Hey everybody welcome back to whiteboard Finance my name is Marco and I'm here to Help you master your money and build Your wealth in today's video we'll Discuss seven different ways to invest In real estate no matter your level of Income so when people think of real Estate investing they think of a super Capital intensive business which it Absolutely can be but there are now Other options out there for the everyday Person to be able to get real estate Exposure in their portfolio so if you Look at what smart money buys such as Endowments and institutions what they Invest in they typically have an average Of 30 percent of their portfolios Invested in private Market or deals with Real estate being a portion of that so This provides stability and proven Performance over time for them so most People don't have access to this type of Investment available to them so we'll Touch on a few ways that you can get That similar exposure in your own Portfolio stay tuned okay let's start With number one which is buying a single Family home to rent out this is what Most people think of when they think of Real estate investing if you're Considering buying a rental property There are a few things that you should Keep in mind before making the Investment it's important to do your
Research AKA your due diligence look at The local real estate market and Determine what type of property you Would be most interested in and which One would be most in demand as a rental So are you looking to attract students Are these student rentals young Professionals families good school Districts things like that is the Population growing most importantly are You in the path of progress okay are There jobs is there a growing population Things like that so then you have to Consider the cost of buying and Maintaining the property this includes The purchase price closing costs Property taxes Insurance Renovations or Repairs so if you're looking for a quick Back of the napkin rule of thumb some People I know use the one percent rule Okay the one percent rule of real estate Investing measures the price of the Investment property against the gross Income it will generate so here you have The rent it brings in here you have the Price the property this is your one Percent rule so its monthly rent must be Equal to no less than one percent of the Total purchase price so for example a Hundred thousand dollar house must rent For at least a thousand dollars a month So it's also important to budget for Ongoing expenses such as management fees If you choose to use a manager and then
Also maintenance costs so you should Also consider the potential return on Investment that's the whole point of Investing so look at the rental income You can expect to receive and compare it To the cost of owning the property this Will give you an idea of how long it Will take to recoup your initial Investment and start seeing a profit I Like to use cash on cash return so right Here cash on cash this is basically the Annual cash flow divided by your cash Outlay how much money you have into the Property multiplied by a hundred so Another important factor to consider is The financing options available to you You may need to take out a mortgage or Another loan to buy the property unless You're buying with cash so it's Important to research your options and Find a leather lender not a leather uh That offers solid financing so finally It's important to consult with the real Estate professional or an attorney to Make sure you fully understand the legal And financial aspects of buying a rental Property buying a rental especially a Single family home can be a great Investment especially with all the tax Write-offs but it's important to do your Due diligence and carefully consider all The factors involved number two is house Hacking house hacking is the best way to Jump start your wealth in my opinion if
I could take a time machine back to my Early 20s this is exactly what I would Have done so first let's define what House hacking actually is essentially it Involves buying a property that's either Multiple units maybe multi-family or Maybe even a duplex or getting roommates Inside of a house that you already have So this could be you know duplex Triplex Living in one of the units while renting Out the others it can help offset the Cost of your mortgage and potentially Even generate a profit so you can also Rent out rooms in a house if you just Have a single family home or a big condo For example Um obviously that's just called having a Roommate uh but I enjoy the term house Hacking so there's a few different ways To approach house hacking one option is To purchase a property with a small unit That you can live in and then rent out The other larger units and other options To purchase a property with a finished Basement or attic that you can convert Into a separate living space my friend Personally lived in his finished Basement while renting out his other two Units upstairs uh he now has many more Units after suffering for a few years Living in the basement so again it's one Of the quickest ways to build wealth in My opinion so there are a few key Benefits to house hacking first and
