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How to Add Value to Multifamily Properties

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If you understand the value of investing in multifamily real estate- you are in a great position. As a multifamily investor, there are many investment strategies you can pursue. Whether as a syndicator or passive investor, it is crucial to analyze all investment strategies to ensure it aligns with your risk tolerance and financial goals. What is Value Add Real Estate? Value-add investing is a real estate investment strategy that involves increasing the value of an asset through renovations, rebranding, or operational efficiencies. This can be achieved through hiring a capable management team to run the property. In multifamily real estate, value-add strategies are used by many investors to achieve solid returns. Let’s understand this from the following case studies: In the following video, James is at one of his properties in Austin, Texas where he bought a value-add deal. Initially, James started the property at 95% occupancy and just after 2 months the occupancy dropped to 65%, but after 6 to 7 months again it has 90% occupancy and is a positive cash-flowing deal right now. You can buy core/yield deals if you don’t want to face dropping in occupancy, but you need to understand that while core/yield deals are less risky, they are also less rewarding.  Value-add deals, on the other hand, have a higher risk, higher value, and higher rewards. Take a look at the videos below for deeper insights: Watch the Video  2-Part Multifamily Deep Value Add Turnaround Case Study Multifamily Deep Value Add Turnaround Part 1 Watch the Video The following is a proud moment for my best-selling “Passive Investing in Commercial Real Estate Book”. A fan sent me his copy of my book 必利勁 to get my autograph, with prepaid postage! I am happy that I am able to truly change the lives of people with my book. We can have millions of assets under management (or even billion!), but nothing beats being an author that can make an impact like that. The title “Author” creates a legacy to be proud of. Take a look: GET A FREE COPY OF MY BOOK

Ultimate Guide to Multifamily Real Estate Syndication

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Multifamily Real Estate Syndication

Multifamily real estate investment is one of the most popular ways for investors to get into the market. Instead of buying a single property, you can buy multiple units, which greatly increases your profit potential. Multifamily real estate syndication is a process of buying and selling apartment buildings that involves multiple investors. It’s similar to purchasing properties individually but has some additional benefits. What is Multifamily Real Estate Syndication? Multifamily real estate syndication is a process of pooling together funds from multiple investors to purchase a large apartment building or other multifamily property. The pool of investors then receives an equal share of the profits and losses of the property over time. Multifamily Syndication is a type of real estate investment that involves multiple investors. The most common type is a partnership or limited liability company (LLC). These types of entities offer tax benefits, which can help you grow your profits faster than if you were working alone. Multifamily syndications can be done through different types of investments, including: Limited Partnerships (LP) Limited Liability Companies (LLC) Corporations What to Consider before doing multi-family syndication? A multifamily syndication is a financing option for real estate investors, who can benefit from tax-sheltered equity and senior financing. The first step before undertaking any kind of real estate syndication is to determine if it’s right for you. Here are some things you should consider: Be sure that you have the experience and knowledge to do it yourself. Are you looking for passive income? Do you have enough capital to invest? Make sure that all of your investors are fully aware of any risks involved in investing in real estate and understand how they can lose their money if things don’t go as planned. Don’t use anyone’s money without having a contract signed by both parties first because if something happens to one side or the other, there is no legal obligation for them to pay back any money or return any property or assets until a contract exists between both parties and it has been signed by both parties with witnesses present (this should not be done verbally). Is real estate syndication profitable? The answer is it depends. The real estate syndication process allows you to buy a property with other investors, who contribute their own money and share in the profits and losses. You can also sell your stake in the property later on if you want to take your money out or if you no longer want to manage it. This is a great way for investors to pool their resources and buy properties that they would otherwise not be able to afford on their own. By combining their assets, they can purchase more properties than they could on their own. How do you structure a real estate syndication deal? There are several ways to structure your real estate syndication deal: Limited liability entity (LLC): An LLC protects each partner from personal liability for actions taken by others in their business dealings. In other words, if one partner fails to pay their bills, it should not affect the other partners’ finances or credit scores. Limited Partnership Agreement (LPA): The LPA is a legal document that sets out the terms of the partnership. It includes information about your partners, such as their roles and responsibilities. It also details how profits will be split up, who will manage the property, and what happens if someone wants to leave the deal. The LPA should be reviewed by an attorney before it’s signed by all parties involved, so that everyone is clear on what they’re getting into. Joint venture: In a joint venture, the buyer and seller create a partnership, and each contributes capital for their share of the purchase price. The buyer may also contribute labor or services in exchange for an ownership interest in the property. In this scenario, both parties have equal ownership interests in the property and share profits or losses equally after closing costs have been paid off. Members’ loan program: In this scenario, the sponsor raises money from investors and loans those funds back to them via a promissory note at an interest rate above market rates. The sponsor then repays that loan with interest over time from rental income received from tenants in the property. Investors receive tax benefits from their distributions, which are treated like mortgage interest payments on their taxes. A member’s equity program It is the most common way for investors to participate in a syndication deal. Members purchase an ownership stake in the property and receive monthly dividends. The amount of each monthly dividend is usually determined by the number of units owned in the building and by the tenant mix. Benefits of Multifamily Real Estate Syndication Multifamily real estate syndication is a great way to invest in real estate without having to be a landlord. Instead of buying one property, you can buy into a pool of properties that are managed by someone else. The benefits of this type of investment include: No management responsibilities: You can invest in a syndicate and not have to worry about the day-to-day operations or maintenance of your property. Syndicators choose the property manager, so you don’t have to worry about finding a good one and paying for it. Higher returns than other types of investments: Multifamily properties often offer better returns than single-family homes or office buildings because they have more units to rent out and therefore more revenue potential. Liquidity: If you need cash, you can sell your stake in the syndicate at any time without having to wait for an exit strategy like selling the entire property or refinancing it with another lender. You can diversify your portfolio: As long as you spread your investment among different properties and companies, you’ll reduce your risk significantly compared with investing in just one property or project. If one investment goes bad, it won’t take down your entire portfolio with it. You can get tax benefits: Interest … Read more

