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Hacking Real Estate Investing...

Burning to start investing in real estate🥵🤪?! No time, no powerful network, no big bucks nor crucial experience?! FOMO 🤔?! Well if you ain’t Buffet or Dalio then piggyback on the moneypot and #hack your way into it...

Talk Dinero💸?!

Before anything else YES, Warren Buffet, and Ray Dalio both invest in real estate big time. Not directly though but rather through stocks and funds. Keep reading you’ll get it 😏. Now girl, as we have stated many times before the only way to really build wealth is to buy assets that produce money. The rich do not, we repeat DO NOT work for money, money works for them!

By far the greatest problem for everyone starting or wanting to start a business, real estate, or investing in the stock market is the darn dinero, gelt, money 💰💰. Once you have enough assets as we mentioned earlier you will be able to create money out of thin air & at will with (re-)financing options, because banks love assets. Banks will loan you almost an infinite amount to acquire and operate assets once you have a proven record.


The irony 🤨🙄 is once you have enough money, you will never need the money to make more money, that is how the financial system works. But to start and get things going you do need money, a lot of money 💰!

In flip to fortune, we gave you a clear path on how to start from scratch with $0 and make money to invest and build a multi-million investment portfolio.




We pointed out different routes and options after you get the first grip of creating money out of thin air with “arbitrage flipping”, which is actually hacking a business startup from scratch. Instead of building a business and making all the massive time & financial investment commitments to develop products, services, marketing, and more, you just resell products for a profit that already do well. The fastest way to instant money. You can now choose to use the money to buy and/or build actual businesses and invest for true wealth. Remember a sales job in any shape or form and even those with high numbers of cash coming in are not true wealth. A well-known analogy with investors is that of the dancing bear, whenever the music stops and the bear doesn’t dance anymore the money stops! Don’t be a dancing bear. That is why actual businesses (that don’t rely on you being the dancing bear) and investing are the ultimate progression to building wealth. That and owning a bank 😏.

As you might have guessed, investing also requires “dinero” a lot of it 👛💸 until it does not. Always remember banks will give you all the money you need once you proved you know how to handle money!


What many “scam & sham gurus” in the entrepreneurial space don’t want you to realize is the equation:

For every $/€ 1.000 in monthly desired cash flow, you will need to have an equivalent of $/€ 100K invested with an approximate 10–12% ROI annually.

That is why it is of the uttermost importance to understand financials and how to achieve a great return on your investments. They don’t want you to realize this because they wouldn’t be able to sell you any of their “get rich quick, with no work” garbage schemes. The best investment you can ever make is in yourself! Yes, invest the time, the money, and the effort to understand the financials first and become a sophisticated investor! Either you pay upfront with sweat equity or you’ll pay with regret and pain of being the sucker and losing all your hard-earned money later. You decide, choose wisely 🧐…


In our Blogs, we describe the many ways to be an active investor, which implies starting real businesses in real estate and actively investing in real estate. All of this requires a lot of time, effort, knowledge & money to start. But, there are also ways to “passively” start investing in real estate, hacking investing in real estate if you will. 🥳🎉



Traditionally, equity investing was only open to accredited investors. Accredited investors include banks, pension plans, insurance companies as well as affluent, sophisticated investors. For you as an individual to qualify as an accredited investor:

  • you have to earn at least $200,000 or $300.000 combined in the two past years and expect to earn the same the current year;

  • you have to have a net worth that exceeds $1,000,000 (excluding your primary residence).

Being an accredited investor opened up opportunities to invest in asset classes such as real estate syndications, real estate crowdfunding, venture capital, and hedge funds. The Securities and Exchange Commission (SEC) created these criteria in an effort to protect new or inexperienced investors from buying into high-risk projects or having insufficient reserves, in the event of a loss. While these criteria aimed to protect they also for a long time excluded non-accredited investors (those who did not meet the criteria above- those trapped in the rat race… which kept them trapped.). Sounds familiar🤨? With access to greater opportunities and greater rewards, comes higher growth, and true wealth. Don't let them fool you with risk avoidance, you don't avoid risk you mitigate the risk that is how money is made!

In the next segment, we are going to break down and dive a little deeper into three ways of passive investing you can start on a small budget as a non-accredited but sophisticated investor until you become an accredited investor. You can start small and keep growing infinitely ∞ even if you just want to remain a passive real estate investor for life:

  • Online Crowdfunding

  • REI Groups / Syndications

  • REITs

Online Crowdfunding

The idea behind online crowdfunding is that many people are willing or able to invest a “small” amount, so large sums of money can be raised quite quickly using the Internet and social media to reach a big audience of potential investors. The process of raising money also known as property crowdfunding, real estate peer-to-peer lending, or financing of real estate projects, is done on an online crowdfunding platform.

