Commercial Real Estate Investing From A-Z

Why should a busy professional invest in real estate? What are the benefits and the risks of investing in a syndication? How do you evaluate a deal right now and how to vet operators? What are standard fees that real estate syndicators charge? Our anonymous guest shares her knowledge to us.Read this entire interview here: https://tinyurl.com/bdtzrpypWhy should a busy professional invest in real estate in general?Real estate has many benefits, unlike crypto or stocks, it's a hard tangible asset and it's generally stable and less volatile. So, there will always be some value in the land and the building itself and you can use leverage or debt to purchase it. For example, if you purchase a property and borrow 75% of the property's cost, and the property value increases 25%, you've essentially doubled your money.  You're basically borrowing money to generate income and grow your wealth.Real estate is also great for an investor who has a long-term horizon, it's a long-term game because real estate tends to appreciate over time, if you hold on to a property for many years, you gradually grow your wealth over time. You can also force appreciation on a property by making some repairs or improvements and you can also reduce expenses, that will help you increase value and income. Given our high inflationary environment, another major benefit of real estate is that it can be a hedge against inflation because property values tend to increase over time, especially in an inflationary environment. Leaving money in the bank can sometimes cause it to lose value when there's inflation.There are several tax advantages, such as writing off the depreciation, which is the wear and tear of a building and it's over a specified period of time. It's possible to receive positive cash flow even if you have a tax loss.How do you vet an operator?Talk to them, try to meet them on a zoom call or ideally in person, listen to what they are saying and ask yourself: are they listening to you and interested in learning about you, what is their track record, do they have experience in this particular asset class?Another good question to ask the operator is, are they co investing in the deal and if so, how much? In general, I have tried to measure their character, do they seem overly confident or do they have a more conservative mindset, are they dodging your questions or are they being open and transparent and that gives you a sense of how trustworthy they are. A way to evaluate this is to understand if they've encountered challenges or failures or how they've handled underperforming deals and what they learned from the experience because everyone has failures, so transparency is the key.The most important question to ask yourself is what does your intuition tell you about the sponsor? Women tend to be incredibly intuitive and we're very attuned to what our gut is telling us so at the end of the day, you should listen to your gut regarding a sponsor. You can also do background checks or Google them as well. Lastly, you should do due diligence on the deal itself, review the properties and locations and understand how they analyze the deal. Look at their projections for returns, are their numbers too positive? Do they seem to be over promising in terms of their returns, or are their returns much higher than average? Those are good questions to ask yourself.What's the standard fee from acquisition all the way to exit fees that sponsors typically charge?Asset management fees are anywhere between one and 2%, acquisition fees can be between one and 3%, the disposition fee is typically between one and 2% and the construction fee is typically around 5%. The total is up to 10%.Sign up to attend Fannie Mae's Chief Economist talk on June 8th: https://bit.ly/44kzfvpSign up for the Monte Carlo Real Estate Investing Club here: www.montecarlorei.com/investors--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What are some techniques in decreasing property taxes when the economy is doing great and values are going up, and when the economy is in a downturn and values are going down? How often should you request a reassessment? How to approach properties in multiple states?  Nicholas Mau, Partner at FirstPointe Advisors, shares his knowledge.Read this entire interview here: https://tinyurl.com/2pk8c3adWe are currently in a recession and there are two scenarios of appealing taxes: when the economy is doing great, and they want to come after you and get more money for your properties; and when the economy is going down and property prices decrease. What are techniques for decreasing taxes when the economy is doing well?You must take into consideration different factors that you have for that property, the income producing potential, what's the end place income, and comparing that to what the overall market looks like, the market occupancy, market rental rates, market cap rates, etc. Diving more specifically into the nuances of the property is going to be where you'll find opportunities when it comes to properties in an up market.The property appraiser is going to have more of the shoe on their foot when it comes to valuations in an up market. The sales are going to be supportive of higher values, the incomes are going to be supportive of higher values so this is where it really is a lot more imperative to be diligent in the review of the individual