4 Reasons Why You Should Invest In Commercial Real Estate

So, four reasons that we are investing in commercial real estate. So there's a lot more than five, but we're going to cover kind of the top ones right now. What is syndication and why does it matter to you? So in 2012, the jobs act allowed individuals like yourselves and like us to invest in commercial real estate without a broker. So it really opened up the floodgates into the ability to invest in a commercial real estate syndication, by the way syndication is just simply pulling resources to buy bigger assets than you wouldn't be able to buy on your own. So in 2012, the Jobs Act made it legal.

1. So the number one thing about commercial real estate is preservation of capital. So everybody can talk all the time about return on investment, what you should be concerned about is return of investment. What makes commercial real estate assets secure, safe, and consistent. You can put your investors into preferred position, so the capital is secured by the project, so you don't buy a deed. Like when you own a single family residence, you buy shares of a corporation that owns the assets. So that's what you're purchasing when you're getting involved in a syndication, the project is secured by cash flow. So what makes these things much more secure than residential is that you could see the cash flow when you're going in, you can see the projections and that's what securitizes the project.

2. Consistency of returns. Look for is safe, secure, consistent, so consistency. And over the past 90 years, you can look at the metrics on National Association for Real Estate Investors have some great graphs that'll show this, but over the past nine years, commercial real estate has always outperformed stocks and bonds over that time frame. And if you look at when the downturns took place, commercial real estate had one quarter of the ups and downs that stocks and bonds have. So again, for that control, for that consistency, commercial real estate is a great choice. I think the metric was during the last downturn, the national default rate was somewhere between four and four and a half percent for residential mortgages. The national default rate from multifamily was 0.4%, so much more secure, much more consistent.

3. So commercial real estate is the most tax advantage investment class that there is. There's appreciation, which means over time we know that real estate grows. Depreciation, which means you get to write off a good percentage of the asset, over a period of time and we do some acceleration on those depreciations. And then your interest expense, like your home when you get to write off your mortgage interest, same thing with commercial real estate, like kind exchanges, when you sell a property, you don't necessarily have the ability to sell a mutual fund and have a like kind exchange like you do with commercial real estate. So if you take your profits from one asset and move it into another, there's some terms and timeframes that you have to abide by, but you defer those taxes even further down the road. Speak to your CPA.

4. Truly passive investments. So the last 10 years we've dug in into residential real estate and it's been great for us and it brought us to this area and we're grateful for that business because it allowed us to see the light and get us to where we're at. But it is not passive, very active business. We're always buying, selling, flipping, renovating properties. So the goal with these larger assets is to be able to hire professional third party managers, no clogged toilet calls if you own any single family, two families, three families, four families, whatever, rentals. And you're still playing landlord, we don't want to do that, right? Have professional third party management economies of scale who will allow you to afford those and then mailbox money. Your goal should be able to get those quarterly distributions every single quarter. Warren Buffett said that if you don't find a way to make money while you sleep, you will work until you die.

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