1. Why Invest in Real Estate?
– 90+% of the Forbes 400 wealthiest people either made or retain their wealth in RE
– RE is either the number one or number two way people make their first million
– Multiple Benefit Sources (C-A-T-P)
• Cash Flow / Ongoing Yield
• Appreciation (through operations and improvement)
• Tax Benefits (highly taxed advantaged investment)
• Principal Pay-down (residents pay down debt)
2. Why Invest in Multifamily?
– Multifamily is controlled by population and jobs
– Current Population Dynamics are MATERIAL
• The 2 largest rental groups are now being filled by the 2 largest population groups
-Baby-Boomers (75 million and down-sizing into rentals)
-Echo-Boomers (75 – 78 million and primarily rent from age 18 – 30)
• Immigration (tend to be generational renters)
• Psychological Shift away from home ownership
3. What are the Tax Benefits of Real Estate Investments?
– Depreciation (gives investors a paper loss)
– Accelerated Depreciation (Cost-Segregation Study)
– 1031 Starker Exchange (Allows capital-gains tax from a sale to be deferred)
– Refinance (Tax-Free Equity Harvesting)
4. How is Real Estate a Hedge Against Inflation?
– Real Estate is a Hard Asset and not a Paper Asset
– Hard assets have historically outperformed paper assets in inflationary times
– Rents go up as inflation goes up
5. Why is Direct Ownership Superior to owning REIT’s?
– REIT’s give 1099 INT income and not K1 income like direct ownership
– REIT’s far less tax-advantaged
– REIT’s give diluted returns
– REIT’s have a lack of transparency
– Historically Direct Ownership has outperformed REIT’s
6. How do you Minimize Risk with Multifamily Investing?
– Invest in Properties in which a 5 part system is possible
• Secure Principal
• Insure Yield
• Grow Yield
• Grow Appreciation
• Harvest Equity
– Invest in the Right Market
• Historically good job growth
• Historically good population growth
– Invest in the Right Sub-market
• Desirable Schools
• Low Crime Rates
– Use Non-Recourse Lending
– Use Sole-Purpose Entity as ownership structure (i.e. LLC)
– Use Professional Property Management with a proven track record
– Use Insurance