property to ensure that you're taking into consideration all of the nuances. You should look into what are some of the challenges that this individual property may have, are there little things that are not evident to the property appraiser from their mass appraisal perspective because they are required to value all the property within their jurisdiction so they're looking at the overall market factors. Market cap rate might be 4% for an industrial property, but is that the correct cap rate for the property that you have, which might have an additional risk factor associated with it, where there's near term leases that are coming due or there might be some different occupancy challenges that they may not know.There's hesitation in the community to lower values when the market tends to turn downward. Make sure that the right rental rates are being used; if rental rates have decreased, ensuring that the appropriate market rental rates are being applied; make sure that the appropriate vacancy and collection losses are being considered and that any nuances with the property in terms of near term lease expirations are being considered, or credit defaults.A lot of office properties are struggling where tenants are vacating because they don't need as much space. Property appraisers don't necessarily know these things are occurring until it's brought to their attention, so it's important to make sure that that type of information is being put forth to them and being provided to them.Sales velocity has slowed dramatically across a lot of property types in the commercial real estate world. When you have a lot of sales and you have brokers that are selling deals at 3.5, 4.5 cap rates, everybody's willing to sling out their cap rate when cap rates like that transact. When properties do transact, the brokers and property owners are a lot more tight-lipped on what is the cap rate that properties traded for because a lot of people are taking haircuts on these deals.Rely upon building cap rates through the weighted average cost of capital, or an equity dividend rate, or looking at the debt service coverage ratios and different things like that to try to come up with an accurate estimate and support for the positions that you're taking in your property tax appeal.Nicholas Mauwww.first-pointe.comn.mau@first-pointe.comSign up to attend Fannie Mae's Chief Economist talk on June 8th: https://bit.ly/44kzfvp--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What are some top lessons learned from lawsuits and how to avoid potential litigation in the future? Where is NYC going with regards to tenant laws? What are some of the best hiring practices in order to grow a real estate company? Top commercial broker in New York, Bob Knakal, Head of New York Private Capital Group for JLL, shares his insights.Read this entire interview here: https://tinyurl.com/2wuc94kyWhat have been the top three lessons learned from lawsuits that you have seen out there? How can we avoid potential litigation in the future?The number one advice relative regarding litigation is don’t get into litigation. Nobody wins except the lawyers. Even lawyers will admit that in litigation, nobody wins. Avoid it, it would be my number one lesson to learn from. Number two, avoid litigation. The easiest is with full disclosure. The brokerage law in New York requires that the broker convey to a buyer what they know, or what they should have known. You can’t say, I didn’t realize that there was a hole in the roof, even though all the apartments on the top floor are flooded every time it rains, because you didn’t know that you should have known that. Was there a fire in the building two years ago? Was there some condition that you either knew or should have known? Do you have to convey that to the parties?Also, in New York, if you’re representing a buyer and a seller, disclose who were you getting paid by, if you’re getting paid by someone, let the other party know. You will eliminate many potential issues relative to litigation by being an open book, being transparent, communicating, over-communicating. That’s something that’s generally good in real estate, to over-communicate rather than under-communicate. Having a lot of transparency avoids a lot of potential problems. What are some of the best hiring practices? What do you look for not only from the brokers that work with you, the agents that work with you, but also from the rest of the team that supports you?Real estate is a very competitive business, and it’s also very team-oriented. We enjoy talking to people that played team sports growing up. We also like to talk to people who exhibited excellence in some type of competitive area, whether it was captain of the debating team or president of the school newspaper, or something that was a competition where they excelled. Secondly, we looked for people who didn’t necessarily have the best grades in the world or the best education, but were very motivated. We used to joke around that we would only hire PhDs. And those were folks who are poor, hungry, and driven because they were going to work hard. But besides being hungry and driven, they must have passion for the business. We have people who had a passion for real estate, not that they thought they could make a lot of money, but did real estate resonate with them? That was a big part of what we thought led to success in the business because no matter