Crowdfunding offers on one hand companies access to capital that they might never be able to raise and on the other hand investors the ability to become shareholders in a company or in a real estate property they might never be able to fund on their own.

Crowdfunding, Why & Who?

Crowdfunding is right for real estate investors who want a passive income from projects that they would not be able to access or afford on their own. It is also a great option for investors who want to raise money to finance their property (portfolio) and increase their debt exposure outside of the traditional lending and financing structures.

Some of the people that can benefit from this form of investment are:

  • Investors who want to invest in real estate but don’t have the capital to acquire a property.

  • Investors who don’t want the hassle of being a landlord.

  • Investors who are looking for an alternative or diversification to the stock market to ease their way into real estate investing in smaller chunks.

  • Investors who are interested in investing in real estate projects outside their area, but don’t have the means, knowledge, experience, or logistics to do so.

Even though it is a legit option for investors interested in real estate investment, it is not the right option for those wishing to actually own the asset themselves. It is also not the right option for active investors who want to be hands-on investors and in charge of budgeting, deadlines, choosing the finishes, and managing contractors, and grow their portfolio, network, and experience at the same time.

The Benefits For Investors

  • You gain access to low-levels of investments with some projects being offered for as little as €/$ 500 -1.000 with increments of €/$5.000 being more the norm.

  • You can make short-term investments, some ranging between 2 and 48 months

  • Peer-to-peer lending opportunities with low or no investment fees, which implies a higher return on your side (in Europe the average ROI is 12-14%, the USA anywhere from 4-28%).

  • Crowdfunding has the benefit of transaction transparency as members know exactly where their funds will be invested.

  • Crowdfunding offers an opportunity to diversify your investment to various asset classes and countries.

Remember you can start with very small portions but the rewards will be small too. Well, it is a starting point better than doing nothing and it will compound over time! You need to have around 100K invested to attain 1K in monthly cash flow on an annual ROI of 12%. It’s all in the return on investment percentage. The higher the ROI, the higher the monthly cash flow but also probably the higher the risks. You never ever defer any risk, you mitigate them!!




The Benefits For Borrowers

  • Real estate crowdfunding increases your chances/channels of getting funds while you grow your investor network.

  • Real estate crowdfunding allows real estate companies in the early stages to start more quickly.

  • Successful projects from a Real estate crowdfunding platform build your reputation/track-record to use with future professional lenders.

  • Real estate crowdfunding involves direct marketing that also helps in promoting your real estate business.

  • Your business can access valuable feedback from your online crowdfunding community.

  • You can save money and time by using user-friendly Real estate crowdfunding platforms.

Types of Crowdfunding

Equity (Equity-based) Crowdfunding

Equity investment usually provides higher returns than debt investing. When you invest this way, you will receive returns based on the property’s rental income less crowdfunding platform fees. This is very different from crowdfunding websites such as Kickstarter, where people donate money and do not receive equity for their contributions.

  • Quarterly pay-outs sent to investors who can also

  • Earn a share of the property’s appreciation value in case it is sold, on top of getting the principal back.

  • The major risk associated with this type of investment is that investors have an equity stake in the property, which means they can lose money if the value of the asset decreases.

Debt (Lending-based) Crowdfunding

Debt investment is the most common route for investors as it is more simple to invest in. In this type of investment, you lend funds to the owner of the property.

  • Quarterly or monthly payments for loan investment.

  • You will receive a fixed interest based on the owner’s mortgage loan and the amount that you have invested.

  • At property pay-out (which is usually a fixed date), you will only receive your invested amount (principal) back.

Where to Find

For full disclosure: "We Only Present Options For Educational Purposes Only. We Do Not Promote Nor Advise Investing On Any Specific Platform”. Please do your own due diligence before investing in any endeavor on any platform and never ever invest what you cannot afford to lose. With all that said here are some starting points to browse around:

USA:

https://www.investopedia.com/best-real-estate-crowdfunding-sites-5070790

https://www.nerdwallet.com/best/investing/real-estate-crowdfunding-platforms

https://www.benzinga.com/money/best-real-estate-crowdfunding-platforms/

EUR:

https://marcoschwartz.com/best-real-estate-crowdfunding-platforms

https://jeangalea.com/best-european-real-estate-crowdfunding-sites/

https://p2plendingsites.com/real-estate-crowdfunding-platforms/

This Post’s Crucial Crux:


REI- Groups/Syndications

Before there were the Internet and the popular crowdfunding opportunities there were small/medium multi-million Real Estate Investing Groups and big multi-billion Real Estate Syndications mostly to accommodate accredited investors as we defined above. Until the JOBS Act that is 🥳, providing many non-accredited investors options to step up onto the plane. It is also always good to know the next growth potential for your investments.


