for Ashcroft Capital. As such, he spends his days working with investors to better understand their investment goals and background. With over 13 years in real estate, he has seen all sides of real estate from acquisitions, to capital raising on the equity and debt side, to operations, and actively invests himself. Please feel free to connect with Evan here.

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How to Grow Your Business Using TikTok

How Antonio Cucciniello Found Success Marketing On TikTok

The social media sphere is a hotspot for entertainment, community, and collaboration. Best of all, these platforms offer opportunities to expand your reach, market yourself, and promote your business. Antonio Cucciniello, a real estate investor, is proof that present-day websites and modern applications are practical advertising tools. TikTok, specifically, has allowed Cucciniello to gain new clients and investors.

Much like any functioning member of society, Cucciniello is no stranger to social media. For years, Cucciniello posted videos to YouTube. After four years and 500 videos, he only amassed 300 subscribers. Meanwhile, his Instagram following was lagging, which proved detrimental to his active and commercial real estate investing efforts. Eventually, Cucciniello discovered the power of TikTok.

In the hopes of advancing his career, Cucciniello hopped on the bandwagon. He got his first taste of social media success after publishing a TikTok video. Within one day, Cucciniello’s TikTok post received 52 views, and he gained 150 followers by the end of the week. Before long, Cucciniello went viral, earning 130,000 views on a video that poked fun at terrible tenants. Since his partial claim to fame, Cucciniello’s devised a sound strategy on how to market on TikTok.

In his experience, Cucciniello’s found that instructional videos typically gain the most traction. Whether you’re discussing how to scale a business or change a tire, Cucciniello maintains that audiences love to learn. He then goes live to talk more in-depth about the content. To increase consumer engagement, he welcomes questions. According to Cucciniello, being controversial is one surefire way to go viral. However, he usually sticks to humor, dancing, and general amusement to appeal to audiences.

Cucciniello is far from the first to unlock TikTok’s marketing potential. In fact, many are gravitating to this platform in an effort to gain more exposure. As a result, industry experts are providing insight on how to scale a business on TikTok. By heeding the following advice, you can reap the benefits of TikTok’s massive following and ever-expanding platform.

How To Market On TikTok

Know What You’re Working With

Arming yourself with pertinent information is a crucial first step. After all, to get the most out of the platform you’re using, it’s critical to learn, analyze, and monitor it. For instance, watch videos that are circulating the platform, note similarities between them, and develop ways to apply this knowledge to your specific content.

Don’t Overthink It

While it’s important to be deliberate in your approach, don’t give entertainment the back seat. In other words, infuse some fun into your content. Even if you’re talking about active real estate investing, you can find ways to inject lightheartedness into your videos. In essence, if you find a happy medium between informative and entertaining, you’re bound to reel in a wide audience.

Work With Other Influencers

On TikTok, there’s strength in numbers. Find someone who’s on your same playing field, and collaborate. Studies show that traditional marketing doesn’t interest Generation Z. With that said, you have to think outside the box. By partnering with other influencers, you can subliminally market your platforms while giving viewers the engaging content they desperately desire. Not only will you be able to reach a dynamic viewership, but you’ll also start making beneficial connections.

Look Into TikTok Advertising

As a powerhouse in the social media realm, TikTok’s introduced unique campaign strategies to its platform. Native content, brand takeovers, hashtag challenges, and branded lenses are the marketing resources they’ve created. Each offers its own perks, so you’ll need to gauge which option is best for your business. No matter what you decide, TikTok’s taken a calculated approach to ensure that your marketing methods breed some results.

Stay True To Yourself

Above all else, don’t attempt to be someone you’re not. While it’s prudent to emulate a person’s recipe for success, recycling someone else’s content won’t prove effective. Instead, highlight the qualities and strengths that set you apart. Most importantly, don’t shy away from topics that interest you. Even if you think that commercial real estate investing won’t attract viewers, you’d be surprised how many niche communities there are on TikTok. Simply put, don’t stray too far from your roots, and you’ll inevitably succeed.

Using the above story and advice as inspiration, you can effortlessly grow your business on TikTok. Whether you’re into active real estate investing or tree shaping, there’s a place for all on TikTok’s inclusive platform. Build your brand with confidence and ease when you start your TikTok journey today.

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REIT vs Private Real Estate Fund

In my life in Investor Relations, I get asked daily: “Is a Fund the same as a REIT?”. Let’s break it down.

What is a REIT, technically speaking?

A REIT is a specific tax structure created in 1960 and has very specific guidelines under the Internal Revenue Code (IRC). A REIT must invest at least 75% of total assets in real estate, cash or US Treasuries. A REIT must derive at least 75% of its gross income from rents, interest on mortgages of real property, or real estate sales. A REIT must pay a minimum of 90% of taxable income in the form of shareholder dividends.

And that brings us to our first big difference. But I will continue with the definitions first.

A REIT must be an entity that’s taxable as a corporation (number 2 difference). A REIT must be managed by a board of directors or trustees. A REIT must have at least 100 shareholders after its first year of existence. And a REIT must have no more than 50% of its shares held by five or fewer individuals.

So, now that we know the technical rules of a REIT, what types of REITs are there?

The most common REIT that people think of is the publicly traded REIT. These are the most visible and any retail investor with a Robinhood app can buy shares. But not all REITs are publicly traded. There are Non-traded REITs. These are companies that publicly report financials and are available to all investors, through licensed Broker Dealers, but do not trade their shares on any exchange. And lastly, there are Private REITs. These are commonly private equity funds with individual or institutional accredited investors, with exempt offerings through a Private Placement.

What is a Private Real Estate Fund?

A Private Real Estate Fund is a private offering, or placement, and issuance of securities. The proceeds of which will be used to invest directly in real estate. Frequently, these funds will buy multiple assets and commingle the funds. There is no specific structure of a Private Real Estate Fund, but they are most commonly structured as a Limited Partnership.

How is a REIT the same as a Private Real Estate Fund?

Most commonly, both will own a diverse portfolio of income producing property. Technically, either could own a single asset, i.e. the Empire State Building is a single asset REIT structure, but portfolios are more common.

How is a REIT different than a Private Real Estate Fund?

The biggest difference for many investors is the tax treatment. Your tax form from a REIT investment will be a 1099-DIV. Your tax form from a Private Real Estate Fund will commonly be a K-1, assuming it is structured as a Limited Partnership.

What is the benefit of a REIT?

While this isn’t a comparison to a Private Real Estate Fund, the single biggest benefit of REITs is the mitigation of the corporate double taxation. Any corporation has to pay corporate taxes first, distribute dividends from after-tax earnings and the shareholders have to pay taxes on the dividends, creating the double taxation. Under the IRC for REITs, if all requirements are met, there is no taxation at the corporate level, only on the shareholders, thereby creating a favorable tax treatment.

What is the benefit of a Private Real Estate Fund?

For many investors, it is the tax treatment through the K-1. Losses can be passed through directly to the Limited Partners on a K-1, which is not available in a REIT and 1099.

Please note: I intentionally kept this blog high level. There are significant differences between a publicly traded REIT and a Private Real Estate Fund in regards to liquidity, access for investors, transparency of reporting, etc. The intent is to outline that a REIT can take many operational forms, but will always have the same tax treatment, which varies significantly from the tax treatment of a Limited Partnership.

About the author:

Evan is the Investor Relations Consultant for Ashcroft Capital.  As such, he spends his days working with investors to better understand their investment goals and background.  With over 13 years in real estate, he has seen all sides of real estate from acquisitions, to capital raising on the equity and debt side, to operations, and actively invests himself.  Please feel free to connect with Evan here and message him through LinkedIn with any questions.

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Webinar Recap: Looking to Note Investing in the Global Health Crisis

The performance of real estate notes was a bellwether for the economy in the last recession, so in this Best Ever Webinar we explored the performance of 1st position and 2nd position notes, how the market has been affected by COVID, and what the data indicates about the real estate market at large.

As a servicer of tens of thousands of first position notes, Jorge Newbery pointed to the $4MM loans currently in forbearance, which are on the precipice of foreclosure after government intervention comes to an end.

The counterargument speared by Kathleen Kramer was that the $4MM homes don’t represent the volume of homes in trouble, but in part those taking advantage of the situation. She also pointed to all-time highs in homeowners equity relative to average debt amounts and record low interest rates that could allow troubled homeowners to be bailed out by refinances.

Jim Maffucio added that we see the unemployment rate dropping and average HHI of homeowners being significantly higher than the last recession where subprime mortgages were provided to low wage earners.

Regardless, all agreed that the amount of unpredictability in the future has returned to normal along with pricing for notes, suggesting that for the time being the market has an optimistic outlook on the future of residential real estate.

What the future holds for commercial notes is a larger question with retail and hotels going to double digit CMBS special servicing rates. Will there be opportunity to buy distressed office notes? Whispers of the opportunity are just beginning and it could be too early to see what the future holds.

Watch the on-demand playback of this webinar and past webinars on our conference platform NOW! Our networking has started for this year’s Best Ever Conference, don’t miss out! Use code WINNERS30 for 30% off your ticket here.

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WEBINAR: Looking to Note Investing in the Global Health Crisis

TOPIC: Looking to Note Investing in the Global Health Crisis

When a recession hits the commercial real estate market, an under the radar asset class flourishes while the rest flounders. Distressed notes are derivatives of real estate ownership that express a low-risk alternative to real estate, often highly discounted. Join us to hear how experts in the space have been deploying multiple strategies to produce stellar ROI even during the toughest of times.

