Webinar on "Single Family vs Multifamily Real Estate Investing"

So welcome everyone. Welcome to Think Outside the Stocks. My name is Madhvi Nadechen. I'm your host today and today we are going to talk about comparison between single family homes to be a landlord versus being a passive investor in multifamily syndication type of investment. So thank you for joining everyone again. Welcome. Welcome to this Thursday evening with Think Outside the Stocks Single family versus multifamily investing. It's a comparison. Before we go ahead, I would like to say that this is information and education purpose only. These are our personal opinions. So if you are seeking an investment and you want to get advice from your financial advisors, tax professionals, lawyers, please feel free to do that. This is not an offer to investment, this is just an education. If there is going to be any investment it's going to be formal offer will be through a ppm. That's the formal documents for the investments and the examples contained in this presentation today. They are purely informational and point in time. So please keep that in mind. About Me My name is Madhavi Nade Chen. Most of you actually already know me. But for you who are joining in new We Think Outside the Stock this series. I'm the president and wealth strategist at Think Outside the Stocks. I help investors with a twofold approach with making their savings efficient using Infinity backing system as well as the high growth and risk managed investing options with multifamily investments. In my past life I worked in IT industry with most of the time top five consulting company about 17 years or so. And in 2015 I started my journey into the alternate world of investments. And when I found out a couple of these strategies which were so strong and they had such an impact in my life, I became very passionate about sharing others. And that's the passion, that's the child. Think Outside the Stocks is out of that passion of sharing this information and also helping investors implementing this both strategies. I have, you know, with me, with my husband, we own a rental portfolio across the different markets, single family homes, Airbnb, also multifamily. But if you ask me, truly the education is my passion. So today what are we going to talk about? Today we're going to talk about comparison of being a landlord in a single family home versus the multifamily limited partner. That is a passive way of investing in multifamily. And we will compare, you know, the whole acquisition process, the renting management, maintenance process, the market cycles, how these two asset classes behave with market cycles, the scalability, tax advantages, diversification and asset protection. When it comes to this type of aspect there is still a lot, but I'll try to cover as much as possible today. If you have questions, you can always, always reach me and schedule that call with me. In that chat window there is that calendar link, if you to just schedule that call and get in touch with me. Okay, so before we get started, let's understand this asset class. Being a landlord simply, I'm talking about, you know, single family rentals, or you could be, you know, be owning duplex or fourplex also. But typically for real estate, the first step most of the investors take is being a landlord of a single family home. Either you are, you know, moving up to the next home in your life and you rent out your previous home, or you buy or purchase a new property, going through the whole system of purchasing and finding this investment property in different markets. And you enter in this investment world of the passive investments being a landlord. So that's the single family. And a multifamily is generally five plus units. And just by show of hands, if you could just tell me that, have you heard about the world of multifamily and what syndication is? And if not, then I can just describe a little bit more about what the syndication also is. Right, so thank you. And so generally multifamily units are five plus. The two economies of scale start at 100 plus units. Right. So does that mean that as a group you invest into, like buy a Property which is 150 units or 100 units and start managing together? That's not how we do it for the syndication purpose. When you are trying to invest passively in multifamily syndication, you actually utilize the expertise from somebody else, the syndication team who has been doing it for a period of years. And they have the expertise, they understand the markets. They do perform thorough analysis before moving into this investments. And you as passive investors get to leverage their experience. So syndication simply is about bringing two type of people together. One is with the intellectual resources, that is the experience and the expertise. That's the syndication team. And the other is the one with capital. So the limited partner, that's the passive investment term. By the way, if you are a passive investor, that is a limited partner, you bring in the money to the table and utilize that expertise so that you kind of, you know, create that team together with, with limited partner and the syndication team, you kind of have that 25% to 30% of the amount of money that's needed to move into the investments of. For example, if it is a $10 million investment, 2.5 million to 3 million is what you will bring to the table together. And the rest of it is going to be as a leverage, that is loan from the bank. And that's when you move into that asset, purchase that together and manage that multifamily asset. So that's simply put, that's the process. So today we are going to talk about starting that acquisition process. How these two are different. The acquisition process, the renting, managing taxes, appreciation, scalability, diversification and the asset protection. So that's what we're going to talk about today. And we could just kind of compare based on what kind of role do you want in this kind of investments, right. Is it going to be the active role that you're seeking for? Are you going to seek for a passive role? For most of you who are attending today, you are busy, professional busy business owners. If you are looking at something that you don't have to babysit or you don't have to manage, that's what we can compare right now. Because technically rental investment is a passive investment. So let's take a look at the acquisition process. So for single family, you know, if you're trying to do it looking at the listings, right? So that's the first point that you engage with the realtor. You start looking at listings. You have your criteria that this is particular market that I want to look into. This is my budget, maybe 200k and that's where I want to be. And then you start looking at this listings. Not every time the numbers actually work out, but there is, you know, some way you can try to project and calculate that returns to see that what is the cash flow that I'm going to get? What is the appreciation? You know, looking at the market, what is the kind of appreciation? What is that money's growth that is going