2.55X Returns – Most Creative Apartment Deal

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You might have heard about our multi-million dollar real estate deals & their success stories of how the passive investors who invested in these deals became millionaires. But, there’s a lot that goes into making any deal a success. And for the first time ever, I James Kandasamy going to share the “Behind the scenes” of one such success story – SOL Apartments in San Antonio, TX. This was the most creative apartment deal that we have done so far. We bought an Apartment and land beside it to solve a parking problem that existed for the past 60 years. We combined both to create one plate of land. We learned about the entitlement process in this deal Two different sellers closed on the same day. Story of the Deal Found using Broker Relationship – Listed website We have Boston Woods Apartments Nearby This Deal had been in and out of contract 4 times > The issue was parking was a 1:1 parking ratio > The last contract was $5.5m for the Apartments. > Seller was frustrated Fully exterior rehab completed and interior ongoing. Has been 80% occupied from 2012-2017 How did we solve the Parking Problem? Apartment Broker Did suggest looking at vacant lands beside the Apartment But didn’t want to do anything with it or the deal. Did mention that previous buyers were able to contact the land owners. North Side vacant Land owner asked for $1m The previous under-contract buyer negotiated to 500K The Previous buyer pulled the plug last minute due to the risk of converting vacant land to improved land with parking.   The only way to make the deal work was to buy one of the Vacant lands and build some parking lots. but How do we Mitigate the Risk of the City not Approving The Vacant Land conversion to a parking lot? How did we mitigate the Risk? Before Going under contract Spoke to the City officer about the feasibility of Converting the North Side vacant Land to a Parking lot Found out the Parking Ratio requirement. Talked to the City Administrator to ensure all align. The city was supportive and gave verbal “OK” Gone through the city code of development. Hired a Civil engineer Walked with the Engineer Meeting- Civil Engineer/City to get verbal “OK” Understood the process of conversion Parking Lot contractors Vacant Land Conversion Challenges? Engineering Surveys Boundary Survey – for platting the vacant land. Once the land was platted, then it was merged with the apartment. New Large Plat was recorded. Improvement Survey –Parking lot expansion. To determine driveway, # spots, Building corner, etc. Tree Survey – Determine the type of Trees and size To get approval from the City to cut the trees. ALTA Survey – for the Bank that shows A new survey for the Bank. All needed to be approved by the City.   Land Developments Since we positioned this as an “Improvement” and not a New Development. There was no new code Parking ratio requirement. We were able to fit 35 parking spots. (1.3 ratio). We decided to add Playground for residents Dog Park – WIP A Nice Park area for residents   Resolved Parking Issue Brought in much higher paying Demography Household with two cars or more. No more concern about limited parking. Brought up occupancy from 80% to 90% easily. We started charging for covered parking. The only apartment complex with a park in the submarket. Families with children — Playground and Park. The Sale We recently sold SOL Apartments for a total passive investors return of 2.55x equity multiple within 4.5 years. That is 34% per annum cash on cash return for our passive investors. That means, that if you invest $100K you would have received $255K after 4 years. A few more passive investors millionaires were created by James Kandasamy Texas.   The Morale of the Story Value add may not be increasing rent or reducing the expense Creative methods and Risk-taking can bring in huge value Congratulations to our investors who put their trust in us.  We are grateful for your support. If you want to invest with us join our mailing list by clicking the button below. Join Our Investor List