TIME: Feb 11, 2021 [02:00] PM in Eastern Time (US and Canada)



Featured Panel:

Jorge Newbery

Founder & CEO preREO & AHP Servicing

With over 30 years of experience in distressed asset management, community development, and borrower advocacy, Jorge founded preREO with the goal of bringing stability to neighborhoods challenged by the blight of vacant homes. He is driven to empower local small business partners to revitalize and improve their communities while creating investment opportunities for themselves. Throughout his career, Jorge has utilized optimism and resiliency to find opportunity in adversity and he has a proven record of developing innovative solutions that can be mutually beneficial for lenders, borrowers, and communities alike. He founded American Homeowner Preservation, the country’s first crowdfunded distressed mortgage investment platform; AHP Servicing, a nationwide mortgage servicer; and Activist Legal, a law firm facilitating default legal services nationwide. He also authored Burn Zones, sharing lessons learned through his challenges and successes as an entrepreneur.


James Maffuccio

Co Founder and Chief Investment Officer Aspen Funds

Mr. Maffuccio is a 30-year real estate veteran and an expert in mortgage notes. He is deeply networked in the secondary mortgage industry and is responsible for acquisitions and underwriting as well as relationships with primary sources and key vendors. During his real estate career, Mr. Maffuccio developed, and/or rehabbed multiple residential projects in Southern California, including infill subdivisions, affordable homes, luxury homes and homesites, multifamily, and planned developments, such as the Gold Nugget Award-winning “Traditions” community in Fillmore. Mr. Maffuccio has personally executed and/or managed every aspect of the development process, including site selection

and acquisition, project conceptualization and design, procurement of entitlements and permits, regulatory compliance, entity structuring and capitalization, construction management, marketing, sales, and investor relations.


Kathleen Kramer

Real Estate Broker 1 Oak Advisory, LLC

In her 25+ years as a licensed Real Estate Broker and Mortgage Originator, Kathleen Kramer has closed over 2500 transactions for more than a $1 billion in volume. She ran a successful Real Estate club in Huntington Beach from 2002 to 2006. She and her husband, Michael, have personally invested in a variety of real estate backed investments including single family, multi-family, office, land development, reg D syndications and non-performing notes in several states. Investing in real estate gave Kathleen the financial liberty to take a sabbatical from her Real Estate and Mortgage Brokerage business for the last two years. She spent the time rehabbing her house in Huntington Beach, travelling, homeschooling her daughter, caring for the older generation and planning what is ‘next’.


Ben Lapidus

Chief Financial Officer for Spartan Investment Group LLC

Ben Lapidus has has applied his finance and business development skills to construct from scratch a portfolio of over $100M assets under management, build the corporate finance backbone for the organization, and organize over $20M of debt capital from the firm. In addition to completing over 50 real estate transactions at and prior to Spartan, Ben is also the founder and host of the national Best Ever Real Estate Investing Conference and managing partner of Indigo Ownerships LLC.


All previous webinars will be featured on demand during Best Ever Conference on February 18-20th. Use WINNERS30 to get 30% off your ticket here.

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Planning for the End

All new relationships start with a bit of nerves, a lot of excitement and typically, big hopes for the future. Whether it is a new marriage, a new friendship or a new business partner.

For the Passive Investor, we are focusing on the business partner. As you are interviewing sponsors, often times the focus is on their business plan, track record and overall experience. But, how much time are you focused on the end, the exit, the divorce? Particularly in real estate investments, the exit is a primary driver of overall returns, whether it be core, value-add or a development deal.

Let’s take a look at an example:
A core asset is purchased for $160,000,000. This is a luxury asset in a very good, high income area with strong population growth. The purchase price is about $400,000/door. The sponsor is projecting a 6% average annualized cash on cash return, 15% IRR and 2.5-3x equity multiple over a 10 year hold. This sponsor offers a straight 80/20 profit split from day 1 with no preferred return.

These numbers allow us to get a rough estimate of what the terminal sale value must be to achieve these numbers. Saving you the boredom of my simple excel model, the sales price in year 10 would have to be $261 million dollars, or 61% more than the purchase price, accounting for a year 2 refinance. This equates to $652,000/door.

Is this sale price achievable?
As investors, we are all speculating as to where values are going. Whether the hold is 1 year or 10 years, if I invest today it is because I believe values are going to rise over that period. The point is to ask the question and confirm the sponsor has thought this through.

Of course, there are a multitude of factors that can affect the terminal value of the asset. Some simple questions that I ask sponsors when assessing the projected sales price:

  • Are there comps today that support that price in total dollars?
  • Are there comps today that support your terminal cap rate?
  • Are there comps today that support that price per door?
  • Who is the likely buyer?

Notice I focus on CURRENT comparable properties, as my crystal ball is realistically no better or worse than anyone else’s. If a sponsor is projecting to sell a deal for $100,000,000 at a 5.0% cap rate and $250,000 per door, I will want to see comps showing that the sale of the asset I am invested in is not going to be a record breaker in two out of three of those areas, and ideally all three. As for the last question, while no sponsor can speak to who the specific buyer of an asset will be in 5-10 years, the purpose is to better understand that a) the sponsor has thought about the reality of an exit, and b) better understand if buyers exist in the market at that price.

At the end of the day, each investment is a balancing act of risk. Asset classes, property types, business plans, sponsors, leverage, time horizon are all pieces of the equation that need to be addressed, and many of these are commonly asked in my dealings with investors. But at the end of the day, the only thing that matters to most people is WILL I MAKE MONEY? Understanding where that money is coming from and assessing the feasibility of those results is imperative to answering that question.

Check out other red flags to look for when vetting sponsors here.

About the author:
Evan is the Investor Relations Consultant for Ashcroft Capital and Active and Passive Real Estate Investor. As such, he spends his days working with investors to better understand their investment goals and background. With over 13 years in real estate, he has seen all sides of real estate from acquisitions, to capital raising on the equity and debt side, to operations, and actively invests himself. Please feel free to connect with Evan here.

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How Passively Investing Can Make You a Better Real Estate Investor

If you would like to make more money as a real estate investor, consider the benefits of a good investment. Investing passively is a smart way to make more money and give yourself more free time. You can start a passive income plan no matter if you have not done real estate before or if you have your own business. Learn about this approach and how it could make sense for you over the long run.

Active Versus Passive

If you want a solid wealth building plan, knowing the difference between passive and active investing is a critical part of the process. An active investment is when you go out and look for properties to buy and sell all the time. To maintain your income, you need a steady stream of new homes to buy and sell.

With a passive investment, you keep making money over the long run. You invest in a property and rent it for the best results. You keep your income stream as long as you maintain your property and follow the proper steps.

Passive Investments Increase Your Wealth

Passive investments are a great way to build your portfolio. You can only buy and sell so many properties at a time, so you will reach a profit cap if you are not careful. If you don’t want to face that problem, get passive investments that make the most sense for your bottom line.

Passive investments involve buying properties that people want to rent. Once you buy the property and set up the paperwork, you continue earning a profit without too much effort. If you want to get the most from your effort, invest in vacation rentals.

How to Get Started as a Passive Investor

Learn how to get started as a passive investor. You need to have a plan before you begin and to know how much you are willing to spend. Look at properties in your area to get an idea of what you should do next. Each investment property you buy boosts your profit and takes your business to a whole new level, and you will see the difference in no time.

If you don’t know why passive investments work so well, do as much research as you can. You can find a lot of information online if you know where to look. Also, buy books on passive investments online. This takes your experience to the next level. Learn different passive investment strategies if you would like to succeed over the long run.

When you educate yourself before you begin, you reduce the number of mistakes you make and enhance your projected profitability. It does not take as much as you think to become a passive investment expert.


Keep an Eye on the Market

Keep an eye on the market to understand what investment makes sense for you. Look at local prices to see how much profit you can expect. Local rental prices rise and fall over time, so you can’t just look at current prices. Look at past and projected profits to discover what path is right for you, and you will be happy you made the effort.

Watching the market shows you what prices people are willing to pay. Even after your investment properties are in place, you should still watch the market for important changes and updates. Doing so keeps you in the loop and lets you maximize your profits.


Try Getting the Best Deal

Try getting the best deal possible to save money. When you look into different investment options, you find a good investment at a fair price. Write down different properties and their prices until you find one that stands out to you more than the rest. You must keep a record of different deals.

Also, some people charge more for the property than they expect you to pay. If you don’t want to pay the full price, negotiate to get a better deal. Speaking with a real-estate professional is another option worth considering. Your expert will help you get the best price possible so that you don’t end up overpaying for your property. A passive investing plan works well no matter your long-term goals.


Look for Future Investments

If you get enough passive investments, you won’t have to keep making additional investments if you don’t want to do so. Many people buy old homes or apartments and fix them. They then rent them out for a profit. You can keep doing that each time you get another apartment up and running, or you can stop making investments once you are happy with the money you make.

No matter your situation, always keep an eye on future investment opportunities to keep your options open. Even when you are done buying properties, you can still find deals worth making. Never overlook a good investment opportunity when it presents itself, and you will make the most profit possible for your situation.

Your wealth plan depends on you having the right strategy for the situation. Your wealth building strategy works much better when you keep an eye on the future, and you will know you did the right thing.

Final Thoughts

Look at different passive income plans to understand what path is right for you. Your passive income plan takes your results to another level and empowers you to reach a level of success you never thought possible. Make sure you know what you are doing and that you have a plan.

The right plan will take your real-estate investments to a whole new level, and you will be happy with the outcome you get. Learn as much as possible about active and passive investing as you can to boost your profitability. You will soon have a steady source of income that keeps working for years to come.

Vacation rentals are a powerful investment when you want to earn money passively. The amount you earn depends on many factors you must consider. When you put a plan into action, you will be thrilled by the outcome you achieve. Being a wise investor takes your profit to where you have always wanted it to go.

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5 Risk Profiles of Real Estate

Real estate can generally be broken down into five risk profiles. But what do these categories mean?