to be. So you kind of try to do on your own. Most of the times I don't see people using, you know, calculators to project this growth, the irr that for their money and they don't know what they're exactly. The business plan is. It's a business, right? Rental real estate is a business. So you have to have a business plan. You have to have your projections. You have to have the entry criteria and the exit criteria for this business. Right. But if at all you're doing that, that's really great. So once you identify, go through you know, this hundreds of listing and identify that, okay, these are the, the houses that you want to look at. You go attend the showings, you look at those Houses. Sometimes you are able to put an offer on that. Sometimes you get in, sometimes you don't. There's a lot of competition in this market with multifamily syndication. It is really a little bit top heavy because your evaluation process, if you are a passive investor, you will spend that time in reviewing that investment. Now you're physically not going anywhere, you're not going online looking all these properties. But you actually have the syndication team who has done all this groundwork for you. So they are the one who have looked into this hundreds of listing. There are more sophisticated tools of underwriting that is calculating those returns and creating that business plan. Because of course for them it's more serious business, right. They're more professional at it. They're more professional teams helping them to do that. So that underwriting process where they're calculating and projecting their returns, projecting their investor returns, they are the one who have done that groundwork for you. For you, it's about reviewing that investments, right? I mean it could be tough to how to review that investment. And that's what we are trying to do with think outside the stocks to take you step further every time so you can be confident about reviewing the investments, right? So it's little top heavy. You will review the investments, you will look at if the returns make sense to you, what is the like a hold period? Does that sense make sense to me? You will review the team, their kind of the track record, what they have done before, have they completed site complete cycles or not. So you will look at that and there are several, several other due diligence. By the way, when I look at an investment and I bring it to the table in front of you, I have hundreds of criteria to go through and evaluate the investment and the team and everything. Also I underwrite this deals, I do my own calculations to make sure that the numbers that they are showing, they're projecting how close I can get to those numbers. So that's the process think outside the stocks follows when bringing these investments to you. There's a vetting process, it's really thorough process that I follow before you see these deals. So that's about the acquisition process. That's the difference between the multifaceted family and the single family investments. The loan process right now being a single family landlord is it. It is really you who are, you know, you are requesting that loan. You are applying for that loan. So first of all you have to do the mortgage rate shopping. You have to provide your financial statements, your assets, liability kind of a list. They will look at the ratio, the expense ratio and all that. They will underwrite you and propose they'll provide you some rate, right? The single family rental rates a little bit different because that's an investment proper property than what your mortgage rates are for your primary home. There'll be personal credit checks on your account and there's, you know, for one unit, you will have to move into one loan. So if you are purchasing say you know, five single family homes, separate homes, there will be you know, five different loans for those properties versus if you have like a five unit plus multifamily property, there's just going to be one loan on it. It's not going to be five different loan. And think about it, when it comes to the investment, the syndication team, if they are moving into like 300 plus units, that's just going to be one loan again. Again for the passive investors though, this is something that you are not on that loan. Your credit checks are not getting done, executed to be on that loan because the syndication team, they are the one on the loan. There's a role called kp, which is the key principal who is also on the loan. But passive investors are never on the loan. So there is no liability. It comes to the loan if something happens, right? Another difference between the loan is recourse and non recourse, right? So in case of default, if you are a single family owner, you are the personal guarantee on it. Your credit is impacted. If something happens, the market goes down. Like for example 2008, a lot of people had to go belly up and they had to come out of their investments, their credits did get impacted. Even if it was your primary home, your credit got impacted. If there is a default, collateral gets collected. And if there is still some delta, your personal assets could get collected too. So that's what happens with the single family. When it comes to the multifamily. As I was indicating that the syndication team is doing all that market shopping, finding a good rate, providing the financial, their credit checks, they're the one who are closing on that. So you pretty much, when you did that top heavy work where you evaluated that investments and you decided to move into it, you are pretty much, it's like a black box. You don't get to be involved in all this kind of formalities, processes and in case of default, this is a non recourse. What it means is that there is no impact on your personal credit. So there is no impact on personal credit at all. And the collateral gets collected and the personal assets cannot be collected. In this case, so lender cannot go behind the syndication team as well. Of course there are some bad buyer carve outs be more involved in the process as in why is it not performing and things like that. But that's the difference that the recourse and non recourse loan, that's the main difference and that your credit is not impacted. That's another thing that's important to keep it in mind. The next comparison, right, the cost of investment itself. So say for example you have found a single family home which is about 200k and 25% typically is the down payment on the investment. When it comes to the banks, they would like you to see 25% as a down payment. So say that's 50,000 is your down payment in the syndication. Also typically it is 50,000 minimum to move into an investment. Some syndication would have, you know, either 75k or little bit less than 50k. But 50k is what I have seen normally. So 50k in terms of single family home, if it is a 200k and that's kind of a typical expectation, you can find less than 200k home, especially if you're looking into the markets around you. On top of that you will have some additional costs because there's going to be home inspection, there's going to