Adding Value to Increase ROI with Real Estate Investing

Adding value to an investment means enhancing its return potential, often through strategic improvements or modifications.

Watch E66: Adding Value to Increase ROI with Paul Moore

Increasing value does not necessarily mean spending a lot of money. It is more about leveraging your existing resources and using them intelligently to improve the return potential on your property or properties.

Keep reading to learn more about adding value to your investments to increase ROI.

Increasing Occupancy Rates for Properties

Maintaining a high occupancy rate is crucial for profitability in the competitive world of real estate. Whether you own apartments, commercial properties, or single-family home rentals, there are strategies you can implement to attract and retain tenants.

Understand Your Target Market

Before you can attract tenants, you need to understand who they are. What are their needs and preferences? Are they young professionals, families, or tourists?

Optimize Your Property

Location

Location is crucial in real estate. If your property is in a prime location with easy access to shopping centers, schools, or tourist attractions, highlight this in your marketing materials.

Building Features

Ensure your property has features that appeal to your target market. It could include things like a gym, pool, or pet-friendly policies for apartment buildings, proximity to transport hubs or ample parking for commercial properties, and unique design elements or stunning views for vacation rentals.

Develop a Competitive Pricing Model

Your pricing should be competitive based on the value you're offering. When setting your prices, research what similar properties in your area are charging and consider factors like location, building features, and market demand.

Enhance Customer Satisfaction

Happy tenants renew their leases, reducing vacancy rates. Provide excellent customer service, respond to maintenance requests promptly, and consider offering incentives for lease renewals.

Justifying a Rental Rate Increase

As a property owner, there may come a time when you need to increase rents to cover rising expenses or improve your investment returns.

Evaluate Your Current Expenses

Start by evaluating current expenses related to your property, including:

Taxes: Property taxes rise over time, especially in desirable areas.
Insurance: The cost of insurance may increase due to inflation or changes in risk factors.
Maintenance: Regular upkeep, repairs, and improvements are essential for maintaining the value of your property.
Mortgage Rates: If you have a variable-rate mortgage, your payments may increase.

Add up these costs to determine your total monthly expenses.

Assess Your Current Rent Revenue

Compare your total monthly expenses with your current rent revenue. Consider a rent increase if your costs exceed your income or there's only a small surplus.

Consider External Factors

Location & Demand

If your property is in a high-demand area with rising rental prices, it makes sense for your rates to reflect this. Research comparable rentals in your area to ensure your proposed increase aligns with the market.

Amenities & Improvements

If you've made significant improvements to the property, such as renovations or landscaping, these can justify a rent increase. Tenants are usually willing to pay more for upgraded features and amenities.

Communicate the Increase

Once you've decided to raise rents, it's crucial to communicate this to your tenants effectively:

Explain the Reasons: Be transparent about why you're increasing the rent. Break down the costs and explain how they've changed over time.
Provide Notice: Give your tenants ample notice of the increase, abiding by any laws or regulations in your area.

Decrease Operating Expenses

Operating expenses are essential to maintaining a profitable real estate investment. However, they can also eat into your profits if not correctly managed. Here are some effective methods to decrease these expenses:

List Current Operating Expenses

The first step in managing operating expenses is to identify what they are. Typical operating expenses for a rental property include:

Property taxes
Insurance
Maintenance and repairs
Utilities
Property management fees
Marketing and advertising costs

Identify Potential Areas of Cost Savings

Once you have a clear picture of your expenses, you can start identifying potential areas for cost reduction. Here are some suggestions:

Energy Efficiency

Implementing energy-efficient measures can significantly reduce utility costs. These could include installing LED lighting, energy-efficient appliances, and programmable thermostats.

Water Conservation

Similar to energy efficiency, water conservation measures can also reduce utility costs. Consider installing low-flow fixtures and toilets and xeriscaping where applicable.

Regular Maintenance

Regular maintenance helps avoid costly repairs. Regularly inspect your property and address minor issues before they become significant problems.

Analyze Market Trends

If rental rates rise, consider raising your rent without losing tenants. Conversely, adjust your rent to stay competitive if rates decrease.

Consider Property Management Fees

If you use a property management company, review their fees to ensure you're getting value for your money. Consider self-managing or switching to a more affordable company if their services are too expensive.

Create a Comprehensive Plan

Create a detailed plan to lower operating expenses. Outline the steps, expected cost savings, and success metrics.

Key Takeaways

Learn about various real estate investments, their advantages, and the factors that impact profitability.
Discover key strategies to maximize rental income: understand the target market, create a competitive pricing model, implement effective marketing techniques, and enhance customer satisfaction.
Justify a rental rate increase by evaluating expenses, assessing rent revenue, considering external factors, and effectively communicating the increase to tenants.
Reduce operating expenses by listing current costs, identifying potential areas of cost savings like energy efficiency and water conservation, conducting regular maintenance, analyzing market trends, and reviewing property management fees.
Create a detailed plan to reduce operating expenses, including steps, expected savings, and success metrics.

Market Predictors to Identify Opportunity

Uncover the secret to successful investing in a dynamic and unpredictable economy. Dive into the world of demographics, analyzing job growth and zoning regulations.

Find the strategy that brings excellent ROI and opens doors for first-time home buyers priced out of the market. Get ready to embark on a lucrative journey!

Watch: Market Predictors to Identify Opportunity with Charles Bulthuis

Housing Demand and Supply-Side Conditions

Understanding the balance between housing demand and supply is essential. If there's a shortage of single-family homes, this could drive up prices, creating a seller's market. Conversely, an oversupply may lead to a price drop, favoring buyers.

First-time homebuyers are currently facing significant challenges in the housing market because of the following:

High Home Prices: Home prices have skyrocketed, making it increasingly difficult for first-time buyers to afford homes.
Limited Inventory: A limited supply of available homes drives competition and increases prices.
Rising Mortgage Rates: Increasing mortgage rates add to the cost of buying a home, making it harder for first-time buyers to secure affordable financing.
Lack of Equity: Unlike repeat buyers who can use their home equity to make competitive offers, first-time buyers lack this advantage.

How Can Real Estate Investors Benefit?

These challenges present several unique opportunities for real estate investors:

Rental Investments: Given the high barriers to homeownership, more people may opt to rent rather than buy, increasing demand for rental properties and providing a steady income stream for investors.
Fix-and-Flip: Investors can purchase, refurbish, and sell homes at a profit. First-time buyers who cannot afford move-in ready homes might consider these more affordable options.
Seller Financing: Real estate investors who can offer seller financing may attract first-time buyers who struggle to secure traditional mortgage loans.
Affordable Housing Investments: There is a growing demand for affordable housing. Investors can capitalize on this by investing in less expensive areas or multifamily properties.

While these opportunities can provide potential profits, investors must conduct thorough research and due diligence before investing.

Population growth

Population growth has a substantial impact on the real estate market, influencing both demand and pricing.

Increased Demand for Housing

As the population increases, the demand for housing also grows. This demand can lead to more construction projects and increased sales in the real estate market.

Changes in Home Prices

The balance between supply and demand dramatically influences home prices. A growing population can increase demand, pushing prices up, especially if the housing supply cannot keep pace.

