All Forum Posts by: Paul Azad

     I think the 1% rules best value may be to protect less experienced investors from overpaying for a rental Income producing property. As we all know, the only Cardinal Sin of investing in any asset class is "overpaying".

There are often long stretches of flat SFR markets in US. like '79-'83, '89-'94, or even down markets like '06-'13 where single family home values dropped 36% on average across country, so 1% rule may help keep some investors out of trouble by at least having some cash flow to safely carry the mortgage during those times.

Perhaps the SFR market is overvalued now and 1% rule is just a simple valuation tool like a P/E multiple in equities telling people to stay clear.

      My parents bought many SFRs in 70s and 80s and with mortgage rates at 18-19% but always made money as rents greatly exceeded mortgage payments, because home prices matched incomes for 200 years prior to 1994, then FED started money printing x 30 years until now. (systolic pressure rising so won't get into that)

And many less experienced individual investors in SFRs don't do as well as others and "well" means what could you have done otherwise. Chart below shows last 45 years, about 14% in sp500 and 8.7% in rental income producing real estate, nominal not real.

so maybe if the 1% rule is telling you that single family rentals are too expensive? Then perhaps you could invest in something else until the single-family rental market is back to an affordable range, and in the meantime, you could also make a lot more money.

Quote from @Greg Scott:

Quote from @Henry Clark:

Quote from @Greg Scott:

I have invested in over 50 syndications, of which about 45 are still active.  I have also done four syndications myself.  Of course, on the syndications we put together, we get some compensation for our efforts, so I'll ignore those when discussing my returns below.

Of the 11 deals we've had that have gone full cycle, we are averaging about a 40% annualized rate of return.  Of those 11, only one had net loss, and clearly the others did very well with outsized returns.

Of the 45 that are still active, the returns have been a little softer the past two years, and we had two small capital calls.  On the other hand, we also had three provide cash-out refinances.  My quarterly cash distributions hit bottom about a year ago and have been on the rise since then.  About 1/3 are still not providing distributions but their cash position is strong and I'm not concerned about them potentially selling at a loss.  Six of them just launched this year, so I wasn't expecting distributions anyways.

These syndications have change life.  I am truly blessed.

However, you should know that these syndications are not available to everyone.  I am a member of a private group that puts these syndications together ONLY with members of the group.  They have rules and best practices about how we put these deals together which has collectively saved us from much of the pain being experienced right now in the multifamily space.

 Thanks for insight.  When you say 40% annualized is that per year or over the entire life cycle.  Example if 3 years then say 13% return each year?  Or 40% each year for 3 years?  

Great job on the due diligence or Operational process you have going.  

This image summarizes my syndication returns on deals that have gone full cycle.  I haven't added the 11th, the one that lost about 60% of value.  They haven't fully closed out the deal yet, so I don't know exactly where it will end up.

 Congratulations Greg, Those are amazing returns from. 2014 to 2023 over a 10 year span to average 40 per cent is phenomenal. What are some of the guidelines you and your group have used to keep you out of trouble? And get those incredibly good returns? Were all these deals multifamily value add or any core deals? Thank you.

Every nation's 10-30 yr treasury bonds are a reflection of only two factors. Risk of future inflation, and projections of gross domestic product. When you add those together that's typically your 10 year yield, currently projecting 2% inflation and two and a quarter to 2.5% GDP growth near term, Bond market has felt that FED cut 8 weeks ago too much and too early, thus risking return of inflation. Add in Trump, who printed 3 Trillion and mailed to people with his name on the checks just 5 years ago, and the Bond market has been guessing higher inflation risk component. 

But market always buys the rumor and sells the fact, so 10yr should fall soon to around 4, or even lower if PCE print Wednesday is lower than expected. 

Longer term, meaning next 30-40 years, Bond market will do what its always done to runaway Fiscal looseness and it will take 10yr up to 10 -16% to put pressure on FED to deleverage the last 45 years of crazy spending, like it had to do from '45 to '82, or 1900-1925, slow and gradual. 

Or maybe FED will just keep printing Trillions and Bond investors will for some strange reason or blind generosity only demand 3-4% on 10-30yr shaky loans. Now that's funny :)

Sorry for the following Contrarian advice, but you're not a 5 year old so:

The only reason to buy a personal residence (Home) is because someone is forcing you to.

Usually, this person is called your Spouse (which is Latin for someone who forces you to make horrible financial decisions then criticizes you for them endlessly:)

perhaps DON'T buy a home, just rent something affordable and invest the 20% or in your case 50% into the stock market (sp500 16.1% yearly return last 15 years, 11% last 50 years, 10% last 125 years)

remember, your RENT is your maximum monthly housing expense, but your Mortgage is your minimum or starting monthly housing cost, it always goes up from there

I've, owned 2 personal homes, 100% appreciation in 6years on #1 and in 7 years on #2, (I timed our market perfectly both times), with 20% down and very low mortgage rates, but after honestly calculating all expenses, only made about 5-6% a year "investment wise". Would have done 2-3X better in stock market, and with 1000% less grief/stress. 

read this to start with 

Why your house is a terrible investment - JLCollinsnh

Also, big picture, residential RE, appreciates only at rate of inflation, on average both in US and abroad.