be termite inspection, there additional cost for the processing of the loan. So there's going to be home appraisal cost, credit report, the origination cost for the loan itself or the points in the loan, they're going to be title insurance. You know, if you are buying, sometimes the buyer, the seller kind of pays it, but sometimes, sometimes it's 50, 50. But there is that 1% cost of the total value. So the cost could land you between 3% to 6% of that purchase price, which is the 200K. So your cost, even though your principal was going into it was just 50k. You could spend about 56 to 62k just moving into the single family and in multifamily there is no additional cost. Of course all this origination costs and everything that that's kind of the, you know, in the business plan for the syndication team and it's already accounted for. Right. So if when you've put in your 50k, your principal is 50k and your rate of return is based on 50k versus in single family homes, your principal is 50k and 6 to 12,000 is just your additional cost to it. Right. On the whole period. Right. Typically the whole period. People have different strategies when it comes to Single family home. But if you try to sell it before five years, it might not make sense because you still have that about 6 to 8% selling cost. So for you to even kind of break even and make some more money, typically you still have to be in the investment about five years. Five to 10 years is kind of a safe, safe period. People do look at kind of owning it long term that they will just own it for 30 years paid off and have kind of a retirement income ongoing in multifamily. Typically three to five years is the whole period. Sometimes some syndication team, some investment especially you will see the seven year as well, but that's typically what it is. And the sales cost, the cost of closing that entire thing to you to passive investor is again zero. So your irr. The rate of return is going to be the. Based on the 50,000 investment that you have. Again, just want to take a quick pause here. If you guys, if you want to ask some questions, please ask them in the Q and A box. I will look at it at the end and I will answer those questions for you. So please, please go ahead and put your questions up there. Just gonna move on from there. The next comparison, right? The next area. So we did look at the acquisition part of it. The next area we're going to look at the renting and the management and the maintenance of these assets, right? When you want to rent a single family home, you have, you know, if you are hiring somebody or you know, realtor or somebody or property management team, they will, it will cost you about one month's rent. Some goes to the buyer's agent, some goes to the seller's agent, right? So the one month rent is the typical cost plus recurring. You will see the property taxes or the insurance that you're paying on top of it. In multifamily, you don't have, I mean there is property taxes, insurance being paid from the business plan. But your 50,000 investment, that is the 50,000 investment, right? In terms of occupancy costs, what is an occupancy cost? Your rental does not get rented on day one. If suppose there is a delay, right? If suppose you couldn't rent it for 15 days or a month's period, you will have to still bear the cost of the mortgage, the electricity, the gas, water, sewage, all that cost, right? In terms of managing this property, you either hire property management which could cost you about 6 to 8% of your rent, or you could buy a purchase a home warranty or you'll have to pay for this maintenance Visits the expenses for recurring expenses. When it comes to the maintenance items, the toilet is broken, the faucet is leaking, those kind. Typically, even if you buy purchase a Warranty, you know, 60, $70 is just that initial cost where somebody is coming and looking at what's really happening. And solving that problem for that capital expense could take a lot. Periodically, after, you know, like four or five years or something, you will start seeing at least something coming out. Because typically these are the old houses. And even if you're purchasing a new house, maybe it will last a little bit longer. But an AC can break down, heater can break down, the appliances could, you know, you might need replacement the roof, you something happens even if it's covered by the insurance. Suppose the hailstorm occurs, right? You still have that copay that you want to contribute in. So those are the kind of things that come in picture. And also there are some other damages too, right? Multifamily. When it comes to the renting and management cost, it's really as a passive investor, it's not your personal responsibility. It's accounted for by the syndication team. They have dedicated professional teams managing it. So there is a dedicated property management team, there is a dedicated maintenance crew. I mean we have lived into apartments some point in our time. We know that if we had an issue, we just picked up a phone and we called the maintenance group, we called the property management team on the line, right? So that's essentially all integrated in their business plan. They are the one who are taking care of it. They're looking at marketing expenses, maintenance costs, the capital expense. They have reserves for that. So they actually have accounted for that. So that's how the maintenance management works for the multifamily. As far as possible, as a passive investor, you don't even have to look at all these things. So it's barely going on. This is all taken care by the team and all you do is you start getting that automatic cash flow in your bank account. So you did your top heavy kind of work when where you, you did the due diligence before moving into the investments and you looked at if it is right for you or not. And now you have that cash flow, that income that's coming from all these rental incomes or other incomes in the multifamily business automatically showing into your bank account. So I was just listening to somebody today. They're saying that it's like your pajama money. You sit in your pajama and yes, money is still flowing. That's exactly what's happening. And when it's upside, when this property gets sold, you again will see that money trickling in in your bank account. In terms of the cash flow and the breakeven point. When you are looking at single family home, it's either 0% occupancy or 100% occupancy. You cannot cash flow when it's 0%. There is nothing in between. You can't rent like for, you know, 50% of occupancy. Right. So 0%. No cash flow. 100% it cash flow, yes. Sometimes it doesn't even cash flow, depending on what market you are in. Because things are getting really expensive. The rental properties are getting really expensive in terms of multifamily because it's multiple units. So even if it's not 100% occupied, it can still cash flow. And typically the breakeven point is kind of lower. So sometimes syndication teams will be breaking even at 70%. They will tell you in the business plan that what is that breakeven point? And if they don't