BPI Episode #5: Investing 101: What Every Passive Real Estate Investor Should Know

Welcome to Building Passive Income, the podcast for professionals, entrepreneurs and investors who want to build wealth, diversify beyond Wall street, and create financial freedom through passive commercial real estate investing. Your host is Wayne Courageous iii, a seasoned investor and founder of CREI Partners, a leading commercial real estate investment company. He spent nearly two decades navigating and educating others on the commercial real estate, from multifamily to storage to retail. Each episode is under 15 minutes, intentionally short, easy to understand, and packed with insights that help you grow your income and protect your capital without becoming a landlord or sacrificing your time. If you're ready to learn fast and invest smarter, you're in the right place. Let's get started.

Welcome back to Building Passive Income. I'm your host, Wayne Courage iii. Super excited to continue building on the foundation of passive investing. And so we're going to talk about how much do you need to invest on one of our passive investing deals or a passive investing deal in general? So typically the minimum Investment amount is $50,000. Most real estate syndications will have a minimum. Some may be 25,000, some may be 50, some may be north of $100,000. But I would say $50,000 is the most common starting point. And I would say, you know, because it's a high dollar amount, if it is one of the last $50,000 that you have, that's okay. But I wouldn't invest this into, I wouldn't invest that into a real estate syndication because that money is locked up. That money is going to the business plan of the property, it's going to the down payment, it's going to, you know, those dollars are being used to either purchase the property or renovate the property to grow income. And so it's not as liquid, right? You don't have that ability to take that $50,000 out year two. So, but that would be like the minimum investment is that $50,000. And on the flip side, think about this like if you were going and buying your own real estate deal, likely you'd be putting more than 50,000. DOL are the only one investing, maybe if you are a first time home buyer, et cetera. But if you're buying an investment property, you're putting in a heavy amount of dollars and then it goes back to that time effort. So typically again, it's 50,000. Every sponsor, everybody's going to have a different minimum investment. And so as you build relationships or you sit on presentations about investment opportunities, just something to be mindful of that you would typically, I typically see the 50,000, but it could range. If you're not ready to invest $50,000 into a real estate syndication, consider doing like a REIT or a fund with those. You don't get the ownership aspect in the sense of like the depreciation, etc. It's more like a stock, but it is investing in real estate. There's plenty of good REITs out there that are, that you would be able to invest in, but think of that more as a stock. So it's just something to consider if you're not yet ready to have those funds go into, you know, a syndication. And we'll talk about what a syndication is in a later episode. But there also may be other crowd sourcing websites out there or platforms that will allow a smaller investment, maybe 1 to $5,000 while you learn and grow. So just something to look at. I'm not as familiar just being very transparent as those is because, you know, we're, we're on more sourcing a property. That property is what we would take to our investors and that we're all partnering together to close that deal, close the property and then execute the business plan. When you get into crowdsourcing or REITs, you don't have any control. You don't know what you're really investing in other than like, you know that this company focuses on class A office. Well, I don't know, is class A office where you should be investing now or is it retail or multifamily? What location, what's the expense ratios? There's a lot of unknown. But the positive of it is it is liquid. You can pull it out, but it's depending on what is going on, you know, with the investment at that time. Again, similar to the stock market, one of the things that you're going to hear a lot of when you're investing passively in real estate is accredited versus non accredited. And so we've talked about like the minimum investment, but because we're selling a security into a physical asset, we have to follow the Security Exchange Commission guidelines. And there's a lot of different regulations, et cetera, that we as sponsors have to follow. But in real estate investing and passive investing, what we typically follow is a 506B and a 506C offering for accredited investors. You can invest in both a 506B and a 506C. There's different rules that for example, like 506B, you just self certify you're an accredited investor. You don't have to provide backup. Whereas a 506C. You would have to provide a third party verification. But how do you know if you're an accredited investor? You're an accredited investor based on income or net worth. So if you're filing as