"Transaction prices of real estate on the Herengracht, the finest of them all, have been carefully recorded. In 1997 Dutch economist Piet Eichholtz build a price index of houses on the Herengracht with a constant quality from 1628 until 1973. This was the birth of the Herengracht Index. Eichholtz’s initial research showed that real housing prices (corrected for consumer price inflation) gradually changed over time, but were fairly equal in 1973 compared to prices in 1628."

We are currently in highest residential housing price bubble ever recorded in US history (Case-Shiller housing Index) so If you buy Cisco in Dec '99, ain't gonna go well for you, probably :)

good luck

Warren Buffett has a rule 1 of investing, which is "don't lose money.", and his rule 2 is "see rule #1"

This translates to me as "Don't overpay.", if you can be thoughtful and diligent and very skeptical, and wait until things are obviously cheap, you will generally outperform 90% of other investors. equation {Buy low + decades} = Rich

Get a hold of someone on the phone, about the investment, ask a few questions and get their best contact information. Don't be afraid to tell them you were nervous as you didn't hear back from them, and ask if they are swamped or were on vacation and expect and gage their answer. Life happens and people get busy or someone gets sick, so it may not be a red flag that they took a week, but it shouldn't happen again and again. They may surprise you with their honesty and that may make them a better syndicator actually. Lord knows there are a lot of fancy, online GP's now with beautiful websites, YouTube channels, and 10 people in their investor relations department but only 1 inexperienced guy in their acquisitions who couldn't underwrite a lemonade stand.

good luck :)

Copium2024 appears to still be the most plentiful element on the periodic table, and also on this thread, Remember Norada Capital Management invested the investor's note money into an obvious scam company run by a documented scammer, which filed for bankruptcy almost two years ago. It has a half a dozen lawsuits against it. Either Marco knowingly did this and was complicit or he unknowingly did this and was moronic. Any other interpretation is pure Copium2024 :)

The investors don't need "communication", they need an apology, an admission of what he did, and their money back. 

Great webinar/format, please keep it up.

If Monday is GP and operating the property, who is RSN? and why are they needed in this deal? Are they bringing equity? Are they part of the pref equity position? Are they given a JV-co-GP position for fundraising or will they be involved in the management of the property?

Atlanta MSA is great and growing, but Multi-Family supply coming on line there both now and through next year is significant, wouldn't this be a better/cheaper deal 1 year from now?

Does Trump's election yesterday, with presumed higher GDP growth and higher inflation (Tariffs/Deficits), which means higher 10 yr and Cap Rates, change timing of CRE acquisitions?

Thankyou

https://www.biggerpockets.com/forums/432/topics/1171472-pep-...

I think this is most recent bp thread on lane Kawaoka PEP fund etc

Quote from @Audris Tien:

Hi Paul, How can you tell that Good Egg is an entity (or fund of funds) that collates funds and invests those funds on your behalf (i.e. more of a capital raiser) rather than the actual operator/GP of the proposed property that is advertised for sale? It seems a bit misleading   to advertise as the actual syndicator if you are not? (I'll admit I am a fairly new potential investor)

So, they are definitely a fundraiser, and you are right, it is definitely misleading. The founder of GoodEgg explains their fees/structure at 20sec mark here in a 1 minute video about how they make their money. (they get a cut of the GP fees for fundraising)

Goodegg Investments – This Is Is How We Make Money Through Real Estate Syndications (youtube.com)

what's most annoying is the slide at 50sec, she has on the left the GP which "does all the work and takes on HIGH risk, while on the right the LP who does no work and bears low RISK". I'm like "What, What, What!!!" 
RISK is the potential for loss. and who in their structure of 3% acquisition fees, 3% asset management fees, and lord knows what pref/split fees they charge is bearing the RISK when only the LP is bringing any capital to the transaction? WHAT!!!! (I almost threw something at my monitor, but took a deep breath and realized my wife would be very upset if I broke another one :)

They are not doing anything illegal, they are just CRE Remoras, who exploit less experienced investors, and there are hundreds like them. Their mere interposition in the process adds a layer of unnecessary fees, and I just don't see what value they add. 

Syndication investing is awesome, it has given me sp500 beating returns for 30 years, fantastic tax benefits, great geographical diversification, a wealth of knowledge about this country and the economy in ways that a nerdy science type guy like me would never have known about. And as an LP, I can do 75% of my due diligence from my desktop computer, the rest is going to the properties themselves, going to sponsor meetings, talking with other investors etc, which is a ton of fun. 

good luck :) 

Warren Buffett has told his children to just buy the SP 500 index fund and do nothing else with any capital not allocated to Berkshire stock. This will provide a roughly 10% nominal return likely over the next few decades as it has averaged that since 1900.

He says it's simple and other than his son Howard, the others have little interest in investing/finance, and the sp500 index has outperformed >98% of professional money managers over any 20yr or greater stretch. 

Active or even passive management of real estate could be cumbersome for many heirs, not skilled in it.