Hey guys Keir here coming to you live for this week’s message. What I want to talk about why you should invest in real estate in 2021. Now a lot of people think about real estate. As a great investment, a great asset class. They also think that sometimes when the market is really hot, or when everybody’s talking about it, maybe it’s not necessarily the right time to get into it.
No matter where you stand on this, I’m here to tell you a couple of different things from a practitioner standpoint. And one is this real estate as an asset class of means to grow income, to build wealth, to experience tax advantages, to really seize the depreciation benefits. All these different pecuniary, what we call it, monetary benefits, as well as the tangible aspect of the asset, make real estate a really attractive investment.
Right now, particularly depending on what asset class or what area you’re in, I also think it’s a really attractive time to be investing in real estate. So several different ways that you could do this, right. As a real estate investor, you can very passively invest in what we call REITs, real estate investment trusts, where you buy a share much like you would in a mutual fund. Um, and it’s a fund that owns several different income producing commercial real estate assets.
Partner with a General Property Developer
Another way to do this is through syndications where you also passively invest, but you do so by partnering with a general property developer or a general partner. In this case, you will be partnering with somebody who presumably you trust. You believe that they have the expertise. They have a great investment thesis and model, and they’re going to go invest your money alongside theirs as well.
So they have skin in the game, they have expertise, they bring other resources, they secure the deal, right? So they bring certain things to the table and you bring certain things to the table, namely your capital to help get these deals done. That’s another way.
A third way is to Invest Directly into Real Estate
But this I will caution is for more sophisticated investors. Those that really understand what they’re investing. And understand the markets in which these assets reside. Understanding the different forces, macro, micro, regional, state, and national at play that affect the value of real estate, right? Because there’s a lot that goes into understanding the product, the business model and the market to successfully evaluate whether or not an opportunity and an investment is attractive or whether it’s not. So those are three vehicles or ways in which the main vehicles, ways that you can get exposure to the real estate asset class.
One completely passively through REITs, buying shares and mutual funds with other experts and companies manage, right? And that share price can go up or down. Will pay a dividend generally. And you own a piece of that fund. The second way is through what we call GPLP structures, general partner, limited partner structures. Where you’re the limited partner investing alongside a general partner. A developer investor on the ground that has the expertise, the skillset, the experience (hopefully), and is also investing their money alongside yours. And the third is to invest directly in real estate as the general partner, the principal, the investor yourself. Whether it be a duplex, a 10-unit apartment building, a hotel or resort, like I own, or some other forum of commercial real estate.
Mixed use, retail, industrial, what have you. And that again, then you could be raising money through limited partners, friends, family, small private equity fund, or other sorts of equity to invest alongside you. If the capital raise is larger than you can afford. So those are three ways to get involved and get some exposure to the real estate market. And the reasons why I liked this asset class are that I have personally a lot of experience as an operator, both of hospitality properties, particularly, but also multi-family as well.
And starting my career as an agent and broker also gives me a knowledge of markets, contracts, the debt and capital markets, and obviously going to school for this at NYU graduate school of real estate for my master’s in real estate finance and investment helped as well.
You don’t need credentials to get involved
You could start, maybe start with doing this passively, but be careful because the world has changed in the market has as well during this pandemic during 2020 here and coming out of it into 2021. And it really depends on what part of the market you’re in, where you are geographically, what sector, et cetera, whether you’ve been impacted negatively or positively by the pandemic. For instance, our hotels in upstate New York are doing really well having record months because people want to leave the cities and go to safe, cleaner environments.
That’s really helped us. But if you’re on an Island, if you’re a big box hotel in a city, if you’re event based, you’ve had a really tough time, a really challenging last, you know, 12 months. So again, educate yourself, be around the right people, upgrade your room, your network, invest in the right programs, be around the right people, read the right materials, books, podcasts, et cetera, do your research. And build a working knowledge of real estate. What it means to be an investor, then understand your market intimately, that you’ll be investing in.
No matter which one you choose to follow and implement. REITs, you know, traditional syndication deals or direct investment in yourself, you still need to know the market really well, right? Drive around it. Look at the comps, look at your competitors. See what’s happening locally on unemployment, shifts where a new developers building, where are the job centers?
What’s the transit look like? Where are the leisure and the retail and the restaurants because where those are demand is right. That’s important too. And then thirdly, educate yourself on the markets, the capital markets. Where you can raise equity, what the debt markets are looking like, what are some of the terms, the interest rate, the different things we’re able to get out that would different loan products for commercial real estate acquisitions.
Transformational to Your Career and Life
And do this by getting around the right people, getting into the right rooms, you know, investing in the right books and materials and courses, and maybe even a mentor to help you understand the ropes of this business. And I’ll tell you though, when you understand it, there’s so many opportunities in real estate to make an impact, to build passive cashflow, to grow wealth, you can make a big difference and it could really be transformational in your career and life.
So if you’re not already invested in real estate, I strongly recommends you do. Cautiously, safely and after you educate yourself, because again, there’s a lot of risk out there, like with any investment, but there’s also a ton of opportunity. And that’s why I’m so heavily invested in real estate. I really believe in it fundamentally.
So hopefully you get some value from this. If you did, it’s just touching the surface. I mean, I could, you know, riff and talk on this all day. So if you did find some value shoot me a message. Let me know, happy to hop on a call, chat with you a little bit about what we’re doing here. Answer any questions, or just generally be a resource to you as you might consider investing in real estate this new year. Thanks so much to your success, your happiness and your freedom. Talk to you next time.