tell you, you can ask them, what is your breakeven point really? Let's move on to the control over decisions and access to that capital. When it comes to single family, you can move into the investment and out of it at your will because you are the only owner. It's not like you're partnering. If you are to partner with four other partners, you'll have to ask the three other partners that if you want to move in, out or not. But it's really the investor decision in terms of single family. So if you want to access your capital, you want to sell it off and you want to come out of it, or if you want to refinance, that's really up to you. That decision is up to you. But in case of multifamily, typically there is that lock in period. So your money is locked in for that three to five years or whatever that duration of that investment is. And your control, the decision making capacity is with syndication team. And also think about it, that the syndication team does have the expertise in this entire model. So they are the one in better position to take decisions about what they need to do about this, right? So for example, if they have a business plan that goes out for five years and if those numbers they could achieve it in three and a half years, they're going to take decision that, okay, can we sell it out and come out of it and return the money to investors, or can they refinance and return your capital at least back to the investor? So they're the one who can take that decision. Does that mean that you don't have access to that money at all? Well, in case of emergency there are ways to do it. I mean you will have to compromise on the growth, the returns that you have because the real growth of the money occurs at the end of that cycle. So suppose, you know, in out of that five years, in 30 year, you just have absolute family merchants and you just need that, that chunk of 50k in your life right now. Right. So there are several options that, you know, either you can find somebody who can replace that spot with 50k or syndication team will put it out and say that to their existing other passive investors saying that does anybody want to buy a purchase this spot? So that will happen or they will try to get that themselves. But again, it's not a hard and fast that you will get your money but in case of emergency there are ways that you can access that money. So that's the next comparison. If you have any questions, please just a reminder, keep, keep posting in there. So there's, you know, I can see that, you know there is, there's some interaction going on or if you want to just pass on a joke, just put a joke in the question Q and A and I'll read it out. Right. Appreciation versus market cycle. How does this impact in single family and multifamily? Right. A little bit snapshot about the whole stock market comparison versus the real estate investments. I'm considering in here, the entire real estate and basically based on REITs just kind of give you a good glimpse of what real estate and stock market compares. Right. So if you look back, you know, few years back, we have about the compounding rate of with the stock market about 5.5% and the CAGR for you know, real estate investments is about 8.7%. So that's comparison with the stock market. But let's see how the single family versus multifamily, how do they perform against each other? Right. So for example, 2008, everybody's very concerned. I mean when they want to move into an investment, especially real estate state, you know, 2008, you just can't stop thinking about it, isn't it what really happened in 2008. Right. So in 2008, if you can see the first graph here, which shows the delinquency in single family, when there is a delinquency, there's going to be more, more and more. This, you know, people are not able to sustain the mortgages and they're just going to go belly up, right? So 12% was the single family home delinquency during 2008. But if you look at the multifamily, how many people could pay? How many multifamily syndicators or people who are investing in multifamily could not pay? That was really, really low. So even if you look at like 2008, it's less than 1%, it's been always less than 1%. So that kind of shows that the single family and multifamily, multifamily can sustain better than single family in recession. And there are a couple of other factors to it too. But, but come to think about it, single family homes, when people, they were losing their homes, where were they going? They were going and moving to the apartment complex because that they still needed a place to stay. It's not a want, it's a need. So they did move around and they went to the multifamily and multifamily sustaining that cycle. So that's how the appreciation cycles work for single family. It's dependent on market and another aspect of it, right? Single family home, when you're trying to sell it, the value of the home depends on what is the value of the home down the street that got sold before you or you know, in the period that's, you know, trailing that six months period. But for multifamily, there is a concept called forced appreciation that comes in play. So multifamily, the valuation of multifamily is pretty independent in itself because it's a commercial asset. It's based on the net operating income. And I'm just gonna show you a little bit by numbers that how does it work? Say for example, there is a property value of $10 million in multifamily, say 100 units or 200 units, right? Suppose 20% was the equity that both LP, the passive investors and the syndication team contributed to it. 8 million loan was from the bank. Bank. And the net operating income is income minus expenses. Suppose, you know, this whole operating income for this property for the year is 1.4 million minus the 400k expenses, that's about 1 million. That's without the debt service. The net operating income and the cap rate is always calculated without the debt service. That's a mortgage payment, right? The cap rate is a very interesting formula. Cap rate is basically your net operating income divided by your current value. So for this $10 million property, when 1 million is your operating income, that gives the cap rate of 10%. Now simplicity purpose. I have just kept the numbers very easy to understand, right? So understand that this is a 10% cap rate. Suppose there is a little bit increase in the income and little bit decrease in the expenses. The expenses from 4 to go go down to 300 and the income goes from 1.4 to 1.5. What happens to the cap rate? So the new value calculated, again, it's kind of a reverse formula, right? So net operating income divided by cap. So 1.2 million is now the new operating income divided by 10%. So now the value, the, the value of the property is 12 million. It didn't even look at that. What is the other apartment complex value down the road is because, because the net operating income of the apartment itself defined its own value. So with that 12 million, you invested 2 million in it. I mean, you would say that, okay, it's just 20% increase, right? 