Foremost it can actually significantly Reduce your living costs by offsetting Your mortgage or potentially even Generating a profit additionally house Hacking can also help you build equity In a property which can be a great Long-term investment again going back to Building Wealth this is the wealth Generation process that I mentioned Earlier so that being said there are Also a few challenges to consider when House hacking for one you'll need to be Prepared to be a landlord and handle any Issues that may arise with your tenants You'll also need to be mindful of any Local laws and regulations as well as Any potential tax implications I would Also be wary of running to friends or Family as this could get messy from a Financial and a relationship standpoint Friends and money can sometimes be like Oil and water okay so is house hacking Right for you it really depends on your Individual circumstances and goals if You're looking to reduce your housing Costs and potentially build equity in a Property it could be a great option However it's important to carefully Consider all the pros and cons before Making a decision okay number three is House flipping I'm sure you're all aware Of house flipping as I've done about Three or four of these videos on my Channel some of these videos have
Hundreds of thousands of views go check Those out if you haven't already so for Those who may not be familiar house Flipping involves buying a property Renovating it and then selling it for Profit sounds simple right well Sometimes this can be a bad profit AKA Loss not even a profit or it can be a Huge profit so it can be a great way to Make money in real estate but it's Important to do your due diligence and Carefully consider all the factors Before diving in so what should you Consider when flipping a house first and Foremost location and after repair value This is key so look for properties in Solid neighborhoods that are in need of Some TLC tender loving care but also Have good bones you'll want to find a Balance between a property that is in a Desirable location but also has the Potential for significant profit margins After the renovation next consider the Condition of the property okay what's The condition how much money is it going To take to fix it up will it require Major Renovations or just some cosmetic Updates it's important to have a good Understanding of the costs involved in Renovation process including materials Labor and any unexpected expenses that May come up make sure make sure to Budget appropriately and leave room for Contingencies it's also a good idea to
Have a clear idea of who your ideal Customer is or your target market so are You flipping this house for families First-time home buyers young Professionals investors you know who are You selling this thing to so Understanding your target market will Help you make design and renovation Decisions that will appeal to your Buyers and then finally make sure to do Your research on current market Conditions so you want to pull a lot of Comps a lot of comparable properties so What are similar properties in the area Selling for this will give you a good Idea of what you can expect to sell the Renovated property for AKA your arv your After repair value and whether or not The flip will be a profitable one okay Number four are real estate syndications And funds so think of this as like a Mutual fund so real estate syndications Are a way for investors to pull their Money together and purchase and manage Larger commercial real estate properties That they otherwise wouldn't have access To okay so it allows the everyday guy to Basically pull their money together and Get into larger deals these are more Expensive deals that they may not be Able to afford on their own so there's Two main types of syndications you have Equity syndications you have debt Syndications most of them are for Equity
So basically and then Equity one Investors are contributing capital in Exchange for ownership in the property And the debt syndication investors Provide financing to the property in the Form of a loan most syndications and Sponsors do Equity deals so one of the Benefits of investing in real estate Syndications is that you can get earned Potential passive income these are Typically paid out quarterly if not Monthly usually quarterly and then also After the property is being renovated You're getting your net operating income Up they can actually sell the property Maybe five to ten years from your Investment date and then you can earn a Big chunk on your initial investment if You will so as an investor you can Receive a share of the rental income Generated by the people who manage it This is typically the sponsor and again These are typically paid out quarterly However it's important to carefully Evaluate the risks and potential returns Before investing in a real estate Syndication this is crucial you guys you Need to thoroughly research the sponsor Who is the person pitching you the deal Are they just some random 24 year old Cowboy who got into real estate because Interest rates have been low and you you Know a blindfolded monkey could have Picked a great property well no deals
Are coming harder and harder to come by Now when I worked in commercial real Estate we typically passed on 99 deals Out of 100 to maybe make an offer on one Now it's getting closer to one out of 200 to be quite honest so it's a good Idea to consult with an attorney or Someone who has experience in Multi-family investing or real estate Syndications in general because they can Be a great way for you to participate in These bigger deals but again you also Have to look at all the risks and Understand who your sponsor is are they Reputable do they have a track record Have they done these deals before and Then also I wouldn't dive into the sexy Properties like your class A hotels your Class a multi-family you know properties Like say for example in South Beach or Miami or something like that the biggest Ones that are going to be the biggest Coupon Clippers or the biggest profit Generators are typically your unsexy you Know Class B Working Class Type Communities where there's good schools Good jobs good population growth it just Needs a little tender loving care if That makes sense if you don't want to Vet sponsors and get into all that mess Or understand you know who to invest With but you still want this real estate Exposure in your portfolio I personally Use a company called fundrise and I've