Shifts in Demographics

Population growth doesn't just refer to numbers; it also involves shifts in demographics such as age, income, and regional preferences, which can impact the types of properties in demand. For instance, an increase in the young adult population might boost demand for rental properties or starter homes.

Impact on Commercial Real Estate

Commercial real estate can have a positive impact in areas where population growth rates are significantly above average, as more residents require services, retail outlets, and office spaces.

Age Distribution

Age distribution plays a significant role in shaping the real estate market, and different age groups have varying housing preferences.

Changes in Housing Preferences

Millennials may prefer rentals or smaller starter homes in urban areas, while older generations may opt for larger homes in suburban areas. As the demographic makeup of the population changes, these preferences can shift, impacting the demand for different properties.

Impact on Supply and Demand

An aging population can create sustained demand for certain housing types, reducing home prices and excess housing supply at a minimum. However, if a large portion of the population is moving into retirement and downsizing, this could lead to an increased supply of larger, more expensive homes on the market.

Effect on Secondary Cities and Alternative Living

An aging population may cause increased migration to secondary cities, where the housing stock might not be sufficient. Older people might seek alternative living arrangements, such as assisted living facilities or retirement communities, influencing the demand for these properties.

Migration Patterns

Migration patterns can influence housing demand. Understanding migration patterns is crucial for real estate investors as it helps predict changes in demand and identify potential growth areas.

Demand and Supply

Whether intercity, interstate, or international, migration directly affects the demand for residential and commercial real estate. Influxes of people into an area can increase demand, potentially leading to a rise in property prices if supply cannot keep pace. Conversely, regions experiencing outmigration may see decreased demand and potentially lower property values.

Shift in Property Types

Depending on the demographic of the migrants, different types of properties might be in demand. For example, young professionals may prefer urban apartments near workplaces and amenities, while families might look for single-family homes in suburban areas with good schools.

Affordability and Lifestyle

Many people migrated during the pandemic due to the opportunity to work remotely, the desire for more space, and better affordability. These factors can cause shifts in real estate markets, with increased demand in more affordable regions or properties offering more space.

Key Takeaways

Real estate market conditions present challenges for first-time homebuyers, including high prices and a lack of equity.
These challenges create opportunities for real estate investors, such as rental investments, fix-and-flip properties, seller financing, and affordable housing investments.
Population growth impacts the real estate market by increasing housing demand, influencing home prices, and driving shifts in property types based on demographic changes.
Age distribution influences real estate market conditions by changing housing preferences, affecting supply and demand, and impacting secondary cities and alternative living arrangements.
Migration patterns significantly shape housing demand.

Bad Beat and Best Deals in Note Investing

Investing in real estate notes can generate income without direct property management. Instead, investors earn interest on the loan. However, it carries risks, such as borrower default. Before investing in real estate notes, thorough due diligence is crucial for potential investors.

Watch Episode 60: Bad Beat and Best Deals in Note Investing with Paige Panzarello

Discover the fascinating world of note investing! Dive into the captivating presentation above and the informative blog below, where we unravel the intricacies and nuances of this exciting investment strategy. Get ready to unlock new insights and opportunities in note investing!

Discover The Magic Of Notes!

In real estate investing, a note, or promissory note, is a financial instrument that documents a property purchase loan. It's a written promise from the borrower to repay a specific amount to the lender under agreed terms.

Key features of notes in real estate investing:

Principal and Interest: The note specifies the loan amount, including the original principal and the interest rate. The interest can be fixed or variable, based on the agreement.
Repayment Schedule: Outlines the repayment schedule, specifying payment due dates and amounts. Repayment can be monthly, quarterly, or agreed upon by all parties.
Term: The note's term is the duration for loan repayment, ranging from months to years.
Default Provisions: The note also includes provisions for borrower default, which may lead to foreclosure and the lender taking ownership of the property to recover their investment.
Collateral: In real estate investing, the purchased property is collateral for the loan. If the borrower defaults, the lender can seize and sell the property to recover funds.

Unleash Your Inner Financial Power: Becoming The Bank

Becoming the bank with notes investing means buying mortgage notes and taking on the role of the lender. Instead of owning the property, you invest in debt or loans where the borrower owes you money.

Here are the steps to become the bank with notes investing:

Educate Yourself: Before you start note investing, it's crucial to understand the basics. Familiarize yourself with terms like performing vs. non-performing notes, first vs. second liens, and the foreclosure process.
Find Notes to Buy: You can buy real estate notes from banks, hedge funds, brokers, or other investors. Online platforms and marketplaces also exist for finding notes for sale.
Due Diligence: Just like in property investing, thorough research is crucial. Assess the borrower's payment history, property condition, value, and loan terms. Also, verify all legal documentation.
Purchase the Note: After researching and selecting a note to invest in, you can proceed. The transaction process usually involves a purchase agreement and the transfer of notes and mortgage documents.
Manage the Investment: You take on the bank's role after purchasing the note. For performing notes, you'll receive monthly payments from the borrower. For non-performing notes, you may need to work with the borrower to resume payments or go through the foreclosure process.
Exit Strategy: Depending on the outcome, note investors can profit by receiving loan payments, selling the note for a profit, or acquiring and selling the property in case of foreclosure

Explore the World of Investment: Uncover the Diverse Spectrum of Notes

There are several types of real estate notes that you can invest in, each with its level of risk and potential return. Here are a few:

Performing Notes: These loans require regular borrower payments as agreed in the loan terms. Investing in performing notes yields a steady income stream from loan interest.
Non-Performing Notes: These are loans where the borrower has stopped paying. You can buy non-performing notes at a discount. As an investor, you can profit by helping the borrower, restructuring the loan, or foreclosing and selling the property.
Seller-Financed Notes: Owner-financed notes occur when the property seller finances the buyer's purchase. The buyer then pays directly to the seller or the investor who purchases the note.
Junior Lien Notes: These are secondary mortgages on a property. Junior lien notes can offer high returns but come with higher risk as they are subordinate to senior liens. In foreclosure, senior liens get paid first.
Reperforming Notes: Previously non-performing loans are current, making them attractive to investors. They are often sold at a lower price than performing notes yet carry less risk than non-performing ones.
First Lien Notes: Primary mortgages are paid first in the event of property foreclosure, prioritizing the first lien holder over other lien holders.
Commercial Real Estate Notes: These are for commercial properties such as offices, retail spaces, or apartment complexes. Commercial real estate notes can yield higher returns than residential notes but require expertise for effective management.

Key Takeaways

Investing in notes is an excellent strategy to diversify your portfolio. It generates income without property ownership challenges, like maintenance, tenants, or property taxes.

As a note investor, you earn returns from loan interest, generating passive income. Note investing offers a range of risks and rewards, from the safety of performing notes to the high-return potential of non-performing or junior lien notes. Tailor your investment approach to match your risk tolerance and financial goals. Note investing can also mitigate portfolio risk as it is less correlated with the stock market, providing a buffer during market volatility.

Note investing provides ample opportunities for diversification within the asset class. Investors have many investment options like residential and commercial notes, first and junior liens, and reperforming notes.