10 million property went from 10 million to 12 million. But it's actually, you know, you invested just 2 million in it, your equity was just 2 million together and that 2 million turned to be 4 million. So that's almost 2x. That's, that's, that's 200% returns. So that's how. First of all, it's not tied to the market cycle. In recession, it has performed better when it comes to multifamily. And also due to the valuation, because it's an independent valuation, not market based, you still have better chances of the growth in terms of multifamily. So that's about, you know, the, the valuation. Now let's talk about the scalability, right? What is really scalability? If you are to suppose you are trying to increase your income, your cash flow so you can quit your job, right? So to come up to your level of income, say if you want to go move in and you know, the cash flow is like say about, you know, 500 even in, in one rental property, property, to get say even to 10,000, you will have to invest into 20 properties, right? What is the scalability of it? If you are managing one rental unit, managing the 20 units, that's essentially just multiplying that work by 20, right? But when it comes to multifamily, the economies of scale really work well because it's now one entire unit, that 300 or 400 units in one, one cohesive unit of that multifamily. First of all, you know, the roof, for example, there's you know, one roof in each, six to 12 units kind of buildings by itself, right? So one single family home, one roof, you have to replace one roof and you, you know, that's for the one property. But here about six to 12 units share that roof. So that's maintenance. You know, the district gets distributed. It's less than what single family would have in terms of percentage for maintenance and management. The apartment complex, we have lived in it, we have seen that there is a dedicated crew to maintain, to manage the property, the property management that's possible because this is the huge number of units that they're managing. They can put somebody who's full time and pay them full time to manage that. So that dedicated professional crew is available. Right? You can't do that. You, once you, something goes wrong and you have to search for a plumber, you search for an AC repair guy that's really dealing with contractors in single family is a nightmare. When it comes to rehab. For example, if you want to kind of fix and flip and increase the value of single family, you have to go at market rate. So you'll go to Home Depot, Lowe's and something like that. Versus in multifamily, it's a very cost effective rehab because they purchase in both bulk, they would look at this wholesale material, even the appliances, they will have special rate for granite or cabinets or things like that. They will be able to get this at really great deals. And that's essential to keep that cost down of the rehab and have that increase in the net operating income Again in terms of professional teams, you know, when it comes to single family that doing your taxes, doing your, you know, asset protection, lawyers, etc. School quite expensive for one property. But in here you can, in multifamily you can utilize the professional teams. Legal representation, tax representation, it's called included in your cost, right? So that's kind of taken care by the syndication team. You don't have to do anything about it. They simply provide you a cave in at the end of the year. And that's very easy to, you know, file your taxes. And as a passive investor, you just take that cave and put it into your taxes and you know, it's, it's as easy as you can do it by yourself too. We talked about the vacancy that, you know, single family versus one multifamily, even if it's not 100% occupied, it can still cash flow. And in terms of consolidation, right. There is just one insurance, just one mortgage in the entire, you know, that 300 units or whatever big property it is. So from economists of scale, multifamily properties work better too. Let's look at the diversification, right? If you're purchasing a single family home, people tend to most of the time, higher percentage will tend to purchase around the city, around them. Because you would still want to have some control. You want to go look at it, what's going on. Unless you have that expensive property management team managing it for you. So typically you will be able to do it around you. And there's no like different classes or anything. It's pretty. Even if you're diversifying outside of the stock market, yes, you have like a diversified asset now into real estate, but you are still doing just in single family. In terms of multifamily, you can invest into real estate emerging markets across the country, really. So you can identify that these are the growing cities. For example, you know, Carolina, it's really going great. Florida is going great. So you will look at what are these growing cities and there you can choose to invest into the syndication deals. Right. So you can do that. And again, within the multifamily asset class, there is different classes. So class A, class B, class C, simply put, you know, more near building the downtown buildings where we just like really posh apartment complexes. Those are typically classes, something which is like really old and you know, needs a lot of maintenance, like 1960s properties. Class C and something in between is class B. So you could do diversification across, across the markets. You can do diversification across the different classes as well. So that's the diversification part of it in terms of just continuing. Let's take a look at tax benefits. So we did look at, you know, multiple ways of this. Multifamily and single family are different when it comes to tax benefit. In single family, there is something that's called depreciation of the house that you can take depreciation. And depreciation is not an actual loss, but it's a paper loss. So that's essentially what it says is that whatever the value of the structure, you can depreciate it for 27.5 years and take that loss as a paper loss every year. So if you're getting say suppose 10,000 as your cash flow, you can reduce that and then the rest of the money is what you have to pay taxes on. Right. In case of multifamily though, there are three level of tax benefits. There's of course that depreciation of the building that can be achieved. There is a study called cost segregation, which provides really better depreciation than what the depreciation itself can provide you. And then with the new tax Cuts and Jobs act law in2017 you can actually take this, this cost segregation as you know, bonus depreciation in first year. And don't worry about all these terms because taxes is a really complex topic. Essentially the point I'm trying to make is that there is a lot of depreciation that could be available to you. So in case of, I mean tax itself, it's a very deep topic and it will take another whole day to talk about it. All you have to remember is that, you know, there is the paper losses, more paper losses that could be written off for you you that you can either, you know, take completely off