  • Core
  • Core Plus
  • Value-add
  • Opportunistic
  • Development


Core assets are generally the A quality asset in the A market.  These are viewed as the lowest risk because of their age, condition and market dynamics.  Because of the low risk, they often also generate the lowest returns.

The returns from these assets are typically from cash flow and long term, market driven appreciation.  The buyers of these assets tend to be institutional and carry low leverage with the intent of holding 10+ years.


Core Plus

The next tranche in risk is Core Plus. Compared to Core, these assets are older and/or in a less desirable market, although still in strong markets and sub-markets with strong population growth, low crime, and good schools.

For simplicity, these assets will be fully renovated assets with little or no deferred maintenance. When talking about apartments, the units will be recently renovated and achieving full market rents. In regard to market risk, these assets will typically fall into Class A or B submarkets, within major primary and secondary MSAs.

The returns of these assets are, like Core, derived primarily from cash flow with long-term, market-driven appreciation. Leverage is still fairly low, but slightly higher than Core.



Value-Add assets, like the name suggests, are existing, cash-flowing assets that have the opportunity to increase the value. The business plan can vary but will always boil down to increasing the income of the asset.  Most commonly in multi-family, the income increase is created through unit renovations.  These assets tend to fall in the B to C range, and can be found in, most frequently, in A, B and C markets.

These assets will frequently have some deferred maintenance that needs addressed, and often times are outdated aesthetically or operationally.  These assets will often require a capital investment to be brought to market standards.

In connection with the large amount of work and capital infusion, the returns in this class jump pretty significantly from Core Plus.  The returns often come from cash flow and forced appreciation but skew more heavily to appreciation.



Opportunistic assets are the riskiest of the EXISTING asset class. These assets often have severe deferred maintenance, high vacancy, and very little, if any, existing cash flow. Most commonly, significant construction is performed to cure the deferred maintenance and bring the property to market standards to begin backfilling the vacancies. Many times, the property is repurposed within its existing structure; for example, converting a vacant warehouse store to self-storage, or a hotel to apartments.

Relative to the purchase price, leverage is often high for Opportunistic assets. The returns are generated through forced appreciation.



Development is the riskiest of all asset classes. Typically, developers are buying vacant land, but may also buy existing properties with the intent to demolish the existing structure and build something new.

Returns for developments are created through forced appreciation.

In the cyclical nature of all things, it is interesting to note that many Core buyers are buying newly constructed assets from developers.

In the follow-up blog, I will be diving into the risks of each profile.

About the author:
Evan is the Investor Relations Consultant for Ashcroft Capital.  As such, he spends his days working with investors to better understand their investment goals and background.  With over 13 years in real estate, he has seen all sides of real estate from acquisitions, to capital raising on the equity and debt side, to operations, and actively invests himself.  Please feel free to connect with Evan here.

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The Pros and Cons of Opportunity Zone Funds for the Passive Investor

With the 2017 Tax Cuts and Jobs Act, the United States government created a new wealth building vehicle for investors. This legislation established opportunity zone funds as a way for investors to improve struggling communities while receiving capital gains tax breaks. The investment vehicle offers a means for a passive investor to gain wealth while helping others.


What is an opportunity zone?

Throughout the 50 states and US territories, there are more than 8700 areas and projects that qualify as opportunity zones. These locations are often properties that have fallen into disuse and require extensive upgrades.

In cities, an opportunity zone project might be a warehouse or factory in a former manufacturing area. The opportunity zone fund will provide investment capital to renew the property for different use.

This program hopes that these initial investments will spur other investors to improve local properties. As a new housing project begins through the opportunity zone fund, investors will improve other properties to redevelop grocery stores and other commercial ventures. Soon, a whole region will see improvement because of the original investment.


How does an opportunity zone fund work?

Opportunity zone funds are a vehicle for passive investing. Individuals who contribute to the fund pool their resources so that the fund manager can invest in a real estate development project. At the end of the project, investors receive income from the sale or lease of the property.

An important difference from other real estate investments is that opportunity zone funds must improve the property as well as acquire it. The government is not looking for dilapidated properties to transfer between owners. The program intends to create a win-win project that benefits both the passive investor and the opportunity zone communities.


Who can invest in an opportunity zone fund?

A major overhaul of a building requires a large amount of capital. To meet the expectations of potential buyers, properties will need both basic repairs and new infrastructure. No company will want to open a branch in a building that does not have adequate resources for a wireless network.
For this reason, opportunity zone funds are not open to every potential investor. People who want to participate must be accredited investors who can meet specific guidelines. The investor must have a net worth of at least $1 million. Alternatively, investors must prove that they have had two consecutive years with an income of at least $200,000.
Also, this opportunity is for larger investments. Typically, fund managers are looking for a buy-in of at least $100,000. This amount increases the ability to make significant improvements to a property. However, it will put this program out of reach for the majority of investors.


The Benefits of Investing in an Opportunity Zone Fund

Without incentives, investing in financially-stressed communities might not be appealing. The legislation that creates opportunity zones also includes several financial benefits.



Deferred Capital Gains

Capital gains taxes are a frustrating reality of wealth building. The better the investments perform, the more the taxpayer must pay. However, opportunity zone investing provides a loophole that allows investors to defer capital gains taxes and use the money to generate passive income.
By making an opportunity zone investment within 180 days of incurring capital gains, the taxpayer can defer the tax on the invested amount until 2026. With positive performance, the taxed money can create more income before it goes to the government.


Reduced Capital Gains

Improving an opportunity zone is a long project. This program awards investors who keep their money in the fund for an extended time. A five-year investment reduces the original amount taxed for capital gains by 10%. By keeping the money in the fund for another two years, the capital gains reduction increases to 15%.


Tax-Free Appreciation

If investors keep money in the fund for 10 years, they are eligible for another tax benefit. The appreciation for the opportunity zone fund investment is not subject to capital gains. Investors must still pay the gains taxes on the original funds from a decade earlier, but there are no additional taxes on the profits derived from the opportunity zone project.


The Risks of an Opportunity Zone Fund Investment

Every financial investment comes with uncertainty. It is up to the investor to decide whether the passive income is worth the potential loss. While opportunity zone funds may benefit both the investor and the community, they are not without risk.


Untested Investment Model

Since this program has only been around since 2017, there is not an established track record to assess the risks of this investment. Improving a property in a struggling community is a laudable idea, but it does not guarantee a high return. Even a well-developed property may have trouble finding tenants in a depressed area.


High Buy-In

Some investors will be nervous about the size of the initial investment. For many people, a six-figure investment represents the majority of their wealth available for passive investing. They may not be willing to tie up so much money in a long-term investment.


Uncertain Community Benefits

The goal of the opportunity zone program is to create an investment that benefits local communities while producing a financial return. As the legislation stands, community leader input is not a requirement of the development process. Unpopular projects could be stalled by legal challenges and protests. Without an understanding of the needs of local residents, investors might fund a project that raises the cost of living and gentrifies a low-income area.


Is an opportunity zone fund the right investment for you?

If you meet the criteria for participating in an opportunity zone fund, you want to do your homework. Potential investors should take some time to learn the details of the different projects seeking funds and the backgrounds of the managers and developers involved. While the tax benefits of this program are attractive, you do not want to lose money just to avoid paying some capital gains taxes.

After doing your research, you may find a project with great potential for success. An investment in the right opportunity zone fund offers fiscal benefits that will change a community for the better.

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JF2326: Highlights From 401(k)aos by Andy Tanner | Actively Passive Investing Show With Theo Hicks & Travis Watts

Investing in 401(k)aos: Highlights from Andy Tanner’s Book

The 401(k) retirement plan has taken its place alongside Mom and apple pie as a pillar of American wholesomeness. Most private-sector employees invest in a 401(k) where offered, and the public sector has its equivalent accounts. As workers, we learn that contributing to an employer-sponsored retirement account is the best way to fund retirement. Andy Tanner, in his book “401(k)aos”, questions this one-size-fits-all assumption. On this Actively Passive Investing Show podcast, we discuss Andy’s five main points and add our observations on the 401(k)’s potentially chaotic role in lives and markets.

1. 401(k) to the Rescue

To understand why the 401(k) is an agent of chaos, we need to look at its history. Invented in 1978 to help workers fund retirement, the 401(k) plan was meant to supplement other options such as IRAs, pensions, brokerage accounts, and personal savings. Ideally, the average American worker would draw from a diverse financial portfolio in later years. A financial strategy could include commercial investing and active investing in providing retirement income streams.

Fast forward to today, and many people rely on their 401(k) as their primary retirement strategy. They expect this account, along with social security and homeownership, to support them throughout retirement. In reality, most people won’t have nearly enough saved to cover their expenses. According to Andy, relying on the 401(k) has created a tragic and chaotic situation. He echoes the original architect Ted Benna in asserting that it was never intended as a primary retirement account.

Another aspect to consider is whether your financial goals are congruent with the 401(k)’s purpose. These plans build net worth, not provide cash flow. If you are involved in passive investing or commercial properties, you care about cash flow. Placing significant assets in a 401(k) may not be your best option, as withdrawing cash before retirement age could incur steep taxes.

2. The Peril of Mutual Funds

If you are an active investor, consider the lack of agency you have with a 401(k). These plans rely on mutual funds as investment vehicles. Further, they offer limited choices and stratify them according to risk. The conventional advice is that younger workers can tolerate more risk and should invest in riskier but potentially higher-yield funds. Older workers should invest more conservatively. Plans usually guide employees through a friendly online algorithm designed to help them allocate their contributions according to risk tolerance.

The issue here is with applying the same general investing strategy to all people. This approach also assumes that age primarily determines risk tolerance, irrespective of individual goals and circumstances. If you are an active investor, you know this view is shortsighted.