Invested my own money with them since 2019 and continue to do so so I actually Reached out to them before making this Video and they agreed to sponsor it so Thank you to fundrise for that fundrise If you don't know I've been using this Since September of 19. I've been on it For over three years now so it's Essentially a platform that allows you To invest in private real estate deals That I just described that you most Likely wouldn't have access to or enough Capital to do so on your own this is all Done through your mobile device or Desktop and it's super simple to set up The nice thing is that you don't have to Be an accredited investor to use Fundrise with a lot of these Syndications you have to be an Accredited investor so at the time of This recording they have over 371 000 Active investors they have 6 billion Dollars of assets under management and They have 223 million in net Distributions earned by their clients Since you don't have to be accredited Any U.S citizen or permanent resident Over the age of 18 can invest you can Invest as little as ten dollars all the Way up to a hundred thousand dollars or More but their most popular tier which Is their core portfolio this starts with An initial investment of five thousand Dollars so there's a reason why smart
Money invests in private markets and Commercial Real Estate my background was Originally in commercial real estate Development and also commercial real Estate lending that's because it Generally tends to generate more annual Income with lower volatility especially Over the last 20 years so here's a quick Overview of the 184 properties that I'm Currently invested in with fundrise you Can see there's some single family homes You can see in the entire residential Developments you can see multi-family Retail mixed use and much more so Overall I'm happy with my fundrise Portfolio it's sitting at 5.6 percent Return year to date compared to that S P 500 being close to negative 20 percent Year-to-date so if you're interested in Adding real estate to your portfolio Check out the link in the description Below and start the new year off by Diversifying your portfolio with Fundrise the fifth way to invest in real Estate is with REITs uh you guys Obviously know about this if you've Watched my channel for any extended Period of time these are real estate Investment trusts REITs are type of Investment that allows individuals to Invest in real estate properties without Actually owning them instead REITs are Publicly traded companies these are just Like stocks they own operate and finance
Real estate assets these assets can Include Apartments Office Buildings Shopping centers warehouses and much More one of the main benefits of Investing in REITs is that the potential For high returns and high dividends is There because they are required to Distribute at least 90 percent of their Taxable income to shareholders in the Form of dividends okay so 90 in Dividends so this can provide a steady Stream of income for investors I Personally hold a lot of REITs Especially with V and Q which is Vanguard's Diversified Reit Index Fund Or ETF so they offer a lot of benefits They can provide exposure to a range of Real estate sectors and geographical Regions so if one area gets hit or is Going through some certain type of you Know economic recession maybe another Can actually uphold that portion of your Portfolio so there's different types of Reads as I mentioned you have Equity REITs they own and manage the properties You have mortgage REITs which lend money To Real Estate Investors they collect Interest on those loans there's a Million different types of REITs you Guys it's too long for just this portion Of the video rates can obviously be a Good investment option for those who Want to invest in real estate but don't Have the time expertise or Capital to do
So on their own however it's important To keep in mind that reads just like any Other investment they come with their Own risks including for the potential For the property to decline in value Especially given the changes in economic Conditions typically these REITs get Crushed when people lose their jobs or Companies have to lay off people or People literally can't afford the lease Which means they have to vacate which Means the property obviously is no Longer generating income number six is Commercial real estate this is my area Of expertise and also my bread and Butter so I worked in commercial real Estate for many years I worked for a Developer I worked for a lender worked As an analyst did a bunch of stuff so Basically commercial real estate is kind Of where you separate like your mom and Pop single family home investor from the Big boys and big girls to be quite Honest that's the easiest way to explain It so I touched on this earlier in the Video but you basically have different Types of property classes here you have Office industrial multi-family mixed use Retail there's there's a bunch of Different property types within Commercial but the biggest thing is with Commercial as opposed to like a single Family home for example is the financing Is much different and then forcing