how good you are, you’re still going to have tough and challenging times. But what enables you to get through that challenging time is that you love the business. And we looked for that passion, the most important of them all.With the real estate investing mindset, is there anything else that is important for our audience to know?A broker should specialize in one thing really well. Investors should do the same. Pick an area of town, a city or region, a type of property, a type of transaction, or a type of something where you can know that particular thing better than others. This ability gives you a competitive advantage.Also, be good to brokers. There’s an expression that says mean what you say, and say what you mean. Don’t lie to brokers, don’t mislead us. Treat us with respect. And that’s a two-way street.Bob Knakal@BobKnakalbob.knakal@jll.comSign up to attend Fannie Mae's Chief Economist on June 8th: https://bit.ly/44kzfvp--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Why should commercial real estate brokers represent only one party? Is buying prime real estate at a top price a great strategy? What are some techniquest that buyers and sellers have used when purchasing a property? Top commercial broker in New York, Robert Knakal, Head of New York Private Capital Group for JLL, shares his insights. Read this entire intereview here: https://tinyurl.com/2jyny68pPart of your business is focused on representing one party only, can you share a little bit about that and the reasoning?Most brokers represent both sides, I've always focused my entire career on seller representation. As a broker, working with control is important. Many sellers are optimistic about the value of their property, and when the value gets down to the point where it is truly market, there are a few buyers that would buy at that price. I always wanted to work on the seller side for a couple of reasons: 1) We like to avoid conflicts of interest. We don't represent buyers. 2) I don't like to have to remember what I say to anybody. If I'm always working for the seller trying to get the highest possible price, I don't have to remember what I say. And that has worked out well over the years and as a broker to the extent that you can specialize in something, and articulate what you do and how you do it, it enables you to differentiate yourself from others. Back at the old company, we always say that we only represent sellers, we only sell properties, and we only work on exclusives. And that was very easy to convey, easy to understand, and it let clients know exactly where we stood.George Ross, Trump's previous attorney, always talks about the fact that the best deals were the highest-paid deals. Can you attest to that? And how does one go about the first couple of years of paying top price, waiting on that until it becomes the next phenomenal deal?In terms of buying property here, there used to be an investor in New York named Saul Goldman. He owned more property than anybody else in New York. I had the good fortune to meet with him back in the mid-80s when I started in the business. I said to him Mr. Goldman you own about 500 buildings, how are we able to do that? How did you amass such a big portfolio? He said Bob, I paid more than anybody else. That's the way he did it and that's the way you have to do it. I applaud him because he built an unbelievable portfolio and, even though at the time, he may have been paying a lot, in retrospect he didn't pay that much.People must have reserves. The most popular type of transaction in New York is multifamily, and often, regardless of what the cap rate is, there's very little free cash flow in the first few years. You must be able to break even. A lot of folks are counting on appreciation, but it's challenging. What are some techniques that buyers have used when purchasing a property after going in contract? What is the best way to approach it?I've seen a lot on all those transactions I've done, but I haven't seen it all. It seems like in every deal there was a new thing that comes up that I wasn't prepared for. From a buyer's perspective, buyers try to get contingencies to their transactions to the extent they can. That's rare in New York, we very rarely have any post-contract execution or due diligence. And by not having that post-execution due diligence, the contract deposit is hard when it goes up. There are times when people will make claims of breaches if they don't want to close, that's generally difficult to prove. But the most common area that creates an issue for a buyer is environmental. And there are several environmental issues we have here, we have lead paint, we have asbestos, we have potential oil leaks, and a number of buildings are still using heating oil. Some of those tanks are very old.Robert Knakal@BobKnakalbob.knakal@jll.comSign up to attend Fannie Mae's Chief Economist on June 8th: https://bit.ly/44kzfvp--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