Andy flags historical mutual fund performance as a risk. Mutual funds generally track the stock market. If the S&P and Dow Jones indexes are down, your account probably is too. Reallocating a 401(k) is cumbersome and tied to specific time windows. You cannot react agilely to a volatile market, and you can’t plan to hedge losses.

The fundamental issue is that mutual funds are part of the Wall Street system and tied to its fortunes. Real estate and other assets can hedge against Wall Street, especially if they focus on people’s basic needs for goods, services, and housing. Retail shopping centers often survive market downturns. Other commercial properties, such as well-managed apartment complexes, usually thrive.

When you manage your own brokerage account, you can set a stop loss against sudden stock price drops. You can create other alerts that help you succeed with active investing. If your 401(k) nosedives, you wait for better days.

Retirement Fund Waiting Game

You may wonder if you need that flexibility in a long-term savings plan. After all, isn’t the 401(k) meant to be the ultimate vehicle for long-term passive investing? Don’t you want to let compounding and historical market trends work their magic? After all, many Americans lack the resources or knowledge to pursue commercial investing.

Let’s think back to the Great Recession. In many cases, the value of conventional retirement plans dropped by 50% or more. People lost half their retirement savings overnight. While the losses were unrealized, they quickly became real to the many people who needed to draw on the money within ten years. Employees approaching retirement did not have time to make up for the losses. Younger workers waited five years or more for their accounts to regain pre-recession value. If you were planning on borrowing against your 401(k) for an imminent home purchase, medical bills, or your children’s college expenses, you were out of luck.

If we look at the math behind the drops, the portfolio performance needed to recover is greater than the loss. If your account plummets by 50%, for example, you have to gain 100% to return to the initial value. In other words, you have to double your money to break even. This is an odd calculus for an investor, particularly when applied to mutual funds.

3. Feeding Wall Street

According to Andy, you should realize that the 401(k) was invented to enrich Wall Street. Though it may offer some advantages to individuals, its purpose is to promote mass participation in the stock market. Wall Street reaps fees and other profits from this vast investor base.

This doesn’t mean a 401(k) has no place in your financial strategy. Just keep in mind that the vehicle was not designed to benefit the individual. The tax situation illustrates this fact. If you want to withdraw from your account before retirement age, you face a stiff tax rate and penalties. To avoid this, you need to take a hands-off approach to that money or leverage the few exceptions, which still tax you at ordinary income rates.

Let’s take a mutual fund purchase as an example. If you buy a fund on your own through a broker, you can hold it for over a year and then sell at a long-term capital gains tax rate. This rate is 15% for most people. If you buy the same fund through your 401(k), hold for more than one year, and then cash out at retirement age, you may pay up to 37% in taxes on ordinary earned income.

Andy asks the question we should all ask ourselves: Do you plan on making more or less money in retirement than you do now? People’s answers vary depending on their goals. If you plan on making more, however, you are likely an investor. Does it make sense to take a 401(k) tax advantage now and pay much more tax later on that money in a higher income bracket? You may want to calculate scenarios in light of your investment strategy.

4. Abdicating Investing Responsibility

Andy points out an insidious side effect of mass reliance on the 401(k). If you trust your sponsored retirement vehicles to secure your future, you may forfeit owning your financial destiny. It becomes too easy to remain ignorant of basic investment and economic principles. Many people don’t learn financial literacy at home or in school. Without an incentive to learn fundamentals, they may pay excessive taxes because they don’t understand the system. Over decades of hard work, they may overlook opportunities and even risk life savings because they abdicated responsibility.

Structurally, the 401(k) reinforces dependence by offering limited investment choices. You typically have a small portfolio of mutual funds at various risk ratings, sometimes only one fund at each risk level. Your company may also offer a stock fund, but consider that you already invest in the firm by working there.

If you invest privately, you can choose from thousands of individual stocks, mutual funds, and other vehicles. You can complement real estate investments such as retail shopping centers or other commercial properties. Crucially, you can enter and exit investments as you need to.

5. Artificial Market Demand

Not only does the 401(k) affect individual financial habits, Andy describes its impact on the market. The millions of Americans regularly contributing to these plans create artificial demand for mutual funds, stocks, and the behemoth infrastructure that supports them. It is hard to cast the situation as a traditional bubble because retirement vehicles are funded so predictably and on a mass scale. We don’t yet know the consequences of this systemized influx.

The Takeaway

When viewed as an asset among several in your portfolio, the 401(k) offers some advantages. Often you can take out a loan against your vested balance. If your employer matches your contribution up to a certain percentage, you’re receiving free money. Before contributing above the match amount, consider weighing your particular situation’s pros and cons.

Andy’s key takeaway is that investing is a life skill we all need to own. You don’t need a degree in finance or a Wall Street job, but you want to understand tax code and market fundamentals. Know some history for context and be able to soundly evaluate your investment vehicle options. The better you can do this, the better you can invest in your financial future, not just Wall Street.

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Investing in Apartments Has Been Life-Changing

Investing in Apartments Has Been Life-Changing

In my opinion, multifamily real estate (apartment investing) can be one of the best ways to grow your wealth. So much so, that my wife and I decided to sell our primary residence years ago and put 100% of our equity into apartments, along with the majority of our investment portfolio.

For those of you who follow Robert Kiyosaki and the Rich Dad Poor Dad philosophy, you know that Kiyosaki is famously quoted for saying “your house is not an asset” meaning your primary residence is not an investment, because it doesn’t produce cash flow each month — quite the opposite in fact as you pay for expenses, taxes and upkeep. That is, unless you house hack, which is topic for another day.

Not only does an owner-occupied home leave you less mobile, it also ties up your money so you can’t use it for investments. In other words, the more you pay down your mortgage, the more you trap your investable cash.


A few thoughts on multifamily real estate in 2021: 

  • 75 million+ Baby Boomers are retiring
  • Many of today’s apartment complexes can be converted to retirement communities
  • A large number of millennials aren’t buying homes
  • Institutional and main street investors are searching for yield in today’s low interest rate environment

Multifamily investing can be a great way to build wealth, while helping fill the need for affordable housing, senior living and millennials choosing to rent by lifestyle choice.




My wife and I partner with experienced multifamily firms and invest in what’s called a real estate “syndication” or a real estate private placement. This means we, along with other investors, “pool” our money together to purchase large assets that we otherwise would not be able to afford on our own; a 300-unit apartment complex for example. The general partner (or multifamily firm) and their teams will manage the property and renovate the building by adding modern updates and improved amenities such as, in-wall USB ports, smart thermostats, storage lockers, improved landscaping, updating the clubhouse, gym, pool, or covered parking spots; depending on what the property is needing. The goal is to modernize the apartment building to today’s standards and increase the rents to the market level throughout the process.

The value or price of an apartment building is primarily derived from the NOI (net operating income), which is the total collected rents and income minus expenses to operate the property. When the net operating income increases, the value of the complex increases at a multiplier of this number. For example, let’s say you increase the annual net operating income on a property by $100,000 a year and a property in that market sells around a 10x multiple of the NOI. A $100,000 rent increase can bump the purchase price up by approximately one million dollars. This could be higher or lower depending on the market.



Let’s take a 300-unit apartment building as an example. Rents increase by $28 a month, per unit x 300 units ($28 x 300 = $8,400 monthly x 12 months = $100,800). For resale purposes, these $28 rent increases implemented across all units, could result in the property value increasing by nearly one million dollars. This type of value-add is much more scalable compared to a single-family home renovation.

Whether you invest individually in multi-family or with reputable firms, it can be a great way to generate cash flow, while helping improve communities along the way. My wife and I have dedicated the past 6 years to investing primarily in this asset class for these reasons. Cash flow investing can provide the ability to focus more on what you love and the freedom to focus less on what you don’t enjoy. At the end of the day, we all deserve to focus our time and energy on what makes us happiest.


To Your Success,

Travis Watts


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How much to invest vs. keep in bank account as passive investor

How Much Cash Should a Passive Investor Have Available?

Whether you invest primarily in stocks, commodities or real estate, it is important to keep a certain percentage of your portfolio in a liquid savings account. The primary benefit of having cash available is that it allows you to quickly buy assets at a discount during a period of economic weakness. Let’s take a look at how much cash a passive investor should keep in the bank at all times.

Do You Have an Emergency Fund?
Before you start investing in stocks, bonds or other passive vehicles, it is important to build an emergency fund. Ideally, you’ll have enough money to cover at least six months of expenses. After you reach that point, you can start to begin to implement your passive income wealth building strategy.

Cash Should Make Up at Least 5% of Your Portfolio
Ideally, you will keep at least $5 for every $100 in your investment portfolio. If you are a passive investor, it might be a good idea to keep even more of your money in cash as you can earn interest and dividends on that money. In fact, depending on your approach to investing, it may be a good idea to put up to 20% of your portfolio in a savings or checking account. As savings account balances of up to $250,000 are insured by the FDIC, opening a savings or checking account can be an effective way to earn passive income while preserving your capital.

There Is a Point of Diminishing Returns
While you can certainly increase your wealth by collecting dividends and interest from a savings account, it may not be the most efficient way to do so. It isn’t uncommon for banks, credit unions and other financial institutions to offer less than 1% interest on money held in their accounts. Conversely, annual inflation in the United States can be upwards of 2% or more.

Therefore, if you kept all of your money in cash, you would be earning less than inflation. In such a scenario, your purchasing power would decrease even if your net worth increased. Historically, stocks have generated average returns of 11% per year while real property prices tend to appreciate by up to 5% annually.

