How Cap Rates and IRR Drive Value Creation

Paul and Matt discuss cap rates, how small changes affect property value, and aiming for ~25% IRR on value-add projects.

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Episode notes

Matt interviews Paul Atherton, CEO of High Spire, about how builders can create generational wealth by leveraging their construction businesses for real estate development. Most builders sell their companies for 1-2x earnings, which isn’t enough to pass down wealth. Instead, Paul outlines three wealth-building pillars: operating a profitable business, investing in real estate, and adding value to assets.

Builders have a competitive edge in real estate because they understand construction costs, materials, and labor, allowing them to budget more accurately than traditional developers. We can invest in land development, adaptive reuse projects, and value-add properties, turning older commercial spaces into high-yield investments. Paul stresses the importance of cap rates, IRR (Internal Rate of Return), and strategic financing; he recommends builders aim for 25% IRR on projects and seek off-market deals.

For those new to investing, Paul advises strengthening branding and marketing, setting anti-goals to maintain work-life balance, and networking with commercial brokers and private investors. Builders should analyze 20 real estate deals per month to understand market trends. While High Spire offers capital investment opportunities, the goal is to help builders become self-sufficient real estate investors.

With real estate offering long-term appreciation and cash flow, builders who reinvest wisely can secure financial freedom for future generations. For expert coaching and funding, visit HighSpire.com.

Thank you to episode sponsor Sugatsune. Learn more at sugatsune.com.

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