Fire, Snow, And 2.4x Returns – The Story

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Chapter 1: The FIRE At around 01:00 AM on March 26, 2019 – I, James Kandasamy received a phone call from my property maintenance supervisor to inform me about the fire at Alamo Park Apartments, one of my investment properties in San Antonio. When I asked him if anyone had been hurt in the fire, he confirmed that no one was. The building was quickly evacuated just before the fire caused the roof to partially collapse. But the third floor was totally destroyed, and an extreme amount of water severely damaged the first and second floors there and he suggested I come take a look. I sent a text to my insurance agent letting him know about the situation, then left right away. https://www.youtube.com/watch?v=9vs5jnQRH1U Chapter 2: Fire Restoration & Apartment Remodeling That Almost Took a Year When a fire or other disaster strikes a rental property, it can be traumatic for the tenant, the owner, and anyone else who has a stake in the property. On March 26, 2019, we experienced a fire in my rental property. The process of repairing everything and getting back to normal took over a year. During this period, we completely transformed the apartment building using some smart remodeling techniques. Demo Day After Fire https://youtu.be/m_rZ-yWEAtQ Finally Coming Back to Life https://youtu.be/uVf-PFQ_rbk Chapter 3: The Turnaround Alamo Park Apartments was unarguably the best MF investment experience I ever had as a syndicator. The 25-unit fire, Covid-19, the record freeze and bursting pipes…a lot of curve balls in this deal but we pulled it through like a champ is nothing short of a miracle! Chapter 4: Texas Winter Storm URI Alamo Park was hit hard during the Texas Winter Storm URI in Feb 2021. The property had the largest claim of Insurance loss in the entire state of Texas. The recovery and repairs to a significant number of units caused us a lot of repair work and resident dissatisfaction. The team at Achieve Properties work tirelessly to repair multiple pipe burst across multiple buildings to ensure that water services are not disrupted.  Both the Fire and Winter Storm damage caused our insurance cost to skyrocket in the next few years. The great news is we recently sold this 309 units apartment with a total passive investor return of 2.48x equity multiple within 4 years. That is like 37% per annum cash on cash return for our passive investors. That means, that if you invest $100K you would have received $248K after 4 years.  As promised the numbers are mind-blowing.     Subscribe to receive updates on our latest investment opportunities. Button: Become An Investor[/vc_column_text][/vc_column][/vc_row]

Understanding Your Schedule K-1 and Real Estate Taxes

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Passive Real Estate Investing