Are you interested in note investing? Want to make informed investment decisions? Join us in Royal Investing Group Mentoring. Learn from the best, network with investors, and fuel your journey to financial empowerment.

Don't miss out! Click here to register for our upcoming session.

Bad Beat Lessons in Due Diligence

Have you ever experienced a bad beat in real estate investing? These failed investments provide invaluable lessons in due diligence.

Seasoned real estate investor Scott Sutherland joined us to talk about a time he had a deal go bad, the wisdom he gleaned from the experience, and insight into how to avoid his experience.

Watch E57: Bad Beat Lesson in Due Diligence with Scott Sutherland

Lessons In Due Diligence With Partners And Sponsors

Due diligence describes the comprehensive analysis and evaluation of a potential business partner, sponsor, or investment opportunity. In real estate, this process is paramount for investors as it helps them understand the risks of a prospective partnership or sponsorship.

It involves scrutinizing factors such as:

experience
past performance
reputation
financial stability
market knowledge

Entering into a partnership without conducting due diligence leads to disastrous consequences:

project delays
cost overruns
complete failure
significant financial losses.

Additionally, if the sponsor has a tarnished reputation or poor financial health, it could negatively affect the investor's credibility and future business prospects.

Property Classification Lesson In Due Diligence

Property classification is an integral part of real estate due diligence. It helps investors understand the potential risks and rewards associated with different properties. Here's a guide to help you navigate this process:

Understanding Property Classifications

Class A Properties: These are top-tier properties in prime locations, often newer builds with high-quality construction. They attract high-income tenants and offer modern amenities but come with higher purchase prices.

Class B Properties: These properties are typically older but well-maintained. They might not be in prime locations but in stable neighborhoods and attract middle-income tenants. They usually have lower rents than Class A properties but offer the potential for value-add opportunities.

Class C Properties: These are older properties, usually 20+ years old, located in less desirable neighborhoods. They attract lower-income tenants and may require significant maintenance or upgrades. However, they offer higher cap rates and cash flow potential.

Class D Properties: These are often found in challenging neighborhoods, requiring extensive repairs. They have the lowest purchase price and risk, attracting low-income tenants and often experiencing high vacancy rates.

Key Consideration Factors

When selecting a property class to invest in, consider the following:

Location: Prime locations attract more tenants and command higher rents—research local market trends to understand neighborhood desirability and growth potential.
Condition: The property's condition will impact maintenance costs and, potentially, your return on investment. Thoroughly inspect to identify potential issues.
Rental Income: Each property class attracts different tenant demographics, which impact rental income. Higher classes tend to attract higher-income tenants but also have higher acquisition costs.

Researching Property Classification

To determine a property's classification, you should:

Check Local Government Records: These often provide information about the property's age, zoning, and past sales.
Consult Real Estate Agents: Experienced agents provide insights into a property's classification based on their local market knowledge.
Research Property Prices: Comparing similar properties in the area gives you an idea of the property class.

Embracing the Silver Lining: Lessons From A Bad Real Estate Deal

A bad deal provides invaluable lessons, helping us grow and evolve as investors. Each setback offers a unique opportunity to learn, adapt, and improve. When a deal goes south, we must analyze what went wrong:

Did we miscalculate the renovation costs?
Did we overestimate the property's value?

By identifying these errors, we avoid them in future deals.

Bouncing Back After a Bad Investment

As a real estate investing coach, many investors experience setbacks. However, the most successful ones see these setbacks not as roadblocks but as stepping stones to greater success.

Stick to Your Investment Plan

When faced with a bad deal, it's crucial to remember why you started investing in the first place. Revisit your investment plan and remind yourself of your goals. It will help you stay focused and avoid reactive decisions based on temporary circumstances.

Avoid Emotional Responses

Feeling disappointed or frustrated after a bad deal is natural, but acting on these emotions leads to rash decisions. Take a step back, give yourself time to process the situation, and approach the problem with a clear, calm mind.

Develop a Strategic Recovery Plan

Identify what went wrong and plan to recover from the loss: selling the property, refinancing, or increasing its value. Consult with a real estate professional or mentor to gain insights and advice.

Learn from Your Mistakes

Every setback is a learning opportunity. Analyze the deal to understand what led to the loss:

Was it due to inadequate due diligence?
Or an overestimation of the property's value?

Once you've identified the mistakes, use these insights to avoid similar pitfalls in the future.

Prevention is Key

To prevent future bad deals, enhance your due diligence process. Research market trends, thoroughly inspect the property, and always factor in unexpected costs when calculating potential profits.

Key Takeaways

Due diligence is fundamental in real estate investing as it aids in understanding better the potential risks and rewards of a property before making a final commitment. It involves meticulously evaluating market trends, property conditions, and financial projections.

This process allows investors to uncover any potential problems, such as unexpected renovation costs or unfavorable market conditions, that could affect the profitability of the investment. Through effective due diligence, investors make informed decisions, prevent bad deals, and enhance the likelihood of a successful investment.

If you want more personalized advice on navigating your real estate investment journey, consider joining us for Royal Investing group mentoring. Our community members are ready to share their wealth of knowledge and insights to help you avoid common pitfalls and maximize your investment potential. Click here to sign up today!

Syndication to Grow Wealth

Are you looking for an investment opportunity that offers passive income, potential for asset appreciation, tax advantages, and diversification? If you said yes, you should learn how to grow wealth with syndication.

Syndication is a method where multiple investors come together to fund a project or venture that would be too expensive or risky for an individual investor. The group of investors is the syndicate.

The investments could range from real estate projects to corporate bonds, startups, TV shows, and real estate. Each syndicate member contributes a portion of the required capital, reducing the financial burden on any single investor.

Watch Syndication to Grow Wealth with Hicham Hajhamou as an additional resource.

Grow Wealth With Syndication

You grow wealth with syndication in a variety of ways. From having control of your money to diversification, keep reading for more information about the characteristics and advantages that syndication offers you.

Control

Syndication differs from other investment vehicles like mutual funds or stocks: In a syndicate,

investors have:

more direct control and involvement
a say in major decisions
active participation in investment management

Passive Cash Flow

Once the project generates revenue, you will receive a share of the profits proportional to your initial investment. You earn income without managing or operating the investment yourself actively.

Asset Appreciation

Syndication leads to asset appreciation. Over time, the value of the project or venture may increase, leading to a higher return when the asset is sold or refinanced. For instance, if the syndicate invests in a real estate project, property improvements or market changes could increase the property value over time.

Tax Advantages

Syndication also offers tax advantages. In many cases, the costs associated with the investment, such as interest on loans or depreciation on real estate, are deductible from the income generated by the syndicate. You reduce your overall tax liability.

Diversification

Investing in a syndicate diversifies your portfolio. You reduce risk and increase potential returns by spreading your investments across different projects and asset classes.

Have more questions about how to grow wealth with syndication? Check out our blog posts for more detailed and granular information:

Syndication: Due Diligence And Mentors

Embarking on the syndication investment path is an exciting venture that yields significant financial rewards. However, it is crucial to approach this journey with due diligence and the guidance of a mentor for optimal success.