Passive Investing Doesn’t Mean Staying Out Completely
There is a major difference between a passive investing strategy and staying out of the market because you’re scared of losing money. If you have a relatively low risk tolerance, you should consider putting money into government bonds, gold or index funds. You might also want to consider putting money into real estate investment trusts (REITs) that send out regular dividend payments.

Finally, you may be able to build wealth in a conservative fashion by purchasing ETFs. An ETF is similar to a mutual fund in that it allows you to purchase exposure to multiple companies or sectors in a single equity. It is also like a stock in that you can buy and sell your shares during the trading day.

How Long Are You Planning to Keep Your Money in the Market?
Time is a key component to any wealth building strategy. For instance, if you are only a few years away from retirement, you’ll want to take fewer risks in an effort to conserve your wealth. Therefore, it may be a good idea to liquidate equities in favor of cash.

However, if you have several decades before retirement, it’s generally a better idea to invest in riskier assets such as growth stocks or IPOs. This is because you’ll have an opportunity to recoup any short-term losses over the course of 10, 20 or 30 years. In such a scenario, you’ll want to have as little cash as possible in your portfolio.

It’s important to note that these concepts are generally true regardless of what your investment goals are. A financial planner may be able to provide more insight into how to allocate your funds to help meet any specific goals that you might have.

Regardless of how conservative you are when it comes to investing your money, it’s important to limit the amount of cash you have at any given time. Although it is possible to generate a return on that portion of your portfolio, you can grow your net worth faster by putting money into stocks, commodities or real estate. Furthermore, any profits or losses generated by the sale of these assets may receive favorable tax treatment.

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Tips for setting goals as passive investors

Passive investing is a strategy that’s designed for the clear purpose of maximizing the returns that you obtain by effectively minimizing any buying and selling. In many situations, passive investments are considered to be long-term investments that you hold for a lengthy period of time before selling. For instance, it’s possible for a passive investor to make investments in art pieces.

No matter the strategy you use for making passive investments, it’s important to set goals that will guide your decision-making in the months and years to come. However, setting goals with this form of investing can be tricky when the returns are difficult to calculate. This guide offers some tips on how you can properly set goals when utilizing passive investments.

What Is Passive Investing?

This is a portfolio strategy that centers around buying and holding investments until they have appreciated in value. Because of its flexibility, there are many types of investments that can be made with this strategy. It’s common for investments to be held onto for a very long time. Keep in mind that this type of strategy hardly uses any market trading.

Likely the most common type of this investment is index investing, which centers around replicating and holding a market index or indices. The primary benefits of using this investment strategy is that it’s considerably less expensive and less complicated when compared to an active investment strategy. Additional benefits associated with passive investments include:

  • Very low fees because of much less oversight
  • Your capital gains tax should be low each year
  • It’s far easier to create an effective strategy with these investments when compared to active investments
  • Can help you diversify your portfolio

How to Properly Set Goals As a Passive Investor

When you want to make passive investments, it’s important that you understand how to properly set goals for your portfolio. If your expectations are unrealistic, you could be disappointed in the returns on your investments. While the returns that come with passive investments aren’t exceedingly high, they can help you bring in passive income and increase your wealth. Before you start implementing a passive investment strategy, take a look at the following tips that can help you along the way.

Make Sure That You Set Modest Investment Return Goals

When you engage in passive investing, your main goal should be to obtain modest investment returns. In fact, you should rarely expect to get high returns that beat the market. While this form of investment comes with much less risk than the majority of active investments, it’s important to understand that the returns are generally random. Even though the returns for passive property investments are somewhat predictable, not all passive opportunities can be calculated beforehand. If you set modest investment return goals, you’re portfolio should be able to withstand a slightly worse return than you expected.

Use the Right Strategy

There are many different types of passive income investments that you can make, the primary of which include real estate, dividend stocks, index funds, and peer-to-peer lending. The strategy that you choose depends largely on your preference and your knowledge of the investment in question. Real estate investments are very popular because of the ongoing rise in property values that has occurred in most locations over the past 10 years. If you want to obtain long-term returns that you can count on, this shouldn’t be a bad investment.

If you invest your money into real estate for the purpose of bringing in passive income, you can gain ongoing income source from rental properties. You could also invest in REITs, which are designed to pay out around 90 percent of taxable income to investors as dividends. Crowdfunding is another great option that gives you the full tax benefits of being a property owner.

If you’re not interested in making investments in properties, you could look into dividend stocks, which are an easy way to generate income. When public companies earn profits, these profits are sent to investors as dividends. You could then choose to purchase additional shares with dividends or cash out. Keep in mind that the yields that can be obtained with dividend stocks vary with each company. Consider searching for companies that are classified as dividend aristocrats, which indicates that significant dividends have been paid out for at least 25 years.

As touched upon previously, among the more popular types of passive investments are index funds, which are mutual funds that are linked to a market index. Index funds are passively managed and won’t change significantly unless the underlying structure of the index changes. Management costs are very low with index funds. The fourth type of passive investment strategy that you should consider is peer-to-peer lending, which is also known as crowdfunding. Currently, crowdfunding is highly popular and is used for everything from buying properties to funding different types of loans.

Crowdfunding involves numerous investors lending money to a business entity or person via an online platform that connects the borrowers and lenders. These platforms include Lending Club and Prosper. Aside from funding the actual loan, you aren’t required to do much in regards to managing the fund. You can expect a return that ranges from 6-12 percent when making crowdfunding investments, which can help you with your wealth building efforts.

Each of the four aforementioned strategies has its own positives and negatives that you will need to take into account. With the right approach, all four options can provide you with sizable returns that you can use to increase your wealth or to open up additional investment opportunities. The goals that you make can be dictated by the strategy you choose.

Identify How Much Money You Should Save

Whether you want to make passive investments to bolster your wealth building efforts or to increase the amount of money that you have for retirement, it’s important that you set a goal for the total amount of money that you want to earn and save from your investments. When saving for retirement, it’s recommended that you set aside enough money to cover 70-85 percent of the income that you bring in before retirement.

If you want to travel the world upon retirement or invest in a new hobby, your savings may need to be even higher. Other investment firms recommend that you save around 10 times the amount of income you generate in a single year by the time that you turn 67. If you earn $100,000 per year, this means that you should have around $1 million in savings by the time that you’re 67. Once you know how much you want to save, you will have a better idea of what your goals should be.

Know How to Overcome Investment Hurdles

There will always be hurdles and challenges that you will be required to overcome when making passive investments. If you want to reach the goals that you set for your investments, it’s important that you know how to overcome any challenges that you face. Even though passive investments are less risky than active ones, it’s still possible to lose money on your investments. Keep in mind that this type of investment is meant to be a long-term strategy, which means that you will want to sell your investments when they have reached an acceptable value that will allow you to generate a sizable return.

Along the way, you may notice that the investment dips in value at one time or another. Some investors will panic in these situations and choose to sell, which is typically a bad idea. Passive investments aren’t meant to fluctuate substantially in value, which is why you should be patient while awaiting favorable returns. The key to a successful investment is to react to volatility in the markets with a calm and measured approach.

Set a Clear Timeline With Each Investment

It’s highly recommended that you set a clear timeline with the goals that you have for each investment. If you want to net a return of 10 percent after 10 years of holding an investment, you should stick close to the timeline that you’ve set. By creating a clear timeline, it should be easier for you to avoid selling too early or to hold on too long while you await higher returns. Keep in mind that the right passive investments can be held until well after retirement age. If you set these timelines as early in your life as possible, it’s more likely that you will earn enough income to reach your goals.

If you want to be a successful investor, making passive investments is a great way to diversify your portfolio. Most of these investments are simple and easy to manage, which helps to reduce overall risk. Though goals aren’t always easy to define with passive investments, setting some basic ones should help you avoid making costly mistakes when you invest your money. With patience, the income that you generate could be higher than anticipated.

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Passive Investing Ideas For Your IRA

When it comes to passive income, holding property in an individual retirement account is as passive as it gets. Typical portfolios with a number of diverse assets require constant supervision and timely transactions. In this case, the IRA does all the work. Taxable income is deferred just as it is with other IRA investments, and investments in land and buildings are likely to pay handsome returns.

On the upside, then, this is an attractive vehicle for any passive investor interested in wealth building through real estate. Your IRA could buy commercial properties, apartment complexes, rental homes or even parcels of raw land.

However, the importance of playing by the rules — which are numerous — cannot be overstated. A small mistake could suddenly turn your entire IRA into taxable income. Carefully consider the pros, cons and risks associated with this form of passive investing.

The Rules for Investment Properties Within an IRA

The first thing to understand is that you are not the property owner. Your IRA is, and that will be stated on the deed. The second is that none of the income the property generates can directly benefit you; it can only benefit the IRA. Most of the other rules fall under those two presuppositions.

The IRA you use, whether conventional or Roth, must be held by a self-directed custodian. IRAs have been overseen by custodians for tax accountability since 1974, but traditional custodial banks and brokerages offer only limited investment options such as stocks and mutual funds. A self-directed IRA allows you to diversify your retirement portfolio with alternatives like investment property. That is one of the biggest perks.

There is another important difference between traditional custodians and self-directed ones: Custodians of self-directed IRAs, beyond directing you to IRS resources, do not give legal tips or tax advice. They manage transactions and report to the IRS as required to keep you in compliance with the rules, but their fees cover only those services. They do not provide an education or suggest best practices. You must make property investment decisions without their help.

In other words, when it comes to investing through the IRA, you are on your own for the most part. That is one risk that many passive investors are not willing to take.

In the eyes of the IRS, you and your self-directed IRA are completely separate entities. This arrangement is strictly for the purposes of passive investing. You cannot enjoy property-generated income until it is time to start making withdrawals from the IRA. Since one prohibited transaction can result in your IRA becoming taxable income, it is best to think of the account as a complete stranger you look forward to meeting someday.