This post covers a few different real estate investing topics: what is happening in the market today, how can diverse teams make you stand out from the competition and increase revenue, and I'm also giving a quick update on our tech stack.Read this episode here: https://tinyurl.com/7evvpwe What is happening in the real estate market today?The following are four different people that are having issues that I learned about just last week:1. We are already seeing people go bankrupt in the multi-family space: 3,200 units from one operator were just returned to the bank in Houson. 2. Another big time person in the multi-family space sent an email out to their investors saying they will be doing a capital call.3. I spoke with someone else that is currently extremely busy helping several owners add value to their multi-family properties, they weren’t good managers and are now hanging by a thread, if the value isn’t added, it’s over. 4. I also met someone else that partnered up with operators, this person was responsible for raising the funds, and now the management company that the operators hired is so bad that they only have 3 months runway. This person asked them multiple times to change management companies, and because the operators think the management company is highly regarded, they are not budging. Now what? The capital raiser not only updated all of their investors on the situation that they're in, but they're also speaking with attorneys and the attorneys said to keep a record of all conversations that they're having with the partners.Why is Diversity Important?This is a very important topic because I see a lot of non-diverse teams in the industry. And it's a proven fact that the most diverse companies outperform their less diverse peers by 36% in profitability. One study by Gartner revealed that a highly diverse environment can improve team performance by up to 30%. Diversity can also lead to better decision-making and higher profitability. When I talk about diversity, I don't only mean people of different colors, I mean people of different backgrounds, countries, younger, older and everything in between, because we have experienced different teams and therefore are more creative in the unique scenarios that arise when building companies.Men vs Women: Who is a Better Operator?This is, in my opinion, the best kept secret that is not a secret: women are fantastic operators, women led companies are simply ran better and are more profitable. This is because men and women are different in nature, and that is a beautiful thing because we must work with people that are strong where we are weak.If you don’t have a woman in your exec team, you definitely must look for one, and I’m not saying this because I’m a woman, I’m saying this because we are very different by nature, we care about different things, we observe different things, and we have different strengths and weaknesses that I think, combined, make for a super powerful team. And I’m not just saying this for the sake of saying it, it’s proven that women led companies perform better, and I’ve seen this both in the tech world and the real estate world. I’ll be generalizing, but according to my personal experience, men have big hairy goals and they don’t really think about the details of those goals. Women, on the other hand, are way more careful and conservative. Imagine how we can both lift each other up to a much better place? Women will be more careful in her underwriting and more conservative on her estimates, and the guys will be dreaming big and aiming high, in my opinion it’s a great combination, and a combination that must be implemented in your company asap.Join the Monte Carlo Investing Club here: www.montecarlorei.com/investors--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

How to deal with problems with your properties? Why did I select self storage? How to get your first deal? Brainstorming exit strategies with your network. This is the talk I had with Beth Azor at her conference Women in Real Estate Investing Summit.Watch this interview here: https://tinyurl.com/mr47yc8pDefine "I learned everything I could about self storage"Educating yourself, reading books, I hired a consultant that I heard speak on a podcast to help me analyze my first few deals. How did you find your first deal?It took me 2 years to find my first deal. I found it on crexi, I didn't have a team calling property owners to find off market deals, and the deal ended up being a portfolio of 3 car washes and a self storage. I didn't even bother asking anyone about car washes, that was mistake number one, and I didn't even go to a conference.How many deals had you looked at before selecting this property?Tons and tons, probably 1,000. It took me two years to find my first deal, I quit my job before finding it, which I don't recommend, you should find your first deal and then quit.Where you worried about money?No, I knew I could always get a job if it didn't work out. Everyone is fully capable of building anything from scratch.What interested you to put an offer in this deal?Car washes have a better cap rate because it's a much more hands on asset class, the numbers made sense.What interested you about self storage?Self storage is recession resistant, it does well in good times and in bad times. In good times people buy more, keep more and don't look at their credit card bills. In bad times, they downsize, they go from a 3 bedroom home to a 2 bedroom home and they need storage, and getting a storage is a lot cheaper than having that bigger home.How do you like owning something outside of your market?I went against my mentor's advice to buy things within a 2 hour driving distance from where you live and, for the car washes I don't like it, for the self storage, it's much easier to manage remotely. How did you pick your lender?You have to ask your