Due Diligence

Due diligence is the comprehensive appraisal of a business or person before signing a contract or entering an agreement. For instance, if you are considering investing in a real estate syndication, your due diligence might involve evaluating the property and its:

Condition
Location
projected cash flow.

You also will want to understand the syndicate manager's experience and strategy for managing and eventually exiting the investment.

Mentors

Having a mentor is equally important. A mentor with experience in syndication investments provides invaluable advice, shares their experiences, and guides you through complex situations.

They help you:

understand the intricacies of syndication deals
interpret legal and financial documentation
navigate negotiations and decision-making processes

Find a suitable mentor through networking events, industry associations, or even social media groups related to syndication investments.

Unique Assets To Grow Wealth With Syndication

Investing in syndication offers access to various alternative asset classes, each with unique characteristics, risks, and rewards.

Self-Storage Facilities

These are becoming increasingly popular as an investment due to their lower operational costs and resilience during economic downturns. However, the success of a self-storage facility heavily depends on its location and local demand. Due diligence should include analyzing the local market, competition, occupancy rates, and potential for rent increases.

Mobile Home Parks

These offer steady cash flow and lower maintenance costs, as tenants often own the homes and rent the land. However, specific laws and regulations make managing these parks complex. When conducting due diligence, consider location, occupancy rates, turnover, and local laws.

Multifamily Properties

These are residential buildings with multiple housing units, such as apartments or condominiums. They offer stable income due to the high demand for housing but require effective management and maintenance. The key factors are location, property condition, vacancy rates, and rental income potential.

Office Buildings

These properties are lucrative, especially in high-demand areas. However, they’re risky, particularly during economic uncertainty when businesses may downsize or close. Due diligence should involve assessing the local commercial real estate market, current tenant leases, and potential for rent increases.

Land

Investing in raw land involves purchasing a plot to sell at a profit or develop later. While it has a high potential for returns, it carries significant risks, including zoning issues and market fluctuations. Due diligence should involve a thorough analysis of local zoning laws, market demand, and development potential.

Key Takeaways

Syndication investments present a unique opportunity to enter the realm of real estate and other alternative asset classes, offering the potential for significant returns:

They require a discerning approach, and due diligence is necessary before committing to any investment.
A mentor with experience in syndication is an invaluable asset, providing insights and guidance that will help navigate complex situations and decisions.
Diversification across different asset classes and geographic locations mitigates risks and increases potential returns.

Join us for FREE Royal Investing Group Mentoring to change the trajectory of your investment journey. Take advantage of this opportunity to gain valuable insights from experts and transform your financial future.

Syndication: PPM Creation Tool

So you're ready to invest in real estate syndications. This type of investing is complex, with many different factors at play that are outlined through PPM documentation. Tools that make the process easier are invaluable, as with any complicated investment.

Stephen Slawinski shows the power of a PPM creation tool in Episode #64 of Royal Investing Group Mentoring. Watch the detailed walkthrough here!

In this blog, we curated the critical information that you should have available as you start your investing adventure.

Private Placement Memorandum (PPM) Deal Structures

Several different types of PPM deal structures exist.

Identified Deal

An identified deal is a PPM deal structure where the investor knows what and where they are investing:

They are for specific projects such as real estate or venture capital investments.
Investors will know precisely how the syndication uses their money and what returns they can expect.
It offers more security since they know what they are investing in.

Non-Specified Fund

A non-specified fund is a PPM deal structure where the investor does not know what they are investing in but instead invests in a pool of assets managed by an investment firm:

allows diversification across multiple asset classes without researching each asset
The firm will manage the portfolio according to the investor's risk profile and goal.

Semi-Specified Fund

A semi-specified fund is similar to a non-specified fund but with more transparency:

The investor still has some diversification.
Has more control over which assets they invest in and how much they invest in each asset class

Feeder Fund

A feeder fund is a PPM deal structure where one or more funds "feed" into another larger fund that then invests those funds into various assets on behalf of the investors:

Allows investors access to economies of scale by pooling their resources with other investors with similar goals and risk profiles
A larger fund invests those pooled resources into various assets at lower costs than if each investor had invested separately into those same assets.

Opportunity Zone

An opportunity zone is a PPM deal structure that allows investors to defer paying taxes on capital gains until 2026 if they invest those gains into certain designated areas as defined by the US Treasury Department's Opportunity Zones program.

Issuer's Information (PPM)

The section of the issuer's information provides prospective investors with detailed information about the offering, including the terms and conditions of the security offered, any risks associated with investing in it, and other vital details.

When you provide information about this section, you'll also need to consider the following:

Class A Members: Investors
Class B Members: Sponsors
LLC vs. LP (LLC is preferable in most cases)

What's The Management Entity In A PPM?

A management entity is any individual or group assigned to manage a project. In real estate syndications, this could include:

sponsors
brokers
property managers

The management entity is responsible for the following:

developing a business plan for the project
organizing financing
selecting properties for investment
managing assets
overseeing operations

Sponsor's Information

A real estate sponsor has experience structuring and raising funds for a deal. The sponsor also plays a significant role in decision-making throughout the life of the syndication.

Typical Fees Outlined In a PPM

In this section, you'll determine the type, amount, and timeline of fees. Fees may be a way for you to generate income from your investment in syndication.

Standard fees include the following:

Acquisition fees cover the expenses for arranging a loan or lease agreement.
Asset management fees come from asset management, financial planning, and portfolio management.
Disposition fees are costs associated with the sale of an investment property.

PPM Offering Information

In this section, you'll determine whether you'll have a 506(b) or 506(c):

506(b) is a private placement offering that allows companies to raise unlimited money from accredited investors and up to 35 non-accredited investors.
506(c) offering is an exemption from registration that allows companies to raise capital from accredited investors. They use social media and other advertising techniques to solicit investments from accredited investors.

Accredited Investors

An accredited investor is an entity allowed to trade securities unregistered with financial authorities:

Net worth that exceeds $1 million, either alone or combined with their spouse
Have an income of at least $200,000 annually (or $300,000 with their spouse).

Accredited investors include banks, financial institutions, and other large corporations with access to complex, high-risk investments.

What is a True Up Provision?

A True Up Provision is an accounting adjustment that reconciles two or more balances, often with the help of an adjustment. It also involves adjusting purchase prices based on changes in value since the closing date of a transaction.

It is usually made at the end of a fiscal year or after a transaction has closed. Accountants will review all relevant financial information and make necessary adjustments to ensure accurate records.

Key Takeaways

When investing in a real estate syndication, there are many considerations. It's mountains of information and documentation, and Slawinski's syndication PPM Creation Tool guides you through the process.

If you have questions about syndication real estate investing or general questions about real estate investing, join us in Royal Investing Group Mentoring. It's free and contains valuable information to help you navigate your real estate investing journey.

RV Park Investing Boom

RV park investing has become increasingly popular among real estate investors. RV parks offer an excellent opportunity to diversify your portfolio and maximize profits.

Paul Moore, Founder and Managing Partner of Wellings Capital, presented during the Royal Investing Summit explaining RV Investing and the lucrative lessons we can learn from the investment strategies of Warren Buffet, Sam Zell, and Blackstone.