If you own real estate, then you probably know that your property taxes are deductible as a real estate expense. But did you know that when it comes to Schedule K-1, the form used to report your income from a pass-through entity such as an S corporation or partnership, there are some things you might not know about? The purpose of Schedule K-1 is to help determine whether you have a gain or loss on the sale of an investment property or rental property. When you bought the property, you invested some money in it. When you sell it, that money has been “capitalized” (turned into income) via depreciation deductions (which reduce taxable income). The Schedule K-1 helps to determine whether those capitalized costs are more or less than what they were when you purchased the property, which will determine whether there’s a gain or loss on the sale. What Is Schedule K-1? Schedule K-1 is a tax form that is issued by the Internal Revenue Service to individuals who have invested in real estate partnerships, limited liability companies or other entities that earn rental income. Investors are required to report the income earned from these investments on their individual tax returns and use Schedule K-1 as an attachment to do so. Schedule K-1 is also used when a partner in a partnership or S corporation sells property to the entity or receives compensation for services rendered to the entity. The IRS requires investors who receive this type of income to report it on Schedule K-1, even if they have already reported it elsewhere on their tax return. Schedule K-1 contains three columns: one for each of your investment properties. You’ll need to fill out a separate Schedule K-1 for each one of your properties, even if they’re all owned by the same entity or individual partner. If you own multiple properties through different entities, you will need separate Schedules K-1 for each property. Who Files Schedule K-1? Schedule K-1 is a tax form that is used by real estate investors and individuals who earn rental income from other sources. This form reports how much money was received from each property over the course of the year, as well as certain expenses related to that property. Schedule K-1 is used to report the income and expenses of each property that you own. If you rent out a single home or apartment building, then this won’t apply to you since there’s just one owner on the deed. However, if you own multiple properties or have several investors in an LLC or partnership involved in real estate investing, then it makes sense to use Schedule K-1 instead of including everything on your personal tax return. What Is K-1 Distribution? When you sell a rental property, you’ll typically receive a 1099-S tax form from your real estate agent. The 1099-S is used to report the proceeds from selling a rental property. However, there are some instances where you might not be required to file this form. If you’re a single-member limited liability company (LLC), then your LLC will be taxed as if it were a sole proprietorship. That means it’s subject to self-employment tax on net income instead of double taxation like corporations are. In that case, you’ll need to file Schedule E with Form 1040 and report any income or loss from your rental properties on Line 21 of Schedule A. If your total amount of passive activity income exceeds $100,000 for the year, then you’ll also have to file Form 8582 and Form 8825 as well. However, if you own multiple rental properties through an LLC or corporation and they’re all operated by someone else or through an organization such as a partnership or limited liability partnership (LLP), then you won’t need to file Form 8582 or Form 8825 because the IRS treats each entity separately for tax purposes rather than combining them together into one entity. How To Read The K-1? When you are in the process of buying real estate, there are some things that you need to know about. The K-1 is one of these things that you need to know about. The K-1 is a form that will be sent to you by the seller’s accountant. This form is used for reporting income from real estate sales and rentals. The K-1 can be difficult to understand, but it is important that you do understand it because it relates directly to your tax liability when buying real estate. Here are some tips on how to read the K-1: Know what kind of property you are buying – You need to know what kind of property you are buying so that you can determine which type of K-1 form will be sent out by the seller’s accountant. If there are any questions regarding this, talk with your real estate agent or attorney before signing anything. Know how long you have owned the property – If you have owned the property for less than 12 months then it should not matter how long you have owned it for because capital gains taxes will not apply until after 12 months of ownership has passed. However, if this does not apply and capital gains taxes do apply then make sure you talk with your real estate agent or attorney. When Is The K-1 Due? The K-1 tax form is due on or before April 15th for the previous year. For example, if you bought a rental property in June of 2021, then your K-1 tax form must be filed by April 15th 2022. In most cases, the seller will provide you with the correct date to file your K-1 form. If they do not provide it to you and you have questions about when to file your K-1 tax return, then please contact us and we will be happy to help you out. Important K-1 And Tax Filing Information For Private Real Estate Investors Private real estate investors are responsible for … Read more

Tips and Tricks of Investing in Syndications using your IRA

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Today, Michael Tortorich will be joining our weekly show.

Michael Tortorich has a Bachelor of Business Administration and an MBA from the University of Texas at Austin McCombs School of Business. He has 10-plus years of corporate finance experience and most importantly is a passionate believer in promoting financial literacy. The content in this book was originally designed as a financial education course for his two children, but after completion, he decided to turn the material into a book that anyone could benefit from.

How to Analyze a Passive Real Estate Investing Deals

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Passive Real Estate Investing Deals

