All Forum Posts by: Paul Azad

You are way ahead of 99% of real estate investors for the age of 23. Many in their 50s have no idea what they want to do when they "Grow Up", we call them elected politicians:) So keep being interested. Keep learning. Watch YouTube videos. Buy some books. Read them several times. Join a local real estate investment association REIA, and go to their meetings. (MeetUp.com) Start meeting other investors, learn from them, and then use leverage as your friend in order to magnify your gains.

Generally, because leases are renegotiated. You can justifiably increase the rents if inflation has been going up. And if a long-term lease like we have in commercial real estate, you can schedule increases in the rent rate on a yearly or biennial basis, either at a fixed negotiated rate like 2% or linked to the CPI or consumer price index, which in 2022 was up 9% and this past year was up only about 4% but traditionally is up only one or two percent a year. (you write this into the lease) Leverage, leverage, leverage is as important as location, location, location when it comes to real estate. Right now, borrowing costs are higher than they've been in 30 years, so it's OK to wait a bit to make a purchase (ie. it may be hard to find a good deal today). Borrowing costs should come down as the economy is slowing down now due to the high fed funds rate (5.33%) particularly in the multifamily space which has an enormous supply coming online across the country this year and next year. There should be very good opportunities to buy potentially distressed multifamily assets one to two to three years from now.

Find property in a good location, at a good price, and at a good point in the real estate and business cycle, with the most leverage you can get, ie. the lowest down payment are some of the keys to success, whether its residential real estate or commercial.

and don't beat yourself up when you screw up, which you of course will, many times. That's just mandatory tuition to the School of Hard Knocks. Remember in Life and Real Estate you can either "Win or you can Learn."

I only do syndication investing but there are many experts on BP forums here that can show you how to get 10% down, or even lower through FHA loans etc, so your leverage is 10X or 20X. You have no total control long term over the appreciation of your real estate, that's more up to the neighborhood/demographics/economy/supply-demand/inflation rate etc. You can though buy well and maintain well and lease well and hopefully sell well. Historically RE appreciates even better than the long term inflation rate, as it has especially the last 15 years, since Great Financial Crisis. So imagine if property appreciates only 2% in a bad year but you have 20:1 leverage?

and then there's the tax benefits, WOW oh WOW - good luck :)

Sorry. Please forgive any stupid questions, but why are you wanting to invest outside of Austin? where you already live, have experience, have contacts within the real estate industry, and likely have a large informational advantage over outside investors who are investing in Austin but don't live in Austin. What advantage do you think you'll get by investing in Tulsa? Or Birmingham or San Antonio? Or is it just that profit spreads are better there? Perhaps the question to ask is not where to invest, but rather when to invest. And maybe at this late part of the business and real estate cycle, perhaps it's not a great time to invest anywhere. Austin has been a high growth city and likely is six to 12 months ahead in the business cycle as many smaller cities.

Of those Three, San Antonio provides you the same legal backdrop (Tx) and also geographical access (same day drive) and accelerating immigrant population growth (GDP growth requires much more immigration both red/blue agree on this in private)

given the above two charts, massive supply x 13 years, falling rent growth rates x 18months, would guess rough times ahead for US Multi-Fam next 2 -3 years, but doesn't look like we are near bottom of the cycle yet?

Ethan, congratulations on starting your investment journey at such a young age. You are way ahead of most of us. I would be careful about setting up a Roth IRA, Check out this Bogelhead's thread,
Can I start a Roth account now? - Bogleheads.org

I think if you set up the Roth IRA, you cannot withdraw any money from it for the first five years without a 10% penalty. And even after the five years, you can't Withdraw any of the interest or profit without another penalty. But you could withdraw the principal with zero penalty I think at any point.,

I like to think of the Roth IRA or a 401K or a 529B or any of these tax deferred accounts as basically different cookie jars on a counter, but inside each cookie jar are different types of "cookies" or "investments" like a bank high yield savings account or a money market fund or a Treasury bill or a municipal bond fund or a corporate bond fund, or stocks, like SP500 ETF, etc. You can place any type of "cookie" into any type of jar, but once it's in a cookie jar, you can't remove it and put it into a different jar, before retirement age, or there are big penalties to pay. This is why Congress set them up to prevent people from pulling the money out until they need it at retirement age and not sooner.