local broker for recommendations, the sales broker in this case. The first couple of lenders said no. I kept going back to the broker to get more lender recommendations, and eventually one of them said yes. But 5 days before closing that lender called saying that they were switching the terms a bit, that because I didn't have experience operating a property, they'd like to retain the entire amount of the loan that I had in stock locked for the entire period of the loan. I called the president of the bank and I said, this doesn't make any sense, why would I even get a loan and not pay cash for it if you're locking my cash? We ended up meeting in the middle, putting a much smaller amount on hold for a couple of years, and after I prove myself as a good operator, they will remove that contingency.You were now the owner of three car washes and a self storage, what happened on day 2?Let's go to day 9 when one of the roofs caved! Thank God for Nationwide, they ended up paying within 2-4 weeks. The self storage has been smooth sailing, we have a local person that walks the facility about once a month, the tenants lease the units online. Today about 80% of self storage is still owned my mom and pops, and they're now retiring, they haven't implemented technology in their facilities. You can put cameras if they don't have it, you can install locks that will open with their phones. They are able to rent online, they get a unique code to the gate, you don't have to ever meet your customer.Are all the car washes gone?We're in the process of converting them, you have to keep talking to people and brainstorming ideas until you come up with the right strategy.Beth Azorwww.bethazor.comwww.linkedin.com/in/bethazorSubscribe to the Monte Carlo Investing Club here: www.montecarlorei.com/investors--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Commercial real estate has been a popular investment asset class for many years due to its ability to generate strong returns and provide diversification benefits to a portfolio. Up until last year, the challenge has been finding value-add opportunities in a highly competitive market, with compressed cap rates. Today, with the increase in interest rates, and a slow down in the economy, we have a different set of challenges, and our focus must shift to how can we make sure that a property is equipped to not only survive, but also thrive in this environment. In this article, we will explore some key considerations for passive investors looking to invest in commercial real estate in our current economy.Read this entire episode here: https://tinyurl.com/t2ycx99zUnderstand the market dynamicsThe basics are still important: is it a market that is growing, does it have a diverse industry, does it have a low poverty rate, what are the housing statistics such as appreciation over the last decade and average household income? If not in a major market, is it near a major city that has been growing over the last few years? This information can help you make informed investment decisions and avoid making costly mistakes.Define your investment objectivesEvaluate if this is something you are comfortable with. Look at the previous economic downturns: how long did they take to recover? When was a good time to buy? While it’s impossible to predict the perfect timing for anything, we must understand at what discount rate we are comfortable purchasing at, knowing that we will be paying more for the mortgage (at least temporarily). Also remember, the downpayment will be smaller with the current cap rates going up. What do these numbers look like compared to the higher purchasing properties at a low cap rate? How many years of the higher interest rate will it take to get to the entire discount that you received? In some of our calculations it was as high as 50 years.Consider passive investment optionsOne of the benefits of investing in commercial real estate as a passive investor is the ability to invest in a variety of different vehicles. Learn what are the pros and cons of each of these options.Diversify your portfolioDiversification is key to mitigating risk and achieving long-term investment success. Define three assets that are non correlated to each other. For example, real estate and the stock market. Real estate is on a different market swing. It does not trend up and down with the stock market, or energy.Partner with experienced professionalsInvesting in commercial real estate can be complex and challenging, particularly for passive investors. That’s why it’s important to partner with experienced professionals who can help guide you through the investment process. This may include investment advisors, asset managers, and property managers who have deep knowledge and expertise in commercial real estate.When working with a new operator, make sure to find someone in your network that has worked with that person in one capacity or another, and check for references. Do a deep dive on the underwriting of each property, if you’re not sure how to do that, hire someone to go over it with you.Focus on long-term valueCommercial real estate investments are typically long-term in nature, and successful investors focus on creating long-term value. This may involve finding ways to improve the physical condition of the property, increasing rental income, implementing operational efficiencies to reduce costs, or expanding the property. By focusing on creating long-term value, investors can position themselves for strong returns over the life of the investment. Decide what asset classes you are comfortable investing in during this downturn, and take the next step!Subscribe to our investing club here: www.montecarlorei.com/monte-carlo-investing-club--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