In this article, we'll explore why investing in RV parks is profitable for real estate investors.

RVs and RV Park Trends

RV park investing may be a solid addition to your portfolio because of the rising popularity of RVs. For instance:

RV ownership has increased 62% since 2001
11.2 million households own an RV, and 9.6 million more plan to buy an RV by 2026
Camping is becoming increasingly popular
RV camping is cheaper than traditional vacations

RVs are becoming increasingly popular due to the freedom and flexibility they offer. With an RV, you can explore new places, enjoy the great outdoors, and have home comforts wherever you go.

According to the Go RVing RV Owner Demographic Profile, Millennials are particularly drawn to RVs as they provide an affordable way to travel while still having access to modern amenities such as Wi-Fi (suitable for remote working) and air conditioning. Additionally, with peer-to-peer rental services on the rise, more people are discovering how convenient it is to rent an RV for their next adventure.

Why Invest In RV Parks and Manufactured Housing Communities?

RV parks have distinct advantages for an investor, including the following:

Rapid demand that exceeds supply
The pandemic accelerated the trend of using RVs
Highly fragmented
Performed well during the recession and COVID
Provide safe and affordable vacations
Long runway for growth
Barriers to entry make it less competitive than other types of investments

Mobile home park investing is an attractive option for real estate investors because of the following reasons:

Recession resistant and steady in all cycles
Shrinking supply and an increased demand year over year
The affordable housing crisis makes them popular
Low tenant turnover
Fragmented ownership by mom-and-pop owners that have value
Diversifies your portfolio
Low maintenance and capital expenses
Less competition because of the stigma
Have favorable tax policies

Surprise Factors For RV Growth

One surprise factor for RV growth is remote work. Living in an RV and remote working is becoming increasingly popular as more people seek the freedom to travel and work simultaneously. With the right resources, finding remote and freelance work while living in an RV is possible.

Another surprising factor for RV growth is the proliferation of AirBnB, Uber, and other types of sharing economies. Two new websites make RVs more accessible to people:

What Are The Types Of RV Parks For Investing?

There are four types of RV Parks:

Overnight and campground parks
Extended stay
Workforce housing
Destination parks

Overnight And Campground RV Parks

This type of RV park is for travelers on the move:

Usually a single-night stay, maybe two
Near major thoroughfares or highway
Convenient, but light on amenities

Extended Stay RV Parks

An extended stay park is for semi-permanent placement of an RV:

Tenants stay for a season, year, or multiple years
Snowbird properties in the Southern U.S.
The affordable housing crisis has accelerated the number of tenants in extended-stay parks

Workforce Housing RV Parks

This type of RV park is a bit more obscure and less common:

Popular among seasonal workers
Commonly house construction, oil field, travel nurses
Programs exist to connect workers with RV parks

Destination RV Park

A destination RV park caters to the population that visits RV parks for vacation:

Close access to national parks, amusement parks, lakes, and other tourist attractions
The RV park is the destination
Heavy on amenities like pools, water parks, dog parks, lakes, and trails

There are significant value adds and abilities to enhance revenue by using:

Site expansion
Resort fees
Merchandise
Rentals
Food service

Destination parks carry major capital expenses and need staff. Thus it has significant barriers to entry and some risks associated with it.

Key Takeaways

The number of people looking for ways to explore the outdoors and enjoy nature while still having access to modern amenities drives RVs and RV park growth. The proliferation of remote work and the impact of the housing crisis contributes to the popularity of RVs as well.

RV park investing can be a great way to capitalize on this trend, as it provides an opportunity to offer a unique experience that combines the best of both worlds. With more people wanting to escape their everyday lives and explore the great outdoors, RV parks are becoming increasingly popular and can be a profitable investment.

Are you looking to invest in RV parks or have other questions about real estate investing? Join Royal Investing group mentoring to receive expert advice and strategies to help you navigate your real estate investing journey.

AI In Assisted Living Facilities

This article will discuss AI in assisted living facilities and its impact. AI is rapidly becoming a part of life. It's becoming more intelligent and impacting many aspects of society and business.

Ron Galloway, researcher, author, and speaker, discusses disruptive technology and its ramifications for assisted living facilities. Watch the presentation about the emerging possibility of AI in assisted living facilities.

What Is Artificial Intelligence?

Artificial intelligence (AI) is simulated human intelligence processes by machines. Currently, AI most often refers to computer systems that simulate human intelligence.

Some examples of AI that we interact with regularly include:

Smart speakers like Alexa or Siri
Chatbots
Self-driving cars

AI has some exciting and controversial buzz because it's becoming more sophisticated and may be approaching "sentience."

What Is AI Sentience?

Sentient means being conscious or having the ability to experience what is happening to itself. For AI to become sentient, it must be virtually identical to human intelligence. That means AI would be able to perform tasks better than humans and appear to understand the human experience.

How Does AI Become Sentient?

AI is becoming sentient because of its computing power and ability to learn from text, images, and other media types. AI can be trained to react using natural language and may learn to think, perceive, understand, and feel instead of just language and output.

Why Is AI Getting So Smart So Fast?

AI may be getting smart fast because it understands images. Images on the internet are readily available and pumped into AI, helping AI learn.

Investing in Assisted Living Facilities

The conversation about AI and assisted living facilities is essential in the context of investing in those types of facilities.

We are on the precipice of a silver wave as baby boomers age into residential assisted living facilities. The reality is that people will need a place to stay as they age. In addition, modern medicine is improving the quantity and quality of life for people, so they will need to have somewhere to stay for longer.

Read our articles:

It’s critical to learn more about the advantages of these types of properties and how they might benefit you as a real estate investor.

Why Does AI Matter For Assisted Living Facilities?

AI matters for assisted living facilities because it collects data and makes predictions. For instance, a senior citizen may wear an Apple Watch or Fitbit, which collects data about the senior.

The watch collects height, weight, blood pressure, and heartbeat data. Using that data and comparing it to data that it has available enables AI to predict or diagnose a potential problem–like a heart attack or stroke before it occurs. That helps assisted living facilities to be proactive with their care towards residents.

Other applications of AI in an assisted living facility include:

Monitoring a resident's location
Medical records
Predicting or diagnosing potential diseases or health risks

The more data that an AI collects, the more the AI can learn and create sophisticated responses. It gets smarter.

How Does AI Affect The Lives Of Seniors?

AI has the potential to learn about specific communities. That means it will collect data on the following:

Staff
Residents
Location

With that data, it will be able to curate experiences and living conditions that are unique and specific to each community. The ability to curate experiences will improve quality of life and has the potential to make data-driven decisions that will cut costs and prevent superfluous waste of resources.

Some other things that AI might be able to do include, but are not limited to, helping seniors:

Connect to loved ones
Stay active and engaged
Manage their health and well-being
Find new hobbies and interests
Stay safe and secure

What Are The Biggest Issues AI Can Solve In An Assisted Living Facility?

There are two significant issues that AI can counteract in assisted living facilities:

Loneliness
Increasing creativity

AI can counteract loneliness by having it talk to you in a voice that you find comfortable. For instance, AI can read a book in a loved one's voice.

