What would you do if you weren’t afraid?
I don’t remember where or when I first heard that question, and I’m sure it’s been asked many times in many places, but it has stuck with me for years now. As I continue to discover the power of passive real estate investing, I want to shout the benefits of multifamily investing from the rooftops.
That’s now. But when I first began learning about passive real estate partnerships, I was afraid. What if I lose my money? I’ll look stupid if I ask too many questions. I feel extra-afraid investing with a friend. It went on and on. But I did it anyway, and it changed my life.
In reality, if you have the opportunity to invest in a private placement, chances are it is a friend who is offering it. That’s why they call it private: These opportunities don’t come around that often, and you have to know how to find them. Because they aren’t offered to the general public, most people don’t understand them or are suspicious for various reasons. But the vast majority of the wealthiest people in the country have passive real estate in their portfolios. It’s not really that complicated, and I believe that if the deal is underwritten conservatively, it is one of the safest ways to a healthy cash flow for retirement. I used to be afraid, and now I am committed to making sure that all accredited investors know the benefits.
For me, it all started with a tax bill. I had a significant portion of my savings in mutual funds, and one January, I received a 1099 that showed I had capital gains of $65,000. However, I hadn’t taken any money out. I owed about $13,000 on money I didn’t even take out of the account. You see, mutual funds buy and sell, costing you and me money every time, while we have no control over what they do, and most fund managers make money no matter what. I thought that there had to be a better way, and the pain of that tax bill was what made me much less afraid to invest in real estate syndications. At least the fees are transparent, I reasoned — plus, you actually have cash flow with taxes usually deferred, and if you work with the right syndicators, everyone has skin in the game, with investors getting paid first — as, I believe, it should be.
The more I’ve learned about passive real estate investing, the more I realize how conditioned we are to put our life savings into a stock market where the experts will tell you that they don’t really know what’s going to happen. Now, I still have money in stocks — there’s money to be made in the stock market for sure, and most stock brokers and financial advisors are good people who very much want to help their clients make money. But they are making educated guesses.
Contrast that with apartment communities, and I can tell you with a fair amount of certainty that the value will either go up or down, but the cash flow will continue either way. You may have to hang onto the asset for longer, but if it is underwritten conservatively, rents rarely go down very much when the real estate market goes south. We just keep making money until it’s a good time to sell, however long that may take.
All of that said, today, I’m not afraid of investing in real estate syndications. Where things still get scary is in the rest of my life: When I decided to launch my business website, I was afraid people would think it was silly, my current boss would be angry that I was doing something else in addition to my job or that I would spend a lot of time and money and then fail. Same fears, same questions, same doubts as always. But I launched it, and it’s changed my life.
The greatest things happen to us when we do what is scary, and I’ve discovered that doing something I’m afraid of is almost a sure way to success. You see, you can’t be afraid of something unless you’ve seriously thought about it and studied the options. I’ve learned that I can indeed trust my gut, that being uncomfortable is good, that I need to build a great team around me who will tell me their honest opinions and that at the end of the day, you get what you give.
Every day we are all faced with choices: Which direction should I go? Which job should I take? Should I launch that new business? Should I ask them out? Should I secure my retirement in passive real estate investments? Study the options, ask your team to weigh in on the pros and cons, and list what you are afraid of. Then ask yourself what you would do if you weren’t afraid. Then do it. Courage beats fear every single time.