For instance, if you purchase a home with funds from the IRA, you cannot live in it, work from it, start a business in it, or even stay in it on vacation. There is a long list of IRS-disqualified people who cannot benefit in any way from the property. The shortlist includes the following:

• You.
• Your spouse.
• Your children and their spouses, children, and grandchildren.
• Your parents, grandparents, and great-grandparents.
• Any beneficiary of the IRA.
• Plan service providers or any custodian, adviser, or an administrator.

Also, you cannot use the IRA to buy property from anyone, including yourself, who is on the disqualified list.

Purchasing Property

No one argues that buying a property through an IRA requires substantial wealth. Mortgages are hard to come by and are quite complex, so paying cash is the preferred alternative.

That calls for a very high account balance. Not only will you have to pay for the property itself, but most advisers recommend that you have enough saved for several months’ property expenses at the very least.

If you do find a lender who specializes in loans to IRAs, you are not personally guaranteeing the mortgage, so the loan will have to be nonrecourse. If you stop making payments, the only asset the lender can go after is the property itself. That means the lender will require a sizable down payment of around 40% to 50% and charge much higher interest rates than those in a conventional mortgage.

There is something else you have to watch for if your IRA makes a debt-financed purchase. Any revenue the property generates might be considered unrelated business taxable income, or UBTI.

Whether you pay cash or obtain financing, there is no tax consequence to buying, selling, flipping, and amassing properties within the IRA. You can freely roll funds among various projects.

Owning Property

Remember that the IRA owns the property. That is where things get a little strange.

You cannot manage the property, landscape around the pool, repaint the guest room or even change a light bulb. You must pay someone else to care for your property, and that someone cannot be anybody on the disqualified list.

If the IRA buys a ski lodge, say, you may not furnish it with antiques you have collected from around the world. If the IRA buys a chain of boutiques, neither you nor anyone on the disqualified list may work in the shops or purchase items from them. This is passive income at its most passive.

You are breaking the rules if you pay for repairs or ongoing maintenance out of your own pocket. Instead, you will fund the IRA to pay for expenses. That can get tricky because contributions are limited. If you have a string of expensive repairs, you could incur high penalties for overcontributing.

All rental income goes into the IRA. It is tax deferred, of course, until you withdraw from the IRA in retirement.

This is an excellent way to go about wealth building, but be aware that you are excluded from certain perks that traditional property owners enjoy. You cannot deduct mortgage interest, depreciation, property tax and other expenses associated with owning property.

Selling Property

This is a simple matter of negotiating the price and terms and asking your custodian to sell the property on your IRA’s behalf. Proceeds from the sale will go directly back into your IRA. No capital gains tax is owed, and the reinvestment is tax-free for now.

The Bottom Line

The IRA plan is not ideal for every passive investor. For example, if you had planned to purchase rental properties that you and family members could enjoy now and then, this is not the right solution for you. If purchasing property through an IRA would require a loan, there are better options with more favorable terms. If you lack experience in real estate investing in general, get some practice buying rental properties the old-fashioned way before you take this route.

Otherwise, you are a great candidate for investing in property with an IRA, and there are some great incentives.

Real estate almost always pays excellent returns over the long term. It is largely recession-proof. Property values are never as volatile as stock prices, and rental property occupancy rates tend to hold steady even in weak economies.

In short, there is much to like about this type of passive investing. It is a great vehicle for building wealth and diversifying your retirement savings.

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How to Grow Your Money In a Passive Manner

Historically, the cost of goods and services has increased by about 3% per year on average. Over the past 100 years, the S&P 500 has netted investors an 8% return on their investment. This means that your net worth would see an actual increase of about 5% each year if you had invested in that index. Let’s look at some additional ways to build wealth and how to decide if a given investment class is right for you.

What Type of Investor Do You Want To Be?

The first step in developing an investment strategy is to decide whether you want to manage your portfolio in an active or passive manner. A passive investing strategy can be ideal for those who take a more conservative approach to growing and preserving wealth.

Examples of passive investments include index funds and real estate that is managed by another person or entity. Putting money into an IRA or 401(k) may be another method of building wealth in a passive manner.

Active investing strategies tend to be better suited for those who are looking to maximize their returns over a period of several weeks or months. In some cases, active investors are referred to as traders or scalpers.

What to Know About Personal Retirement Accounts

The federal government allows you to place a percentage of your annual taxable compensation into an individual retirement account (IRA). A traditional account can be funded with pre-tax dollars while a Roth account is funded with after-tax dollars.

While it is possible to have more than one IRA, total contributions across all accounts cannot exceed the limit for a given tax year. In 2021, those under the age of 50 can put away up to $6,000 while those over 50 are allowed to contribute up to $7,000.

Generally speaking, funds in an IRA are invested in mutual funds and other conservative investment vehicles. However, if you want more freedom to manage your money, it might be possible to create a self-directed IRA. This enables you to put your money into stocks, startup companies or any other investments that have long-term wealth-building potential.

If you are under the age of 70 1/2, you will need to start making the required minimum distributions (RMDs) from your traditional IRA. Failure to comply with MRD requirements could result in penalties that equal half of your account balance. Any funds left in your account at the time of your death can be transferred to a beneficiary.

An Overview of Qualified Retirement Plans

Any retirement plan that meets Section 401 requirements is generally referred to as qualified. The 401(k) or 403(b) offered by your employer is a common example of such a plan. Typically, you must be at least 21 and accrue at least 1,000 hours of service before you are eligible to take part in such a program.

These types of plans typically invest in real estate, individual stocks, and index funds. In 2021, you can contribute up to $19,500, and if you are self-employed, you can likely make both an employer and employee contribution. There is an RMD requirement for those who have a traditional 401(k), and you must typically start withdrawing funds when you turn 72 or immediately after retirement.

If your employer offers to match your contributions, it is generally in your best interest to take advantage of that offer. An employer match represents a guaranteed 100% return on your investment without having to do anything to earn it.

Real Estate Can Provide Multiple Revenue Streams

Acquiring real property can be an effective wealth-building strategy because there are so many different ways to generate a return on your investment. Getting started as a landlord can be easy as renting out your home’s garage, attic, or basement. Doing so will allow you to collect a monthly rent check while also benefiting from the appreciation in your home.

Buying land can also be an effective way to earn passive income over a period of several years or decades. If your lot is vacant, you won’t need to pay a monthly fee to a property management company to oversee it.

Investing in commercial buildings can be advantageous because commercial tenants tend to do a better job caring for the buildings that they occupy. Furthermore, companies that make use of office, warehouse, or retail spaces are generally responsible for the cost of maintaining them. Therefore, you get to maximize the return on your investment while offloading most of the risk associated with owning the property to another party.

Alternative Investments Can Be Attractive to a Passive Investor

Stocks, bonds, and cash are what financial professionals think of when they imagine a traditional investment. Depending on who you ask, acquiring residential or commercial properties can either be labeled as a traditional or alternative investment.

Looking into alternative asset classes may present you with an outstanding opportunity to generate a passive income and diversify your portfolio at the same time. In some cases, you won’t have to store the asset on your property or even take delivery of it.

For example, an art collection might be stored at a local art museum while a bottle of fine wine can be kept in a secure cellar. If you like to invest in coins or other precious metals, your holdings can be kept in a vault at the bank as opposed to in your home.

As long as your items are kept in good condition, they will appreciate in value regardless of where they are stored. It may be in your best interest to purchase an insurance policy on any asset that you purchase for investment purposes. If an insured item is lost, damaged, or stolen, the policy will help you recoup a portion of your losses.

Buy a Professional Sports Franchise

If you’re a millionaire who is passionate about both sports and making a passive return on investment, you should strongly consider buying a football, hockey, or basketball team. As the owner, you have the freedom to appoint a president or other executives to run the team on your behalf.

At the same time, you’ll still be able to have input on who the franchise should draft to play quarterback or should be named as the next head coach. Franchises typically make money from a ticket, merchandise, and concession sales, and they may also make passive income from television deals and other sponsorship agreements.

If you can’t afford to buy a team on your own, it may be possible to buy a minority stake in an existing franchise. This might be easier than actually owning an organization outright because you won’t have any significant role in running it.

Should You Keep Money in a Savings Account?

As a passive investor, your goal is to make as much money while doing as little as possible to earn it. Depositing checks into a bank account may be among the least strenuous activities that a person can engage in. These days, depositing or transferring money into a checking or savings account can be done with a few taps on your smartphone.

However, just because keeping money in a checking or savings account is easy doesn’t mean that it will meet your passive investing goals. It isn’t uncommon for banks to offer annual yields of less than 1% for balances of $1 million or more.

Generally speaking, it is a good idea to keep at least some of your money in a bank or credit union. This is because up to $250,000 per account is protected by the Federal Deposit Insurance Corporation. Furthermore, having cash on hand can make it easier to buy stocks or make other investments in a timely manner.

How to Properly Diversify Your Portfolio

Ideally, you’ll invest in a combination of stocks, real property, and alternative investments. Doing so allows you to maximize returns during periods of economic prosperity and minimize losses during economic downturns.

Of course, simply buying a bunch of different assets isn’t enough to protect your money. Instead, you’ll want to take a look at how those assets are correlated to each other. For example, the price of gold tends to move in unison with the price of the S&P 500. This means that a portfolio that is primarily invested in stocks and gold has the potential for outsized gains as well as outsized losses.

However, the price of oil tends to move opposite of the price of gold. Therefore, it may act as a better hedge against any potential losses in the stock market. It is important to note that most of the global stock indices are roughly correlated to each other. Therefore, this type of strategy could work whether you have money in the S&P 500, the Dow 30, or the Nikkei 225.