One thing that hurts people as they age is the lack of creativity. AI can bolster senior creativity with its ability to augment its natural knowledge or synthesize inputs to create something new.

Key Takeaways

AI is here to stay and will increase its presence in our lives. The ability to harness and use AI in unconventional and creative ways may define how we progress as a society.

Although it's not as flashy as self-driving cars, the application of AI in assisted living facilities is essential. AI has the potential to improve the lives of seniors in those types of communities by:

Collecting data and predicting potential health issues
Combating loneliness
Increasing creativity

Do you have questions about assisted living facilities? If so, join us at our weekly Royal Investing Group Mentoring, where we discuss best practices, investment opportunities and facilitate a space for networking with like-minded people.

Turn Active Income into Passive Income

If there was a guaranteed way for you to be financially liberated, would you do it?

If you answered yes, you're in luck. Watch Russ Morgan, Partner at Wealth Without Wall Street, share his expertise about attaining financial freedom at a recent RLS summit presentation titled Turn Active Income Into Passive Income.

The formula for attaining financial freedom by turning active income into passive income is simple: Financial Freedom = Passive income > Expenses. As always, the devil is in the details. In this article, we'll go over Morgan's expert advice and best practices to help you on your way as you turn your active income into passive income and become the master of your financial future.

Step 1: Turn Active Income Into Passive Income With An Income Account

Establish an income account separate from your business account and personal checking account.

An income account is an accounting entry that tracks revenue generated. This account is typically part of your company's current assets. It's divided into rent, services rendered, investments, and interest earned.

The income account also tracks the amount of money coming into the business. It records any discrepancies between expenses and revenues. You can use this information to measure your overall performance and decide how best to manage your finances. It is also a key component of financial forecasting and budgeting.

Step 2: Using A Life Insurance Line Of Credit

A life insurance line of credit (LILOC) is a financial product that combines the convenience of a revolving loan with the death benefit of an insurance policy. It allows you to borrow against the death benefit of your life insurance policy, up to a certain percentage of its face value, and repay it over time as long as you meet the terms and conditions of your lender.

The life insurance policy and death benefit typically secure the loan, making it an attractive borrowing option for those who don't want to tap into their other financial assets or take out a traditional loan. In addition, if you pass away before you repay the debt, the remaining balance will be paid off using the death benefit from the policy, thus relieving your surviving family members of any financial burden.

You would use a LILOC as an interest-only revolving credit line collateralized by the cash value of a whole life insurance policy. Instead of purchasing liabilities with this line of credit, you buy assets that produce a return.

Possible ways to spend LILOC money include, but are not limited to:

Investments
Real estate
Reinvest in your business

Step 3: Turn Active Income Into Passive Income Using An Income Account And LILOC

This example illustrates how you use active income, income accounts, and LILOC to generate passive income. It is not a guarantee of performance.

Suppose your business generated $100,000 in income. You would put $100,00 in an income account, then:

Deposit money to pay for your personal expenses in your primary checking ($25,000)
Use the remainder of that money ($75,000) to pay back the LILOC

You enjoy a revolving credit line via your LILOC and have access to its cash value, potential investments, and a way to pay taxes.

Bonus Step: Using Taxes And Building Passive Income

Using the government's money is better than using your money. That's not a controversial statement. You can use the government's money by choosing to forgo paying quarterly taxes.

What follows is not tax advice but a strategy for making money work for you.

Instead, you could send any extra money (less your expenses) into your LILOC (or other investment accounts). You'll use the money you don't spend on taxes on other assets. Typically, the return on your investment will be higher than the late penalty on your tax bill.

As long as you pay your taxes by April 15th of any given tax year, you'll pay a 2% late fee. Instead of holding the money in an account, you're using the money to build wealth.

Key Takeaways

Income accounts and LILOC are effective strategies for converting active income into passive income. An income account is an accounting entry that tracks money received from revenue-generating activities.

A life insurance line of credit combines the convenience of a revolving loan with the death benefit of an insurance policy, allowing you to borrow against it up to a certain percentage of its face value. You can build passive income by investing the money you save on taxes in a LILOC or other investment account.

Lastly, it is essential to remember that these strategies are not guarantees of performance, and you should consult with a professional to discuss your goals.

Join our Royal Investing Group Mentoring to learn how to turn active income into passive income. We'll also discuss the finer points of real estate investing and provide strategies for you to build wealth and secure your financial freedom.

Buying Real Estate Notes To Build Wealth

Are you a real estate investor who likes the idea of building wealth? Buying real estate notes might be right for you.

We invited Paige Panzarello, CEO of Cashflow Chick, to share her expertise about building wealth with notes when inventory is low, and property prices are too high for any good deals.

Panzarello draws on her 20 years of experience and $150 million in real estate transactions completed to explain the fundamentals of buying real estate notes and how they generate profit.

Keep reading to learn more about building wealth by buying real estate notes.

What Does Buying Real Estate Notes Mean?

To understand what buying real estate notes means, you need to understand what a note is.

What Are Notes?

Notes are a promise to pay or a debt instrument. The note's debt can be secured or unsecured:

Secured debts mean there is collateral securing the promise to pay. In real estate, that collateral is the property.
Unsecured debts are a promise to pay without collateral. Examples of this type of debt are credit card debt or auto loans.

Also, notes can either be performing or non-performing:

Performing means that the buyer is paying.
Non-performing means that the debt holder stopped paying.

Advantages

An advantage of buying real estate notes is that you become the bank.

Another advantage is that by not buying hands-off investing--you're not a landlord. Instead, you own the promise to pay, not the property.

What Types Of Notes Should I Buy?

The type of note you buy will depend on your risk tolerance and investing strategy. But, Panzarello prefers to invest in non-performing real estate notes.

Why Non-Performing Notes?

Non-performing notes provide good value for a real estate investor. When you buy a non-performing note:

The property is collateral and secures the debt
You must be in the 1st position (you get paid first)
There is a deep discount based on securing collateral

How Do You Find Deals Buying Real Estate Notes?

Building a network is the best way to find deals for buying real estate notes.

Through your network, you may find deals buying real estate notes from the following:

Conferences
Personal relationships
Social media

How Do You Make Money Buying Real Estate Notes?

How do you make money buying real estate notes? Usually, you'll buy the non-performing note at a discount on the unpaid principal balance.

The following example uses figures for educational and illustrative purposes only. The figures are not a guarantee of performance.

Here is an example of how you might make money buying real estate notes:

Note's unpaid principal balance: $100,000
Legal balance (fees and taxes): $120,000
Current market value of securing collateral (property): $80,000

Since it's non-performing and the person who has the note is not paying anymore, you can buy the note at a discount.

In this instance, let's suppose that the discounted note price is 50% of the current market value of the property:

Note purchase: $40,000
Note workout costs: $5,000

You are all in for $45,000 but have equity of $35,000. The equity is the home's current market value minus the cost of buying the note: $80,000 CMV - $45,000 note = $35,000.

But how do you tap into that equity?

The way to make money buying real estate notes is through one of the many flexible exit strategies.