The second question is what type of "cookie" you should put into the jar, which means what you should invest in, And if you need the money in three years I would not invest in stocks or corporate bonds or municipal bond funds which could lose significant amounts, but would likely all recover a few years later. But I would invest in perfectly safe investments like Treasury bills, or money market accounts, or a bank high yield savings account. All three of these last investments are actually just one investment. They all invest in ultimately 4 week, 8 week, 13 weeks, 17 week US Treasury bills. and there is no risk of losing your money. To make things easy for me. I move cash from my checking account, that I don't need each month (your 130 dollars a week) into my taxable brokerage account, which is my "cookie jar", and then I buy a wisdom tree ETF ticker USFR which holds eight week US Treasury bills and currently pays 5.4%. and it re-adjusts much faster to interest rates than savings accounts or even money market accounts do. Interest rates likely will come down over the next one year, but the USFR - ETF. will still pay higher interest than most money market accounts or any bank savings account. And whenever you need the money, you simply sell your shares and one day later, the money settles into your account, and you then transfer back the cash to your checking account.

Investment Calculator

plug in your $520 a month and in 3 yrs you would have saved 21k, 19k deposits and 2k interest earned, if rate stays at 5.4% whole time

good luck

 Hi Nick, I've been reading for a year now that multifamily new construction has ground to a halt due to rapid increases in construction costs, insurance costs, financing costs and also due to mass overbuilding in 2019 to '23, causing huge supply in 2024 and 2025, which is now putting downward pressure on rent growth? and that the relative supply will drop precipitously, after '25 leading to a new golden age in multifamily by 2026 and 2027. What have you been hearing or reading? and have you invested in any MF recently. I want to invest in MF syndications but not too soon at high current prices.  thankyou

Never a Bad Time? Hold on, I have 2021/2022 on the phone for you, they're asking if you are interested in a 100 unit 1960's Vintage Multi-Fam property called "The UnderWater" at a 3.5% Cap rate....Wait, Blackrock just said "Hold my Beer" and offered all cash at a 3Cap, something about subway tile Backsplash should double NOI in 3 months.

perhaps modify "It is never a bad time to invest in real estate." to "at a good price". :) jus playin'

Financial scams can be Exploitative of people's emotions and the shame in admitting to family and friends that they were duped when typically the investors are felt in their family and friend groups to be the most financially savvy and therefore less capable of getting exploited. For example, Bernie Madoff started his Ponzi in the mid 1970s and it ran until December of 2008 and very few people ever took out their money even after it collapsed. Unfortunately, they only recovered 14.1 billion of the 42 billion he stole. People blithely received their 14 to 15% yearly whether markets were up or down and they never wanted to peer behind the curtain to see what was going on. And many of these investors were extremely sophisticated and savvy hedge funds and pension funds, including hundreds of educated retirees and professors and mathematicians and people with long careers in finance. Some investors did know it was a Ponzi, and actually blackmailed Madoff to get higher returns/payouts, but that was effectively stealing from the less savvy investors as well, so they became complicit with Madoff. some likely suspected but rode the Dragon as long as they could hoping to get out before it crashed, but that's an attempt to catch a falling knife, which never ends well. 

Sounds like the author is justifying a reason to overpay for something.

Isn't Brandon Turner the guy from Open Door Capital Fund? Which has now stopped investor distributions? And has many very unhappy limited partners on the syndication threads? From reading some of those threads, it seems like ODC was overpaying for commercial real estate in the last couple of years using floating rate short term maturity debt with limited rate cap insurance, and got caught when 10yr went from 2% to only 4.2%. You may not want to finish reading that book....

Dozens of threads on BP, like this of excessive risk leading to excessive losses, hopefully nothing illegal, and likely to be more if US slips into recession.  

I think BP is planning on a "Passive Pockets" link or area where maybe some resources to help educate passive investors can be collated, so investors in syndications/ mortgage notes/ even non-collateralized promissory notes can be explained/discussed/reviewed etc. Could be very helpful