 

The Jumpstart Our Business Startups (JOBS) Act is a piece of U.S. legislation that was signed into law by President Barack Obama on April 5, 2012, that loosens regulations instituted by the Securities And Exchange Commission (SEC) on small businesses. The JOB Act The law allows non-accredited investors to invest in startups through crowdfunding and "mini-IPOs".

  • First, it lets startups raise up to $1 million through crowdfunding, which is a form of investing by many small investors pooling their resources.

  • Secondly, it greatly expands a category under a rule called "Regulation A" (or Reg A+), which allows companies to offer stock up to $ 50 Million in stock each year, without going through the process of registering with the SEC.

source: Wikipedia

 

Why & Who?

A syndication is a transaction between a sponsor (the investor/business seeking funds) and a group of investors (with a lot of money to spare). As the manager and operator of the deal, the sponsor invests the sweat equity, scouting out the property and raising funds, handling acquisition, and managing the investment property’s day-to-day operations, while the investors provide most of the financial funds needed. The sponsor is usually expected to invest anywhere from 5-20% of the total required equity capital herself and the participating investors put in the remaining 80-95% of the total equity needed. The more the sponsor invests in the deal, the better for all the investors. As a participating investor, you want the sponsor to have the most skin in the game.

REI-groups or Syndications are mainly for passive accredited investors aspiring to invest substantial capital in real estate but would rather avoid the 24/7 hustle and bustle of active investing and for a smaller financial responsibility with leverage to bigger opportunities while keeping all of the known benefits of tax write-offs, leverage, and a hedge against inflation. Before the Internet, syndications started in lumps of 50 -100K with REI groups allowing for a minimum of 25K participation portions. But with the increasing popularity and rising competition from crowdfunding platforms’ transparency, clarity on fees, and ease of use they are being pushed from their high horses and forced to adapt 😉. Since then more and more are lowering their threshold for non-accredited investors to get in on the party for as low as 5-15K increments! It is also a great way to invest larger sums, grow and diversify a large portfolio passively.

Syndications are structured legally as Limited Liability Companies or Limited Partnerships. The sponsor participates as the General Partner or Manager and the investors participate as limited partners or passive members. The LLC or Limited Partnership structure is very similar to the setups of other private funds in the Venture Capital, Private Equity, and Venture Debt space. Such legal entities are there to protect both the Sponsor and the Limited Partners if the deal goes south.

The Benefits For Investors

  • Lower Financial Risk In A Greater Asset. The Legal Structure of Syndication with a general partner and passive partners arrange for the management risk in the investment to be with the general partner. The passive investor only invested a limited amount, and their greatest risk is only losing their original investment.

  • Exceptional Expertise & Knowledge. With real estate syndications, real estate investors get to take advantage of the fact that they can rely on the knowledge of a group of investors, and experienced, professional teams with a wide range of backgrounds to manage every aspect of the process and property. They can also use the opportunity to learn different aspects and processes concerned.

  • Economy of Scale With more investors, there is more capital or money available upfront. This means bigger down payments for bigger properties as well as more available money for rehab, upgrades, and maintenance.

  • Diversification. Because of the lower required participation, it is easier for investors to allocate and spread their money in multiple asset classes and markets.

  • ⭐⭐⭐Consistent Returns, Lower Volatility & Tax Benefits. Most syndications provide steady, fixed quarterly payout in cash flow, while providing also consistent appreciation and exit pay-outs and tax deferrals and depreciations off-sets to capital gains this might not be the case with smaller REI-groups.

  • Entirely Passive. Because real estate syndication consists of a real estate limited partnership, you are a business entity and have limited liability when confronted with losses but enjoying owning tangible assets by receiving a share of ownership, inflation hedge through cash flows as limited partners while avoiding daily real estate management issues.

The Benefits For Borrowers

  • More Capital and Faster Growth. The Syndication has many equivalent benefits to the borrower as to the investor. It empowers borrowers to build and maintain bigger portfolios of investments than with only traditional banking financing. The collective group of investors has a higher net worth and a larger network than the borrowers working on their own. Syndications also have a more diversified portfolio and a greater ability to pool resources including skills, contacts, and experts.

  • There are at least 12 ways a sponsor gets paid higher returns through several management and operational monthly fees on top of the quarterly payouts.

Distributions. Syndicators typically earn between 25% and 50% of distributable cash generated from operations, refinance, or sale of a property, which are paid as a direct split between the members and the syndicator (i.e., 65/35) or as a preferred return.

1. Operations

2. Refinance

3. Sale of the property

Fees. Fees are an expense of the syndication and are collected by the syndicator on a monthly, quarterly, or annual basis. The type of fees a s