4 Money-Making Exit Strategies For buying real estate notes

Foreclosure

When you invest in notes, you need to be aware of the difference between judicial and nonjudicial foreclosure states.

Judicial foreclosure states can take up to 18 months to complete the process.
Nonjudicial foreclosure states generally take 6 months to complete the proceedings.

In general, you want to avoid judicial foreclosure states because they take more time and money to foreclose.

Foreclosure is usually the last resort, but since you're in the first position:

When the house goes through foreclosure, you'll get paid first
The only "work" you did was flipping the note
You never have to go to the property or invest sweat equity

Here is an example of how foreclosure may work out.

Foreclose starting at $70,000
Sell to a 3rd party
The 3rd party gets the house
You get $70,000.
You've made $25,000 by merely flipping the note

Short Sale

A short sale usually takes 3-6 months. An example of a short sale looks like this:

Sell the house for current market value: $80,000
You've made $35,000 cash from the short sale.

Deed In Lieu Of Foreclosure

This exit strategy generally lasts 3-6 months. You get the property instead of foreclosing, which acts as complete repayment of the loans.

Once you have taken possession of the house, you can:

Sale at REO
Fix and flip
Short term rental
Buy and hold property

Establish Reperforming Loans

Getting the loan reperforming can take between 6-12 months. You can use $120,000 to work with borrowers to get them reperforming on loan by forgiving some debt to get them performing. It makes sense because you were never going to see that money anyway.

You might give the borrower a $20,000 discount:

Set a new principal balance of $100,000
Determine interest rates
Reset the length of the loan
Require a downpayment

You make money by:

Refinancing the loan
Earning interest
Receiving mortgage payments as monthly cash flow.

Or, when they become performing notes, you can sell them to a performing note investor.

Key Takeaways

As with all deals, buying real estate notes requires you to perform due diligence.

The fundamentals of buying real estate notes include the following:

Real estate notes are a type of secured debt
There is value in non-performing notes
Hands-off investing
Several exit strategies exist for real estate note investors

Do you want to learn more about real estate investing? Join Royal Investing Group Mentoring, where our expert investor community discusses opportunities and real estate investing best practices.

Why Residential Assisted Living Investing May Be Profitable For You

People age. And as those people age, they will need a place to call home. Our aging population’s demand for homes may make residential assisted living investing an attractive addition to your portfolio.

As Isabelle Guarino-Smith, COO of Residential Living Academy, notes, 76 million Baby Boomers are entering the marketplace for assisted living. As a result of the Boomers' entrance into the market, Guarino-Smith argues that now is an ideal time to invest in residential assisted living.

The world is in flux, but the more things change, the more they stay the same.

People will still get old and still need a place to stay. Consider this, the fastest growing demographic is people aged 80 and older. We have better medicine, technology, and healthcare. And it's making people live longer.

Those longer-living people may need some help with their day-to-day life or medical attention to preserve their quality of life. Our aging mothers and fathers still need a safe place to call home.

In this article, we'll discuss the following:

The truth about residential assisted living investing
Ways you can get involved
What the possible return on investment might look like for you

Residential Assisted Living Investing: Marketplace Truths

A residential assisted living is a group home that helps with the activities of daily living for the seniors who live there.

It's not:

A corporate-owned nursing home
For the elderly who are independently living

Instead, a RAL is a residential home in a single-family home residential neighborhood. Typically, an owner or operator renovates these homes with age-appropriate furniture and furnishings, especially the rooms and bathrooms.

Common Myths and Misconceptions

You'll have to work at the RAL home. That's untrue, you are an investor, but you'll have staff to take care of the day-to-day operations.
Liability insurance will be expensive. Also inaccurate, you can protect yourself without breaking the bank by developing a cohesive plan.
Finding good employees is hard. That's only true for bad owners and operators.
I need medical experience. You don't have to have medical experience; you hire people with experience in the field.
HOAs forbid this type of home. The Federal Fair Housing Act protects you.
Seniors can't afford this care. Seniors pay for assisted living as they downsize and enter their golden years. In many cases, RAL is a more affordable and advantageous option for adult children who want to see their parents well cared for in the twilight of their life.

Ways For You To Get Involved In Residential Assisted Living Investing

There are three primary ways you can get involved in residential assisted living investing.

#1 Own The Real Estate And Lease To An Operator

You would be known as a preferred real estate provider. You would need to purchase a home, renovate it, and get it licensed and ready for the operator.

Some advantages of going this route include the following:

Twice the fair market rent
Long-term, low-impact tenant(s)
Little to no maintenance

#2 Own The Real Estate And Be The Operator

You work in the home and operate the business. Being an owner-operator means you'll help each senior with their day-to-day activities, including but not limited to:

Cooking
Cleaning
Hygiene
Medical needs

You can save money by doing this, but you will invest a lot of sweat equity.

#3 Private Lending Or Partner

As a private lender, you provide the capital for an interested borrower who wants to operate a residential assisted living facility. Private lending is the most hands-off approach to breaking into the RAL market.

Residential Assisted Living Investig: Model ROI

For these education examples, we will use an assisted living facility's average monthly cost of $4,500. For illustrative purposes, we'll use ten residents, which is typically the maximum number of residents that you can house:

$45,000 = monthly gross income ($4,500 x 10)
$30,000 = overhead ($20,000 if you're providing care yourself)
$5,000 = debt service or rent

________

$10,000 = monthly net income
$120,000 = annual net income

For a more detailed breakdown of how much money you have the potential to make, check out Isabelle Gaurino-Smith's in-depth discussion of different earnings models.

Key Takeaways

There is a silver tsunami upon us composed of aging Baby Boomers. More than 76 million boomers are aging and are looking for places to live that are conducive to their lifestyle.

One possible place that boomers will call home is residential assisted living (RAL) homes.

RAL properties have several advantages that may make you want to include them in your investment strategy:

Twice the fair market rent
Long-term, low-impact tenant(s)
Little to no maintenance

The demand appears to remain strong as people live longer, so now may be an opportune time to invest in the emerging RAL marketplace.

Do you have questions about how to get started in residential assisted living investing or real estate investing in general?

Join our FREE Royal Investing Group Mentoring, where we meet weekly to discuss the nuances, challenges, and solutions involved with your real estate investments.

Syndication, Due Diligence, and Profitability

Your first step in syndication due diligence is deciding if this type of real estate investing is right for you.

To help you determine if syndication is the correct type of investing for you, Sarah Sullivan, founder, and owner of SuGo Capital, shares her wealth of knowledge on syndication investing.

In general, Sullivan argues that determining what kind of investing is right for you requires you to consider four concepts:

Vision: passive income and net worth
Effort: active vs. passive
Risk: your tolerance for risk
Goal: clear, attainable, and accountability

Watch Sarah's presentation to get a detailed breakdown of Syndication Structure and Due Diligence. To help you determine whether syndication investing is right for you, we'll cover syndication, due diligence, and potential benefits.

What Is Syndication?