an individual 200,000 or more, you are an accredited investor. If you file jointly and combined your income was 300,000 or more. That's gross income. I didn't not net income, but your gross income was over 300,000 then you qualify as an accredited investor defined by the Security Exchange Commission. Meaning they think that you are competent enough to look at investments. If you're making that good of salary that you can look at investments and determine if the deal is worth is a good business plan or not. Right. That's in essence what they're doing. If you're not an accredited investor, then what the SEC is wanting you to be is at least a sophisticated investor. By listening to this podcast, by doing our passive investor coaching program, by reading books, by going to conferences, etc. You are becoming more educated and sophisticated about investing. The caveat with the non accredited investors. So the people that don't meet the income threshold or don't meet the net worth and we didn't talk about the net worth, the net worth was 1 is 1 million or more excluding house your primary residence. So that could be your 401k, it could be your personal property, it could be numerous things to help you get to that 1 million or more net income, second properties, etc. Including the home residence. But say you don't have the income or the the 1 million plus in net worth then you would be considered a non accredited investor. With non accredited investor you would only be able to invest in 506B deals. But here's the caveat. To invest in a 506B deal, you and I or you and that sponsor have to have a pre existing relationship. I wouldn't be able to come to you if we didn't know each other and be like hey, I've got this new deal. It's great meeting you tonight. I got this great deal. Are you willing to invest or look at it? You want to have a conversation about it? That would not be following the Security Exchange Commission guidelines. So it's really important. If you're thinking about passive investing and you're not an accredited investor, that's okay. It really is. Not everybody is accredited investor without years of earning and hard work. Don't let that stop you. Just find sponsors, syndicators. We are one of those that do 506B. We don't do all of them 506B offerings, but we at least do one a year. That's 506B. But whether you're investing with us or you're investing with someone else, just make sure that they provide those opportunities. And if they don't, if you're not an accredited investor, you need to look for groups that offer that opportunity. But capital also isn't the only asset. So we talked a little bit about a credit investor is not accredited. What if you don't have the 50,000 yet? That's okay. Keep listening to this podcast, keep going to conferences, keep networking, because eventually you will and you want to be ready. You want to be educated and excited to be like, hey, this is I'm diversifying away from Wall street, going into Main street and I'm going to benefit like an owner and be able to tell my friends like he I'm an owner in this 11 million or 100 million whatever million asset that you're investing in because it's incredible because you're able to invest and we're able to partner or you're able to partner with other sponsors on doing deals that you wouldn't be able to do on your own. That's the power of passive investing. The sooner though you get started, the sooner you benefit, right? It's not just about the amount of money, it's the education, it's getting started in networking, all the things that you're doing right now and listening to this podcast, Even if it's 10 to 15 minutes a day, getting ready for that next step in your journey as a passive investor, buying back your time, getting the time, getting that consistent income, et cetera, so you can have the choice and whatever lifestyle and however you want to live in the future with you and your family. So hopefully this was valuable. I always do a plugin for my free passive investor coaching.com program. A lot of great content, it's all free, no gimmicks or anything trying to upsell you. It also allows our team to reach out and just see if you want to build the relationship. We also have a monthly meetup on the fourth Monday of every month you can go to meetup.com and just put in Texas multifamily active and passive investor meetup and you'll find us and hopefully we can build a relationship. Whether you're an accredited or a non accredited investor, we're excited to continue adding value and hopefully helping you along your journey. Hope everybody's doing well and have a great day.

Thanks for Tuning in to Building Passive Income if today's episode helped shift your mindset or gave you a new tool to grow your wealth, do us a favor and like, subscribe and share this podcast with someone you care about. Want to go deeper? Join our free Passive Investor coaching program@ passiveinvestorcoaching.com it's the perfect next step to start building wealth through commercial real estate the right way. Remember, financial freedom isn't a dream, it's a decision. And it starts with building passive income. We'll see you in the next episode.