What are some strategies available for business owners and real estate professionals to decrease their taxes? Tim Gertz, CPA and Partner at Provision Wealth, will be exploring these scenarios with us.Read this entire interview here: https://tinyurl.com/mrxdyyanFor business owners, including law firms, dentists, etc, what are some tax strategies available?The tax code is created for you. That is the incentive based model that has been created for you as a business owner to create wealth, or to create jobs, and more opportunity for them to tax more people. For business owners, the sky's the limit. In order to take a deduction under the code, it has to be ordinary and necessary for what you're doing. Every business is different, but as long as you can look at your business and make sure that you align your facts with what you're trying to do, you can duck almost everything. There are huge opportunities, we still have bonus depreciation in play. If you buy any equipment, meals, travel, auto expense, home office, it continues to go on.The inflation Reduction Act included huge opportunities for solar, if you have a commercial office building, you can put solar on it, you can get up to a 70% tax credit this year on that. On top of that, if you don't have a tax liability, the IRS has given you an opportunity to sell your tax credits. Not only do you have the opportunity to get a tax credit, but if you can't use it, you can sell it. Secure Act 2.0, which was signed into law in December, as incentives for setting up retirement accounts, where they will pay for the setup of the retirement account. It will be a dollar for dollar credit. When you look at businesses, look at what are you trying to do, and align yourself to what you're trying to accomplish, then everything would be deductible. If you're saying: I want to do this, then what is it that I need to do to make this an ordinary necessary deduction so that I'm aligned with the law, and I'm not doing anything that's in the gray areas, but it's ordinary and necessary, so I can deduct it.For real estate professionals – what are the tax benefits for them? Is this the best profession for tax purposes?It is. There are nuances here and there, a lot of times, I've a lot of people that are active in business A: the husband has a business, he is a dentist for example, and the wife is a real estate professional. That gives us an opportunity.Real estate professionals are huge, especially after 2017 with the advent of bonus depreciation on used assets, now we are able to create this huge loss in real estate that can offset all the income in this business that the other spouse has. Being a real estate professional does open a lot of opportunities. You're investing in an asset class that has been in a storied past of growth and appreciation. It's also a great asset to invest in. It's kind of a double whammy in that regard.The Inflation Reduction Act was huge. Whether you're a business owner, whether you own real estate, whether you're buying an electric car, whatever it might be, talk to someone about it. A client is putting a solar installation on their commercial building, and they're getting about a 90% credit. You're putting a $10 million dollar solar array, and getting a $9 million credit, which you can also sell, and you might be able to sell it for 90 cents on the dollar.Tim Gertzwww.provisionwealth.comcontact@provisionwealth.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

How can you reduce your taxes if you are a W-2 employee that is single, or a W-2 employee with a spouse that doesn't work? This is a topic we have been wanting to cover for a while and Tim Gertz, partner at Provision Wealth will share his insights.Read this entire interview here: https://tinyurl.com/2ckdcd6bTax can be confusing and we all want to reduce our taxes. Let’s break it down into different scenarios, starting with W-2 employees that are high earners and are not married.Some would ask: what's the best tax planning advice for someone that single and a high W-2 earner, the joke is to get married! The tax laws incentivize you to: grow industry to create products, create revenue, create workforce, that can be taxed. Unfortunately, as a W-2 employee, you are in this little box where your opportunities are very minimal.There are still some opportunities such as: oil and gas investing. It can be very advantageous because it is outside of the material participation rules of the passive activity loss rules. You can invest in an oil and gas fund and have no involvement in it and be able to offset W-2 income. It's one of the few carve outs in code section 469 that gives us that opportunity.Another thing with the Inflation Reduction Act, it bumped up tax credits for energy efficiency. It reinstated the 30% tax credit on solar on residential properties. It increased the tax credits for vehicles, used vehicles, various energy efficient systems, whether it's HVAC, or things of that nature. Those are definitely things that you can look at to offset tax on W-2 taxable income.One