There are few greater joys in life than watching your bank balance grow despite the fact that you spent zero hours at work today. In addition to securing your financial future, passive investment strategies may allow you to spend more time with family members or volunteering in the community.

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How You Can Invest and Create Passive Income in Real Estate – Step by Step

Examining the Benefits of Passive Investing – How You Can Invest in Real Estate

When you invest in real estate, you can examine the value of each property, the location of the real estate, the features of available homes, and the prices of nearby houses. Typically, an investor could also evaluate the average rent in each geographic region, and once an individual purchases a house, the investor may quickly find new tenants. Additionally, an investor can review detailed charts that indicate the historical values of many homes. Subsequently, the purchaser may study predictive forecasts that could examine long-term profits, various types of expenses, and relevant trends.

Choosing a Strategy and Increasing Wealth

If you would like to create a passive income, you could purchase high-quality houses that can accommodate multiple tenants, and the owner could provide a detailed contract that can describe the monthly payments, the duration of the lease, the terms of the lease, and the initial deposit. When the tenants rent a home, the renters can consistently provide monthly installments that could increase the profitability of the investment. Once the investor receives these payments, the investor could purchase additional properties, complete renovations, or create new listings that describe available homes.

When you implement a strategy that involves passive investing, you could purchase a home that may accommodate more than three tenants, and each tenant can sign a separate contract. Several reports have suggested that more than 50 percent of investors usually purchase larger houses that may contain multiple tenants. According to numerous surveys, this strategy could increase the investor’s revenue by approximately 29 percent.

Studying Reports That Indicate the Average Rent in a Geographic Region

Before you purchase a house, you should view detailed reports that examine the median rent in each city, and you may also view interactive maps that indicate the average rent in specific neighborhoods. If an area does not contain a large number of available homes, many owners could substantially increase the rent, or the investors may purchase houses that are situated in nearby suburbs.

Estimating the Values of Many Homes

While you examine an available house, you could evaluate the bedrooms, the bathrooms, the kitchen, the dining room, and the home’s exterior. Some investors frequently purchase houses that have extra features, and you may select a home that contains a fireplace, extra rooms, a hot tub, and a game room. Several reports have indicated that these features could augment a house’s value by more than 20 percent. If a home provides additional amenities, many individuals may request guided tours, and typically, the seller could receive multiple offers.

Before you purchase a house, you can evaluate many houses in numerous regions, and you may examine the price of each home, the features of similar houses, many listings, and the number of available homes. Once you study detailed reports, you could estimate the current value of each house, and you can quickly submit a new offer.

Studying Relevant Trends

Each investor can view detailed charts that indicate the historical values of houses, and these graphs could examine emerging trends that may influence many buyers, affect the prices of homes, increase the overall demand and reduce the availability of houses. Once you examine relevant trends, you may also review predictive forecasts that could indicate the prices of homes in the future.

Increasing the Profitability of Each Investment

When an investor is managing a property, the owner could complete numerous renovations that can significantly augment the value of the home. The investor could renovate the kitchen, modify the bedrooms, and improve the design of the basement. The owner can also install energy-efficient windows, new siding, outdoor decorations, and high-quality doors, and some reports have suggested that renovations may augment a house’s value by more than 35 percent.

Many investors install new roofs that feature stylish shingles, durable felt, and various types of flashing. The owner may also hire roofers who could add new vents, which can protect the ridges of the home. Typically, the vents may considerably reduce energy costs, decrease humidity, and improve the flow of air. Numerous reports have suggested that a new roof could augment a house’s value by around 15 percent. Additionally, a durable roof can protect the ceiling, the walls, and insulation.

Understanding Several Factors That Could Affect the Values of Homes

Before you purchase a home, you could tour houses that are located near well-known destinations, and when you evaluate specific areas, you can examine local parks, shopping centers, restaurants, nearby businesses, and fitness centers. Multiple surveys have indicated that approximately 71 percent of buyers prefer houses that are situated near various businesses. Usually, many buyers search for homes that are located within 20 miles of popular attractions.

Once you evaluate available houses, you should also examine nearby highways, bus stations, large airports, and other types of transportation. According to recent reports, more than 50 percent of tenants would like to rent houses that are situated near bus stations, and most buyers prefer homes that are close to highways.

Evaluating the Overall Demand

After you create a long-term strategy, you can evaluate the number of available houses in each area, and once buyers purchase nearby houses, you could examine the prices of similar homes. Typically, a passive investor can also review reports that describe the median income, the school district, the population growth, and the population density. Moreover, some reports can indicate the number of citizens who have relocated to a specific area, and if many residents are searching for rentable homes, the value of houses could quickly increase.

Choosing a Lender and Examining Available Loans

Before an investor purchases multiple properties, the individual may search for a financial institution that can provide a sizable loan. Once the investor submits an application, the lender can evaluate the applicant’s income, credit score, available assets, and investment plan. The creditor could also examine the cumulative value of other debts, and the lender can examine personal loans, credit cards, and automotive loans.

Joe Fairless is an experienced investor who offers an educational program that could help investors, and the expert can provide instructions that could allow investors to find numerous lenders. When you are searching for loans, you should examine the interest rate, the monthly payments, the duration of the loan, additional fees, and the reputation of each lender.

Creating High-Quality Listings

While an investor is managing a property, the individual could create detailed listings that indicate the size of the home, the number of bedrooms, and the number of bathrooms, and the listings can describe extra features that may considerably augment the value of the house. The listings could also examine the layout of the home, the design of each room, and the house’s exterior. The owner may utilize online tools that can provide a virtual tour, and according to detailed reports, these tools can significantly increase the number of customers who contact a seller.

Managing an Open House

If an investor would like to sell a home, the owner can schedule an open house that could attract buyers, and the investor may create advertisements that describe the home, feature many images, and indicate the duration of the event. The passive investor could hire a real estate agent who can provide guided tours, describe the features of the house, and answer questions. Several reports have indicated that an open house could substantially increase the number of buyers who submit offers, and once an owner manages an open house, the event may augment the price of the house.

Finding Partners Who Can Manage Investments

During the last decade, numerous companies have created networks that can help investors to find experienced partners, and these experts can manage properties, increase wealth, review many types of contracts, describe the benefits of investing and find reliable tenants. Once you choose a partner, you could offer an initial investment that has a value of less than $7,000, yet the investment can consistently generate revenue. Joe Fairless provides extensive guidelines that could help an investor to find a partner, and the expert has created informative reports that describe wealth-building strategies, multiple types of agreements, and educational programs.

Creating a Long-Term Strategy and Accomplishing Many Goals

When you develop a new plan, you could evaluate the price of each home, the monthly revenue, various types of expenses, and available loans. Joe Fairless has written a book that can help investors to create numerous strategies, and once an investor evaluates the guidelines, the individual can overcome various obstacles, manage many properties, examine the benefits of investing, choose a new loan and maximize the profitability of each investment.

Learning More Information

If you have any questions about our services, you can evaluate our blog, various resources, wealth-building strategies, informative videos, and important updates. Joe Fairless has also developed a mobile application that can help investors to create a passive income, and the expert has written a book that describes many strategies, the benefits of passive investing, and inspirational stories. When you visit our website, you could also complete our contact form, and once you contact our experts, we can answer your questions, describe our educational programs, and provide a consultation.

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Tips on What to Do in Between Investments

Achieving financial freedom does not mean that you stop working. While passive investing requires less work than active investing, you may still need to spend your free time researching new investments or starting your next income opportunity. Because of this, there are plenty of activities you can work on between investments that can help you increase your wealth.

Being Financially Independent Still Involves Work

As an investor, your goal is to become financially independent. When you reach this stage of affluence, you get to choose how you spend your time. In most cases, wealthy individuals spend a lot of time going to seminars, visiting real estate meetups and networking with other affluent investors. The difference is that you will not have to work for money anymore. Instead, you get to pursue your passion projects.

After each investment, many passive investors spend time researching their next investment. They may spend time expanding their company or serving as an angel investor. Depending on how you earn your passive income, you may want to spend your free time writing books or creating online courses.

Focus on Building Your Passive Income

In general, passive investing involves a buy-and-hold strategy. You purchase an investment with the expectation that you will hold it over the long run before you sell it. Index investing is one of the most popular examples of this investment style.

Because you do not have to spend time buying and selling your investments, you can use your time for other productive activities. Whether your goal is to retire early or develop intergenerational wealth, there are other techniques you can use. The following ideas can help you create new sources of passive income when you are in between different investments.

Create a Book or Online Course

Over the years, you have learned a lot about your career field, hobbies and investment choices. Most likely, those experiences have helped you learn interesting information that other people want to learn as well. All of that information can be packaged into an online course or book.

The beauty of this technique is that you can keep earning money for years after you make the course. In addition, published books and courses help you become a thought leader in your field. Eventually, those activities could lead to speaking events or new opportunities as well. At the very least, these books and courses will help you bring in a consistent revenue stream.

Buy a Rental Property

While renting an apartment building or home requires a bit of work, it can bring in a significant amount of revenue as well. For example, Michael Blank added $40,000 to his net worth for the year with a 12-unit complex. The initial purchase price of the building was just $530,000, and Blank expects annual returns of 15 percent per year for all of the building’s investors.

Other than renting a unit to tenants, you can also buy a property to rent on Airbnb. While the average host made just $924 per month in 2019, this figure is mostly based on people who are only renting out a spare room on the side. If you are renting out your second home or multiple units, your Airbnb earnings can quickly increase.

Once you sell your real estate property, you will be able to realize any gains your investment has made over the years. While your tenants or Airbnb guests were paying your mortgage and expenses, your unit increased in value. After you sell the property, you can put those funds into your other investments.