of the cash flow that you're getting from multifamily investment. And if you don't use it, all of it and it gets carried forward to next year, you can use it next year and you can keep on using that losses and reduce your income till you completely utilize that. Right. Cost segregation. Just a little bit kind of touch on that topic. What exactly is cost segregation? When the single family home allows just to depreciate the entire structure. Cost segregation is a separate study which is, you know, syndication team often do it paying some extra dollars to it. There is a different schedule for depreciating assets like for example interior assets like carpet and ceiling fans, appliances, they depreciate faster in five years. Outside assets depreciate in 15 years and you know, so and so forth you can escalate that depreciation and you can take, take it, you know, like for example, if there is, you know, more money that that's put into this interior assets, you can take all that depreciation as a part of cost segregation study. And with the bonus depreciation you can apply that, all of it in the first year. So that's essentially what that tax benefits are. To go into much more detail, I will try to have another session wherever you know, I'll try to bring in actually experts of this area where we can talk about the taxes in detail. Right. Again, this bonus depreciation with the tax cuts and job law, it is not going to stay there forever. It will kind of start scaling back till 27 is what it's going to scale back to. So it's really beneficial right now to move into the multifamily investments. Now if you are an, in addition, if you are a qualified real estate professional, doesn't have to be a real estate, real licensed real estate agent or something, but there's some certain criteria. If suppose one of your spouse is not working and you qualify for that bonus depreciation, that bonus the qualified real estate profession, you can actually take this whole depreciation and apply it on the active income of your spouse spouse. So for example, you know, if 50k is what you invested and even if you get, you know, 50% of it as a, as a, as a paper loss, not actual loss, say you get that 25,000 as a, as a loss that you can write off on your spouse, it can be, you know, taken off from your spouse's income w2 income and then your taxes are eventually is going to get a positive impact from that, right? If you want to know more about the qualified real estate professional, talk to your CPA or I will also try to get some CPA who can talk about this topic, right? There are multiple topics that I have planned for this education, the continuation of this education series. If you want any particular topic, just ping me in the chat window that hey Madhvi, I want to know more about this and I'll try to get somebody who is expert in that area who can talk about that. Let's talk about asset protection. Why is asset protection really important, right? If it is in a single family home that you are renting out, suppose something happens like some guests visit and they trip over the staircase or somebody's walking in through your driveway and it's just slippery and somebody trips and slips, right? They can sue you, they can come and sue you. So typically, you know, the lawyers advise to move in the URIA real estate, your rental real estate into an llc and there's kind of a lot of of nitty gritty details about it. So you purchase a property, move, create an llc, that's another expenses, you move that property into the LLC kind of and then you know, manage, start managing, Keep the expenses and the income kind of completely separate. Do your financials kind completely separate and you manage that inside of that llc. So there's a lot of documentation that's that needs to be done in that and that's what the asset protection in single families when it comes to the multifamily and the asset protection in multifamily syndication, this each of this investment is kind of standalone in itself. So even the syndication team will create a complete new llc. They'll call whatever, apartment abc llc, right? So within that LLC the protection is kind of included. So you are going just as a limited partner. You are not liable if something happens and somebody sues. You know, because of this property, even the syndication team is not impacted because this is a completely standalone llc. So there is going to be another LLC within The llc, sometimes they create kind of a structure too. Where there's a property management is a completely different llc. The syndication team is a different LLC which are managing that asset. So that's essentially the protection that's automatic for you when it comes to multifamily syndication. Now let's talk about the final thing, which is about active partners participation, right? So the roles in single family. When you are trying to look into the single family, we looked at all these multiple aspects of it. You are the one who's responsible for finding that deal, getting the loan process, financial management, renting process, managing the property, maintenance expenses, the sale of the property, finding a, you know, kind of a buyer for the property. And if there is a tenant turnaround every time, you are the one who's responsible for that. So you pretty much responsible for everything when it comes to the syndication. That whole process of finding and doing the calculations or maintaining the property, managing the property acquisition, tax process, professional management, getting the lawyers, etc. Closing as per the business plan, that's all to the syndication team. Your investment responsibility as a passive investor is first of all to attend that webinar or over the overview that the syndication team is providing you. After that you will do your kind of, you know, due diligence, see if that investment makes sense for you or not. And really after that you're, you know, once you're committing into that investment, you literally sit back and you'll start seeing the automatic cash flow in your bank account. You'll receive a newsletter periodically, you'll receive that cash flow, you'll receive the ca, the taxes which is done for you, you again in your hand year after year. And when the final investment is closed, you will see the upside in chop in your bank account too. So essentially what you're doing is just analyzing that investment is right for you and moving into it, deciding that. And after that everything is lit pretty much on autopilot. So that's completely passive for you. In terms of expertise, you're actually leveraging the expertise from the syndication team. They have been in this business for a really long time. If you are trying to become a landlord, it's a really competitive market out there. The house prices are getting really expensive. The expertise that you need, maybe first time you don't have that expertise and there's a lot of time and effort needed for that. But when it comes to multifamily syndication, you're literally leveraging at no cost somebody else's experience. And they're the one who are committed, committing their