of the other opportunities if you are an individual that does itemize deductions, an opportunity is called deduction stacking. Especially with charitable contributions. For example, instead of giving $10,000 every year, you  give $20,000 this year, then nothing the next year, then $20,000 the following year, and you flip flop between itemized and standard deductions.What about W-2 employees with a spouse that does not work. What are their options?This scenario opens up a huge opportunity. If the spouse wants to be involved in activities, they can look at:  What is it that they want to do? Do they want to open a business? Do they want to operate a business? Do they want to invest in real estate and become a real estate professional? One of the nice things about being married is that your income is combined, and your income and losses are combined. If you've an individual that's a W-2 high wage earner, and you have a spouse that is a real estate professional, and you invest in real estate that throws off half a million dollars of losses every year. Because they spouse is active in real estate, that loss is active. Now we have an active loss, and we have active income from W-2 that are married to each other, then they will offset each other. It doesn't have to be a real estate professional because that's where a lot of people are investing in. It can be any activity, it can be any business that someone materially participates in. It could be: coin laundry, things of that nature, things that are highly capital intensive, that have a lot of equipment on the upfront that can be depreciated. That can create a loss that will create an active loss. If they're active in it and materially participate in that activity, it will offset the W-2 income.A real estate professional has to:1. Work 750 hours in real estate activities.2. Do that more than any other income producing activity.Tim Gertzwww.provisionwealth.comcontact@provisionwealth.com--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support

Why is diversification important in your investments? How to find and vet great operators and partners? Patrick Grimes, CEO of Invest on Mainstreet, shares his advice after being in the business for over a decade.Read this entire interview here: https://tinyurl.com/2m8jh277Why is diversification important? What are the asset classes that you picked to diversify and why have you picked them?Multifamily is the core of our company, we have over a $500 million dollar portfolio now, and we have workforce housing currently in construction. If you look back over the data that suggests recession resilience and long term appreciating assets, you'll see that three bedroom two bathrooms are very strong. Then 80+ units is the next strongest asset class. All existing construction where you can buy for cash flow, income generating, and you're not hoping to build and hoping somebody will pay your premium price, that's the foundation of most of our investors' portfolios. But I have lost everything in real estate once. If you read my passive investor guide on my website, you'll see that it talks about diversifying, it talks about how the middle class has 7-8% of their portfolio in alternative assets. The high income earners are at 25%. Then the ultra wealthy is at 50%. If you want to invest like the high income earners, the ultra wealthy, you've to get out of those 401k's in the stock market, or IRAs in the stock market, or peel some of that off into a self directed variant which allows you to invest. Maybe your financial planner has you in the more stock markets or you're day trading.What is your process for deciding who you partner up with for these different asset classes?Having been somebody that lost at all, having lost at all doesn't mean you're not a good partner. In fact, I just spoke on a stage in Chicago in front of hundreds of people in economics. The question was How to do deals today, and would you do deals in today's economic environment? - everyone said yes for sure. But we were all talking towards how we saw the demand shift in 2009 and 2010. And how we saw the economic models breakdown and the financial systems. We were speaking from a lens of experience of being raked over the coals, and seeing how things fall apart. You're looking at people that made it out, and people that continue, but with better education and knowledge. I think that is part of what I look for in partners, is somebody that has been a little bit like me, and had some really rough times, but came out fighting, and now speaks from a level of understanding and made it through the failure, they didn't just go crawling back to whatever their job was, but fought their way out and now are moving forward.There are a lot of things to look at. But the general items are: are their investments recession resilient? Are they structured in a way like our real estate deal is, does it have six months of reserves so that if a financial disaster or natural disaster storm hits the property, you can ride it out? Are they fixed interest rates? Or are you at risk of losing all your cash flow, or maybe the building, which I know of several dozen now that are in threat of that this year.Patrick Grimeswww.investonmainstreet.comJoin me in Orlando on March 8th! www.bit.ly/3Yf9KYw--- Support this podcast: https://podcasters.spotify.com/pod/show/best-commercial-retail-real-estate-investing-advice-ever/support