Real estate, which includes land, homes, offices, and retail structures, is a popular investment option for those who like to put their money into tangible assets. Many investors pick real estate as a source of income or because it is relatively simple to borrow money to purchase homes. Passive real estate investing is the act of owning rental properties that generate income without you having to be involved in the day-to-day management and operation of the property. If you’re a passive real estate investor, you don’t want to spend your time running around trying to fix a leaky faucet. You want a team of professionals behind you who can take care of all that stuff for you—and that team generally comes from a professional property manager. Look for a company with a proven track record and good references from other investors. The first step in analyzing a passive investment is to determine whether it’s an equity or debt offering. From there, you can evaluate the deal using cap rates (for debt) and using cash-on-cash returns (for equity). If you’re considering both types of investment opportunities, keep in mind that each has its pros and cons. Debt deals may provide steady income streams with a guaranteed return of capital at the end of your term; equity deals, on the other hand, can provide larger returns over the long term through appreciation and distributions from operations. What Is Passive Real Estate Investing? Passive real estate investing, also known as non-active investing, refers to a type of real estate investment that does not require direct involvement from the investor. In this form of real estate investment, the investor can enjoy cash flow from rent received without becoming involved in the day-to-day management and responsibilities of owning rental properties. Passive real estate investing is sometimes called “hands-off” investing because it requires little or no hands-on work by the investor. Passive real estate investments can take many forms, including real estate investment trusts (REITs), syndications, and crowdfunding platforms. To analyze a passive real estate investment, you should consider the following factors: Location: Is the property located in a desirable area with strong rental demand? Property condition: Is the property well-maintained, or will it require significant repairs? Potential return on investment (ROI): What is the potential for rental income, and how does it compare to the cost of the investment? Management: Who will be responsible for maintaining the property and finding tenants? Will you be required to be actively involved in the management of the property, or will you be a passive investor? Risks: What are the potential downsides, such as vacancy risk or the risk of natural disasters? Tax implications: How will the investment affect your tax liability? Analyze Real Estate Investment deals Let’s walk through it, so you can see what I mean. Let’s walk through it, so you can see what I mean. To begin, the process, the first step is education. This is the time when you, as a passive investor, get educated on the deal. You learn that the deal sponsor has a deal and that they’re seeking passive investors for it. Then, you learn what the deal itself consists of. Often, this information on the deal will come to you from being on a deal sponsor’s email list and receiving a notice from them of the upcoming deal. In learning about the deal itself, you’ll probably join the deal sponsor for some sort of presentation. As a deal sponsor – and a friend to numerous other deal sponsors – I can tell you that presentations are the norm when sponsors wish to communicate their deals to interested passive investors. Your commitment – if you chose to make it – would be to “softly” pledge to put money in the deal sponsor’s deal. In this case, “softly” means that you’re not making a rock-solid, binding commitment to invest $__.___ in the deal sponsor’s deal. That kind of commitment could be one you make later. Yet for now, you’re just making a “soft commitment” to keep yourself in the running, to potentially participate in the deal. Let’s begin the discussion with a look at metrics. Metrics are what you’ll use to measure your potential returns from a deal. They’ll allow you to see whether the deal will produce healthy or unhealthy returns. Metrics will also help you to make the right decision when faced with investment opportunities that all look good. To start on metrics, here’s an example. For this example, suppose you were presented with the following three opportunities: Deal 1: A deal where you’d put in $100,000; receive $8,000 cash flow each year for 5 years; and then in the 5th year, earn returns when the property was sold for $200,000. Deal 2: A deal where you’d invest $100,000; receive $3,000 cash flow per year over 5 years, and then get another payday from the sale of the property in year 5 for $250,000. Deal 3: A deal that has you invest $100,000; receive NO returns for the first year; watch as the property is refinanced for $50,000 cash out in year 2; receive $2,000 cash flow per annum in Years 3, 4, and 5; and at last receive returns when the property is sold for $200,000 in year 5. Cash Velocity  Deal 1 Deal 2 Deal 3 Total Investment $100,000 $100,000 $100,000 Operational Cash Flow Y1: $8,000 Y2:$8,000 Y3:$8,000 Y4:$8,000 Y5:$8,000 Y1: $3,000 Y2:$3,000 Y3:$3,000 Y4:$3,000 Y5:$3,000 Y1: $0 Y2:$50,000 Y3:$2,000 Y4:$2000 Y5:$2000 Sales Price $200,000 $250,000 $200,000 Of those three opportunities, which one is best? It depends on what metrics you’re looking at. (For the sake of simplicity, look only at those metrics for the time being and ignore any buying or selling costs (i.e. closing costs, broker fees, etc.)). Now, getting into those metrics, we can start with the cash-on-cash return. It’s the simplest metric to understand when assessing your returns from a deal. cash on cash return = Annual Cash Flow/Total Investment  In those three … Read more

Things You Might Not Know About Your Schedule K-1 And Real Estate Taxes

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Things You Might Not Know About Your Schedule K-1 And Real Estate Taxes ​What Is Schedule K-1? Who Files Schedule K-1? What Is K-1 Distribution? How To Read The K-1? How Is K-1 Income Taxed For Real Estate Investors When Is The K-1 Due? Schedule K-1 Form Sections You Should Know Important K-1 And Tax Filing Information For Private Real Estate Investors and many more things.

Ep#105 From Techie to Commercial Real Estate Investor With Yomesh Deliwala

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value add real estate investing

Today, Michael Tortorich will be joining our weekly show.

Michael Tortorich has a Bachelor of Business Administration and an MBA from the University of Texas at Austin McCombs School of Business. He has 10-plus years of corporate finance experience and most importantly is a passionate believer in promoting financial literacy. The content in this book was originally designed as a financial education course for his two children, but after completion, he decided to turn the material into a book that anyone could benefit from.

Ep#104 Advanced Capital Structures With Merrill Kaliser

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value add real estate investing

Today, Michael Tortorich will be joining our weekly show.

Michael Tortorich has a Bachelor of Business Administration and an MBA from the University of Texas at Austin McCombs School of Business. He has 10-plus years of corporate finance experience and most importantly is a passionate believer in promoting financial literacy. The content in this book was originally designed as a financial education course for his two children, but after completion, he decided to turn the material into a book that anyone could benefit from.