Characteristics of a real estate syndication:

You (as an investor) would not be on the loan or the deed
Tenants don't know who you are
Passive investment

The structure of a real estate syndication consists of

General partners who form an LLC and control the operation of the property
Limited partners who invest and receive quarterly passive income

The capital needed for syndication comes from the general partners, limited partners, and a loan. Here is Sullivan's example of how capital and ownership would work.

Capital	Ownership
General partners pay 10%	General partners own 30%
Limited partners pay 30%	Limited partners own 70%
Loan for 60%	N/A

The general partners execute the business plan and exit strategy when appropriate and pay the limited partners their share.

Because the company is an LLC, there are certain tax benefits that a limited partner is entitled to. For instance, asset depreciation passes through the LLC and can be claimed by the limited partners when it comes time to pay taxes on your gains.

Simple Model For Syndication Return On Investment

A real estate syndication should double your money in five years or less.

Suppose you make a $100,000 investment into a real estate syndication. Your return on investment ideally would play out like this:

Five-year cash on cash return: $40,000 (5 years at 8% yearly projected interest)
The portion of your appreciation at the sale: $60,000
Principal investment returned: $100,000

Sullivan advises her clients that a real estate indication that performs less than this level is not worth investing in.

Syndication Due Diligence

For syndication due diligence, you want to start your evaluation with the people involved, consider the market, and then the property.

Syndication Due Diligence: People

The people involved in the deal will be a critical factor in whether your investment is a success or failure. Evaluate the sponsors, property management team, and extended team by:

Googling the people involved
Conducting a background check
Asking for a track record
- Consider the types of investments they've made vs. what they're offering you
Using Verivest.com
Checking the private placement memorandum (PPM) for waterfall and tax information

Syndication Due Diligence: Market

Evaluate the market and compare it to what's happening in the United States. Some of the factors include:

Population growth
- Compare it to the national average
- Check moving company reports
Job market
- Who are the major employers?
- Do the employees fit the asset class of the property?
- Are all the jobs in the same industry?
- What do the next five years look like for the industry?
Job growth
- Google job announcements in the city or county
- Research historical and projected job growth rates
  - You want to see more than 2% growth for the last two years and above the national average for the future
Vacancy rates
- No less than 80% occupancy
Market rents

Syndication Due Diligence: Property

The property is the final piece of the puzzle. When checking the property, evaluate the following:

Vacancy rates
- Property vacancy rates that are higher than market vacancy rates are ideal
Rents
- Local rents that are higher than market rents make for better investments
Neighborhood
- Class A properties: compare these to the broader US market
- Class B properties: almost always a good investment
- Class C properties: may be solid if surrounded by A and B properties
- Class D properties: avoid these
Google Street View
- How easy is it to get into the property?
- What is next door or surrounding the property?
Tenant profile
- The profile should match jobs and the asset

Key Takeaways

Finding the right type of investment for you is an essential component of your overall strategy. As you determine what type of investing might be right for you, it's crucial to do due diligence. Through careful research, you may decide that real estate syndication investing is right for you.

Some things to keep in mind when it comes to syndication:

It's passive
According to Sullivan, anything less than doubling your money in five years is underperforming
Syndication due diligence is multi-pronged and hierarchical and includes the following:
- People
- Market
- Property

Join other like-minded professionals in weekly Royal Investing Group Mentoring, where we network and discuss real estate investment opportunities and best practices.

Alternative Asset Classes

Assets that don't fall into the typical real estate investing categories are known as alternative asset classes. These include self-storage, ATMs, and car washes rather than the more conventional single-family homes, multi-family homes, or short-term rentals.

Some advantages of these alternative asset classes include the following:

the ability to use accelerated depreciation to reduce your tax burden
passive income
diversification of your portfolio

In this post, we'll review specific types of alternative asset classes for you to consider their feasibility as part of your real estate investment strategy.

What Is Accelerated Depreciation?

Accelerated depreciation is an accounting and income tax technique that lets you write off more of the cost of an asset in its early years. With accelerated depreciation, the owner of an asset will incur higher depreciation expenses in the first few years and lower expenses as time goes on.

The depreciation of an asset influences your company's income statement—the more substantial the depreciation, the lower the reported profits in earlier years after acquisition. However, as it gets closer to the end of its useful life, there is less annual depreciation overall. As a result, later years show higher reported profit margins than when it was first acquired.

You use rapid depreciation methods to reduce taxes in the early years of an asset's life. Still, it's key to remember that the total tax deductions over the asset's lifetime will be unchanged no matter the method used. The upside of utilizing an accelerated method is the timing of when the deductions occur.

Alternative Asset Classes: Investing In Self-Storage

Self-storage properties can help people and businesses who need more storage space for their belongings. The future for self-storage appears to be healthy as of 2021:

More than 13 million (10.6%) of American households use self-storage
$39.5 billion annual industry avenue
$89.12 average monthly cost

Advantages

Consistency: Because self-storage units only make up a small percentage of the tenant's discretionary income, operators can increase rent while maintaining high occupancy levels. In other words, people tend to react less to price increases and continue using self-storage.

Recession resistant: According to Inside Self Storage, self-storage REITs were the only type of real estate investment that made money for investors during 2008's Great Recession.

In addition to the millions of households who use the storage, businesses utilize self-storage space frequently:

Contractors need a safe place to store their equipment
Landscapers need quick and easy access to tools
Retailers use self-storage units for additional inventory

Alternative Asset Classes: Investing In ATMs

If you're looking for a unique investment offering substantial returns, consider investing in an Automatic Teller Machine (ATM). With these opportunities, you can earn double-digit cash flow returns and tax-free income through depreciation.

With an ATM investment, you're investing in physical machines that will be placed and operated by a reliable management company. ATMs are often located in high-traffic areas like grocery stores, gas stations, and pharmacies.

You don't have to worry about liability for any damages or vandalism because the machine is insured and will be replaced if something does happen.

Alternative Asset Classes: Investing In Car Washes

The car wash market is expected to see growth over the next decade.

Demand drives the expected growth

As long as cars are on the road, car washes will always be needed. While drivers can hand wash their cars, they're turning more and more to automatic car washes because of the convenience and speed.

Car washes are easily scalable

Car wash businesses can make much money if managed efficiently, leveraged correctly, and can be automated for passive income. Car wash technologies are constantly evolving, which provides new opportunities for improved efficiency and higher throughput. The car wash point-of-sale collects detailed data that you can use to enhance your operations further and increase profits.

There is a clear exit strategy

Look to the car wash industry for a business that is easy to profit from or sell as part of your retirement strategy. The emergence of unlimited wash programs creates reliable, repeated income that investors view favorably. Before weather-controlled car washes became popular and allowed operators to take back control, they were at the mercy of mother nature. With these newer plans in place, they can have a more dependable revenue stream.

Key Takeaways

Alternative real estate investments can provide investors with a steady revenue stream and great returns. These investments are often recession-proof, have minimal maintenance costs, generate passive income, and frequently require little to no tenant interaction.

However, investors must do their due diligence when considering an alternative real estate investment. Research the local market, understand the risks, and determine if you have access to capital for any potential repairs or maintenance.

For those looking to explore the potential of alternative real estate investments, join our Royal Investing Group. Register today and learn about topics of importance to real estate investors. Click here to register now!