Effort, their time and their expertise to the success of these investments. And you're getting the outcome from that particular asset, that particular investment. So really, the final thought about it, this is our tenant horror story. This is what happened to one of the investment property, the rental real estate. The tenant left this place in the trash to just get the junk out of this house. Took about $5,000 just to haul this junk away and to bring me back to its real glory. It took another, you know, I mean, we spend about 12, 15,000 just to bring it back to its glory so somebody can stay in here. I mean, look at this toilet. This toilet was, it felt like, you know, it's going to fall off the garage floor. There's like a small leak that, you know, they never paid attention or never wanted to report on that for some reason, but this is how they lived into it. So it takes just that one bad experience for the tenant, you know, wrong tenant to get into your house, house, and your past future cash flow is going to get completely wiped out. Your appreciation can get impacted too, right? So there's a lot of to deal with when it comes to single family rentals, when it comes to being a landlord, all this kind of, I mean, if you have to go through the eviction process, for example, or you know, these damages, the pet damages, all that stuff that, you know, you have through the rentals, that's just a nightmare. So it just takes, remember, it just takes one experience to happen like that. So if you're planning to become a landlord, just consider all these aspects, the side by side comparison of multifamily syndication, being a passive in it and being into a single family rental, right? So what is the investment objective in multifamily? Right. You're looking at, when you're trying to move into investment, what are you looking at? Whether it comes to being a landlord in single family or the multifamily, you want something which is high growth, right? It is tied to the lower volatility and it's truly diversified. It's giving you maximum tax benefit and it's completely, completely passive for you because if you have that one extra hour, you want to share it with your families, you know, spend time with your kids, right? So when it comes to that multifamily syndication, these are the advantages of it. First of all, it has provided above average average returns last, looking at last, 15 years or so. It has provided consistent 13 to 15% annualized rate of return, which is, you know, better than or compared to what single family could give you. It is of course backed by that real asset which is not tied to the market volatility as much as the, the single family home. It has as good as, you know, provides you very truly diversified way of investing outside of the stock market and also in real estate. It has multiple tax benefits and it's complete. I cannot insist enough on being the passive part of it that it's really, you know, you move into the investment and it's completely passive after that for you. So how does it pay to be a passive investors? In multifamily syndication you get the passive cash flow from the distribution, first of all the rent or the other income that's being paid off, that's paying the part of the mortgage, the principal and the interest. So, so it's building that equity slowly. That again happens in the real, the single family rental as well. You have more tax benefits, tax benefits kind of saves more money, put more money in your back pocket and you have that force appreciation, the valuation of the property that again puts more money into your packet and with all that you will get significant upside at the end. So multifamily investment, if you're looking for a completely, completely hassle free passive investment investment for you, that's really what it is for you. If you are thinking of going on vacation, for example, ask yourself that question, if I'm a single family landlord, can I just go peacefully on vacation without receiving a call or something? You can literally with multifamily, you know, be on that vacation, sit back and enjoy your pina colada and you know, just have somebody else manage these investments for you. So that's a quick comparison about what we all talked about and, and what is the advantage of the both areas and how it compares to it in terms of when it comes to multifamily, this is that multiple level of benefits that you're getting with investment. So just an example of what a multifamily investment would look like. Suppose this arbor lake apartments, 212 units, class C. It'll tell you what class investment it is. It's 20 million in price, getting a loan of 4% for 10 years, you know, 25% LTV. It'll tell you what kind of investment it is, it'll tell you your preferred return. So 8% is cash and cash that they're providing total returns, 80%, that's 1.8x the IRR is 16% to move in with. So they will tell you exactly what this investment will look like. Does that mean it's guaranteed returns? No, that's what their plan is, that's what they're going to try to strive and achieve that. Right? So they will also tell you what that exit criteria is and you know, tell you if you invested say 100k what is your, you know, return is going to be. So that's essentially what multifamily syndication and comparison of the single family rental is. If you are an accredited investor, you get more opportunities to invest in it. So if you're into invested, you're interested in that just, just you know, just let, let us know. And also I'm just going to take this time to kind of launch a poll. You have you know, you know, some questions in front of you in terms of helping me that what kind of education are you more interested in moving on? And just tell me, you know, if you're interested in knowing more about multifamily syndication and finding this investment so you can invest in this deals, I will keep on keep you posted because you need to tell me that you're interested in investing. I cannot just come and approach and share with you that these are the investments coming. There are certain SEC regulations. So unless you are an investor in my database, you will not see my investments. You will continue to see all educational events but you will not see the investment. So the problems that I'm going to try to address here, which I face personally is finding that right asset class in real estate, where to invest, finding that right education. So I'm providing you multiple level of free education. We think outside the stocks. Every other Thursday, 6 o' clock is when I will bring more and more education to you and also waiting those investment opportunities so you can invest in those opportunities. Right? So that's where essentially what I'm bringing to you we are focused on with the infinity banking system and the investment. We are focused on something that you want to do and don't want to do. Something that you don't want to do or don't need to do or can't afford to do. Our approach is to increase your net worth, reduce your income tax liability and kind of increase your monthly cash flow so while keeping it completely