Appreciation is different you can't Really I want to focus on this we won't Touch on the financing because it's too Complicated for this segment but forcing Appreciation this is where you make your Money in commercial real estate so Commercial real estate derives its value From its net operating income this is Basically it's ebitda okay it's earnings Before interest taxes depreciation Amortization whatever so my point is is That you can't really do this with a Single family home or even a duplex for Example when you put your comps on a Single family home or on a duplex that Single family home or that duplex is Going to be worth what it's worth based On the comparable properties around it You can only control it so much right But when you get into big multi-family Or if you get into big retail or big Office Buildings the building's value is Derived from its net operating income It's noi so if you can actually make Improvements to the building or increase The leases enough to where your net Operating income increases significantly You just take the cap rate you divide That number and that's the value of the Building right so if you if you can Squeeze out more money from you know Every lease or by providing more men Entities or some sort of benefits or Increasing the income of the property
That's where you really make your Killing in commercial real estate okay Financing is a little bit different you Want to go typically Max loan of value I'm laughing because this lender I work With his vanity plate was literally Max LTV Max loan of value But sometimes you want to do that Sometimes you don't that's outside the Scope of this video but basically these End up with balloon payments it's it's Much different than your 15 or 30 year Fixed as you would get with a single Family home okay finally number seven Are triple net leases triple net leases Okay so what are they a lot of people Don't know about these so simply put a Triple net lease is a type of commercial Lease where the tenant is responsible For paying all of the operating expenses Associated with the property so this Typically includes property tax Insurance and cam common area Maintenance so this means that the Landlord is essentially hands off when It comes to the day-to-day management of The property this can literally be uh Mailbox money for some of these deals Depending on the structure of the lease So triple net leases are typically used For properties like retail stores Restaurants and other types of Commercial real estate they're
Attractive to landlords because they Provide a predictable and stable stream Of income as the tenant is responsible For paying all the the operating Expenses so take like a Starbucks for Example Starbucks isn't in the business Of owning and operating real estate They're in the business of selling Coffee so most starbuckses that you see Are simply just renting space from the Developer or landlord who built the Building that they're in or who bought The building that they're in so like why Why might investing in these triple net Leases be a good idea in the first place So first of all they offer a low risk Investment depending on the type of Lease that you have in place and Depending on the tenant and then also The tenant is responsible for paying all Of this stuff right here so it reduces a Lot of the headache going into owning Real estate right so additionally triple Net leases they tend to have longer Lease terms than different types of Commercial leases so when I was leasing Out office space our leases were Sometimes three five maybe seven years Maybe but that was very rare typically Three to five years with these triple Net leases sometimes these can be 15 Years right this is just another way That the landlord knows is that their Income is going to be smoothed out
During the period of that lease so a lot Of these negotiations or a lot of these Leases are renegotiated years before They expire so typically if you have a Really good tenant like a Starbucks for Example you can build this building spec Meaning without even a prospective Tenant say you land a Starbucks say a Broker brings you a Starbucks right they Sign a 10 15 year lease you have your Little increases in bump up you know it Could be CPI it could be a bunch of Things that you negotiate in the lease And say they renew again you could have A free and clear paid off building paid By Starbucks maybe you made a little bit Of money per month typically these cap Rates are very small they're like four Four and a half maybe five percent Historically but you're going to own a Free and clear piece of real estate at The end of that lease so it could be a Really good wealth generator especially If the property is in a good location Okay thank you for sitting through that Presentation of my thoughts as always at The end I think real estate is a great Tool or a great asset to have in your Overall portfolio historically has been A great hedge against inflation even if You're in a market that isn't doing well The properties typically keep up with Inflation at least from a single family Home standpoint so it never hurts to
Have some exposure to real estate if You're going to own this stuff outright Or if you're going to have it as part of Your portfolio from a physical Standpoint the IRS loves real estate They want you to own real estate they Give you a ton of write-offs they give You a ton of benefits which I'm not Going to go into right now at the end of This video but you can look it up There's so many different ways that you Can use it from a tax advantage Standpoint so I hope you got value out Of this video thanks again to fundrise For sponsoring the video These sponsors Allow me to keep creating this content For free and allows me to maintain the Quality of this channel thank you so Much and have a prosperous day dude so When I first bought this prop money I Had it sitting out on my kitchen island And my mom came over one day she's like Why do you have Why do you have 40 000 sitting on your Kitchen island someone can steal that They can kill you I'm like dude this is From Amazon it's like five bucks [Music]