Unless you hire a property management team, managing a rental unit will take time and effort. If you want an easier option, you can try buying real estate investment trusts (REITs). When you buy a REIT, you are essentially buying a share in a portfolio of properties. You can generally invest in these properties individually or through a mutual fund.

Historically, REITs have performed about as well as mid-cap stocks. From 1990 to 2010, the FTSE NAREIT Equity REIT Index had an average annual return of 9.9 percent. During the same time period, mid-cap stocks had a return of 10.38 percent. Meanwhile, commodities returned just 4.5 percent per year.

Recently, REITs have performed even better. From March 2013 to March 2016, REITs had an average annual return of 11.21 percent. You can also select between different types of REITs. For example, you can buy retail, healthcare, office, mortgage or residential REITs.

Try Peer-to-Peer Lending

During your free time, you can also focus on wealth building through peer-to-peer lending. This lending style is when individuals make loans to borrowers through a third-party institution like LendingClub or Prosper. Basically, you get to take on the role of the bank. This means that you get to earn interest from loan payments just like a bank does.

Like bank loans, peer-to-peer loans also involve risk. If the borrower does not repay the loan, you will lose your investment. You can reduce this risk by lending to multiple people and diversifying your portfolio. At companies like Prosper, you are not required to fund the entire loan amount. Instead, you can do your research to find multiple qualified borrowers. Then, you can invest and start earning interest from your investments.

Become a Better Investor

As you wait for your next investment to appear, you can also become better at making passive investments and wealth building. To start with, you should determine your motivation. Are you interested in capital preservation, financial security or building your net worth? Do you need a steady income stream or appreciation? What is your risk tolerance?

You also need to become talented at screening deals. To find the right fund or company, you have to figure out your investment window, risk tolerance and need for cash flow. You will need to consider the company’s experience, industry knowledge and geographic market. In addition, you should look at the potential return on the investment, management fees, private placement memorandums (PPMs) and exit strategies. A defined exit strategy is important because you need to have a way to withdraw your initial investment and profits. In addition, you should see if the investment has a PPM. If it does not, then the investment is probably a scam.

Once you find a decent investment, you need to review the company’s financial statements and how they plan to use the funds. Ideally, the company should clearly detail all of its funding sources, management compensation and projected income. Because every investment has risks, you should clearly understand the market, industry, legal, management and company risks involved in your investment.

If you want to earn a profit, you have to do your due diligence. In general, managers are happy to help you with any questions that you may have. If the management team is unresponsive to your questions, you should be extremely cautious.

Once you decide to invest, you need to be fully committed. Most passive and private investments are for the long run. If you plan on withdrawing your money within five to seven years, you should choose a different investment type.

You should also be prepared to walk away from a prospective investment. Many investments sound good initially, but the financial statements do not make sense. If you want to continue wealth building, you have to do your research and be ready to move on when an investment turns out to be a lemon.

How to Spend Your Time If You Are Truly Finished With Working

What if you truly are a passive investor and have no other investments left to make? In that case, you can start enjoying an entirely different style of living. As a passive investor, you can spend your days relaxing on a Caribbean beach or hiking the Camino in Spain. Passive investing allows you to take control of your time and your future.

While most people imagine wealthy investors driving a Ferrari and sipping margaritas on a private yacht, this is generally not the case. Once you are done building your wealth, you will quickly realize that upgrading your vehicle from a Lexus to a Ferrari will not make you any happier. Instead, savvy investors spend their money on financial goals that make their families happier. They focus on activities like traveling and taking time off instead of just buying a more expensive car or a fourth house.

Once you make so much money that you never have to work again, you will also realize that vacations are only fun for part of your time. You have to have something interesting to do. Even world-famous investors like Warren Buffett spend most of their time learning and exploring new topics. Each day, Buffett spends five to six hours reading five newspapers and hundreds of pages of corporate reports. Bill Gates is said to read an average of 50 books per year.

Like Buffett and Gates, some investors decide that they love running a business and keep working, but they do work on their own terms. Other people pursue passion projects like starting a charity, writing a book or learning a language. The magic of being a passive investor is that you get to determine how your time is spent. Rather than waste your day in an office, you can devote your time to activities that bring you happiness instead.

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Resources To Stay up To Date on Apartment Market as a Passive Investor

If you are interested in the world of property investments, it’s vital you keep updated on the latest apartment values in your area. Properties make a fantastic investment opportunity for anyone looking to replace or supplement their income.

You enjoy many rewards and boost your profitability to a whole new level. You can earn more money than you once thought possible if you follow the right steps, and you will be pleased with the outcome. Make sure you check Zillow, commercial property blogs and other sources so that you don’t get left behind.

Why Invest in Commercial Real Estate

You could be asking yourself why you should invest in the apartment industry, which is a great question. Apartments are great for anyone interested in passive investing, and you will know you made the right choice when you see the outcome. In addition to earning a passive income, you get several other great benefits you don’t want to overlook. You want to explore the advantages and know what to expect. Another benefit of investing in commercial property is that your investment goes up in value over time.

Passive Income

One of the top benefits of property investing is that you earn a passive income. You get apartments and rent them out to your tenants, and you collect a paycheck each month. As a landlord, you must remember that you have a lot of obligations you must uphold if you want to stay in business.

You must take care of plumbing and other repair issues if your renters run into problems along the way. You must also make sure the HVAC system runs the way it should. Another issue is dealing with people who are late paying their rent, a problem you will have to encounter.

Combat that issue and save time by hiring a property management company, and you will know you are on the right track. Most property management companies can take care of those issues so that you won’t have to worry about them. Even though you sometimes have a lot of maintenance work to do, investing in apartments is still a passive investment opportunity if you know what steps to take.


You must consider how much a property will appreciate over time when making an investment. Some people buy cars or other investments but don’t consider how much they will go up or down in value over time, but that’s a factor you can’t afford to overlook if you want to earn money over the long run. Most apartments still appreciate even during the COVID-19 pandemic.

If you would like to earn as much as possible, you can buy an old apartment and fix it up. Painting the walls and floors works wonders for increasing the value of your apartment, but you can also take other steps. People always see the roof before they notice anything else about your building, so consider the condition of your roof.

A roof that is in bad shape turns renters away and decreases their odds of making a purchase. The cost of repairing a roof is an investment that pays much more over the long run. A new and attractive roof grabs attention and inspires interest, and people will be willing to pay that much more for your units.

Look into property values in your area to see how much units in better condition are worth before you move forward. You then know what to expect and how much you can gain when you purchase an apartment complex. Advertise your apartment to get it in front of as many prospective renters as possible, and you won’t have any problems moving forward.

You will earn your money back in no time if you follow a solid business plan and keep yourself on track. Monitor your spending and earning over time to calculate your profitability to make sure your business is moving in the right direction.

Build Equity

Get property investments if you are looking for a passive investing opportunity that makes sense for you. You use your apartments to build wealth and increase your profitability over time. When you take the right steps and care for your apartment complex, you build positive equity and increase your wealth more than you once thought possible.

The apartment industry is a great place for anyone who wants to build a strong portfolio and earn a respectable amount of wealth. If this is your first apartment investment, you can get started with a small business loan. You can otherwise add additional apartments to your collection if you want to get the best possible return on your investment.


Look at Zillow when you want to know what the property values are in your area. Zillow lists plenty of property values and commercial property values in your area. You can look for apartments similar to the ones in which you are interested and compare prices. Look at what price you will pay for similar apartments to yours in different areas, and you start getting a clear picture of what you should expect. Track the value of commercial properties over the last 10 years to get an idea of what to expect before making your investment.


Apartments is a great website for anyone who needs to find apartments and compare prices. Some investors overlook the importance of simple search sites when it comes to looking up property values. Some of the most basic sites have great features you can use to check property values, and you can use it to research your next commercial investment.

Check out the various options and search filters to discover apartments near you that stand apart from the rest. You will soon have a wealth building strategy that makes sense for you over the long run. This website lets you enter the city in which you would like to buy property.

You then decide the type of apartment you want and how much you are willing to spend. gives you a list of apartments and shows you which ones make the most sense for your needs. The best part is that you see how much people are willing to pay for apartments each month.

Review the website several times per week so that you can track changes and updates, and you won’t have any trouble moving forward. The property industry always changes based on crime rates, the economy and other factors you must consider. Your wealth building profile expands each time you research and take calculated steps in the right direction.


ShowCase is another great website for the passive investor. You can look up countless properties in your area. Different websites list different prices for the apartments in your area, so keeping track of what different websites say is a vital step in the right direction. You review the listings on each one and write down the average listing.


CoStar is a great website for anyone who wants to make smart investments. The site has a blog with tons of great information you won’t find anywhere else, and you get landlord advice and other great tips that boost your results to a whole new level.

In addition to getting tips, you also get the latest news related to the real estate industry. CoStar has several sections dedicated to giving you the top news in the real estate industry, and you can use this information to choose what investments are worth it over the long run. You will be glad you did.


The properties section has plenty of property listings in which you might be interested. You can search through the different listings and find more than 50 million properties across the globe. Use this information to decide what investments are worth making over the long run. When you look at each piece of information with an objective eye, you know what you must do to reach the outcome you had in mind.

Compare prices for different areas to discover what path is right for you and your business. You should find properties in your budget so that you can take your business up a level. No matter the type of apartments for which you are looking, CoStar has your needs in mind.

Final Thoughts

You should have no problem finding great resources that show you the value of apartments in your area and around the world. Staying updated on the market value of apartments is important for any investor who wants to avoid falling behind. You know you are doing everything you can to safeguard your business and boost your profitability to a whole new level.

The steps you take today make a difference in where you expect your results to go tomorrow, so don’t overlook the importance of proper research. Passive investing is one of the best ways to increase your earning potential because it’s one of the most scalable.

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