passive. So with that I think there are more questions coming in so I'm just gonna take these questions. I own a piece of land and want to build a two family home on it. Is it a good move? It's a, again it's, you know, it's just a perspective from my side. If you own a land and if you want to go and doing all that you are personally responsible for all that. Right. So you are going to be moving into, you know, finding a builder and you know, ask yourself what kind of expertise that you need. Do you have that kind of expertise? Where can you seek those kind of expertise? Right. So there is a lot of calculation goes behind it. If you want to, you know, do it as a business, create a business plan, that's the kind of involvement that you need. Right. So it's up to you if you want to, you know, have that land, sell it off or you know, have somebody else bring, bring in that multifamily units to that land or sell it off and use that money, money to invest into multifamily property. So it's really depends on how active participation that you need for that. Right. So if it is an active versus passive, if you want to be completely passive and have that time available for you, that's something that I would recommend to looking to consider when you're evaluating it. Right. Again, it's just my perspective, just my perception. I mean for you it could be completely different. For somebody else it could be completely different. If someone invests 50k and exit after 5 years, years, do we get to share an appreciation? Yes Sachin. So there like I shared, there is multiple ways that you get paid during the cat, during the time that is invested, you're getting the cash flow from all the kind of income. So it's either the rental that's being collected or even the extra charges, right. Even somebody's paying for storage, for example, there's a garage or something, the storage or the parking spot or anything that they have all that extra income you will get paid from that cash flow. And once that exists out, for example in the past example that I was considering, right, 8% was the cash flow on 100K. Right. So if you'll get that 8,000 every year for the five years, so say 40,000 is what your cash flow income is. Suppose they sell it out and now the, you know when they're returning your money back, that 100k there is an upside of 40,000. So you will get that additional 40,000 at the end of that five year cycle. So you got your 40,000 during the cycle, 40,000 at the end of it. So together you got, you know, when you invested 100k into it, 180,000 is what you got back and that's what's that 16%. Whatever that IRR on the previous slide I showed, I hope that answers that questions. If you guys think that I haven't answered your question, please feel free to ask more questions. If you can run please a number for 50k for example, how would an average typical cash flow look like? Sachin? I think in that example. Did that answer your question? If it did answer, please say yes either in chat window or in Q and A. But exactly what I said in just sometime back, few minutes back too. That's exactly the example of 100K. You can divide that by two and that's your 50 example. Right. So 50K will give you maybe typically in that case about 4,000 annually. Cash flow. Flow, that's, that's your cash flow from income from the rental and you know instead of 40k you'll get 20,000. So on a 50,000, you know that's, that's what you will see the numbers look like. Okay, can someone with work visa participate? Yes, I think you know there are multiple ways that you can participate. But you know, if you have specific in mind, you know, get in touch with me. The there is certain limitation based on your net worth. There is accredited investors and non accredited investors. The exposure of the investments based on accredited and non accredited is different. Accredited investors would have more exposure to some of these investments. But does that mean that it limits the other investors? It doesn't. So just book that call. There is enchantment to my link to schedule a call with me and we can talk Based on your own personal scenario. Thank you so much for that questions. Srikanth, please give an example of a recent deal. If someone invested 50k total amount returned to the investor after 5 years in best medium and low scenarios. I think that looks like a favorite question by everyone. I think I addressed that. I looked at the numbers in the there. So the low and medium. Let's look at that. Right. So in this case the business plan for them says that they want to return 1.8x. Right. So if you invested 100k they want to return that, you know, the 80k on top of it. Right. So what's going to happen? What if they're not able to do that? Right. They're going to try their best to do that. It's not a guaranteed. Right. But that's the business plan they're planning to implement. Right. They're increasing the their rent capacity. They're maybe putting in some rehab, some you know, value adds where they are increasing that rent by $100 per unit or something like that. Right. During this Covid time for example, that's a classic example, right. That they couldn't increase that rent. So what happened? Typically you know, the investments which were supposed to be completed in five years. Maybe they'll take extra few months, maybe they'll take seven months or 10 months or one year. So, you know, you will see a little bit extension. But they'll try to implement that business plan for you and you know, give that kind of returns. Sometimes they in most of the times they are very conservative about it. So when they say that 1.8x they might actually be able to give you 1.9 because they have written these numbers very conservatively. And that's what I like to see. I do the underwriting myself when I put these investments in front of you. And I like to look at really conservative when it comes to all these numbers because numbers could be really fancy, right? They could really tell that 10% return or something like that. But that's what I like to see how conservatively they have calculated their returns so they can have more probability of providing what they're saying to you. So that's typically what the scenario is. Yes. So everybody looks like we have reached the end of our questions and answers. And and meanwhile I'm just going to put this out there if you want to get in touch with me. And also I have a free ebook for you, how to Think Outside the stocks, like top 1% of America. Just go to that link Bitly with Think Ebook and you can download it there. And if you want to have that free strategy session with me, please come in and schedule a call with me or just let me know. So with that, I'm going to conclude this session today. Thank you so much everyone for joining in. I really appreciate you spending this weekday evening with me, you know, with Think Outside the Stocks. And I would love for you to come and join my continuation of this series where every other Thursday I will bring you new topics every time. Thank you so much again for joining. I have, I hope you have a wonderful evening. Thank you so much.