Series A Units - High Yield Equity Investment Can Offer Significant Benefits To Your Real Estate PortfoilioThank you for watching Ivan Barratt’s interview with Curtis Edwards, VP of Investor Relations. If you are interested in working with Ivan and the BAM Capital team on Multifamily syndication, please see the options for booking a call to learn more – or if you are ready to invest click the invest now link at the bottom of this page. BAM Capital works with accredited investors to invest in B++, A-, and A multifamily assets with in-place cash flow and proven upside potential. This mitigates risk and allows the fund to target consistent monthly cash flow. Ivan Barratt is the CEO of BAM Capital and is pleased to bring value to potential investors who are looking for high yield equity investments to increase your portfolio’s value. Ivan Barratt is a 20 year veteran of the real estate space and currently serves as founder and CEO of The BAM Companies. Ivan is a multifamily owner, fund manager, and syndicator who specializes in large apartment communities in the Midwest. Since 2015, he has raised nearly $100M in equity and acquired well over 4,000 units. He has also grown the BAM Companies to a three-time Inc 5000 Best in Series private equity and management firm. Today, Ivan focuses his time on equity finance, acquisitions, and company strategy. Currently, his firm manages $593M in assets. Ivan is an active member of the Young Presidents Organization, Entrepreneurs Organization, and the National Multi-Housing Council. Ivan serves on the Executive Board of the Indiana Apartment Association and is a member of The Penrod Society, a not-for-profit arts organization. He enjoys public speaking and has been on countless podcasts discussing real estate, entrepreneurship, and personal growth. Ivan lives in Carmel, IN with his wife and three children. Real Estate Investment- Series A Real Estate Units WebinarIvan: Curt, it’s good to see you. How are things at the office? Curt: Things are good man, like two ships passing in the night here, but, uh, good to find time to get on the webinar with you here. Ivan: Yeah. So likewise, thanks for carving this out. I know you’ve done some really extensive work with our national accounting firm. And it’s been fun to watch these shares get gobbled up by some of our larger investors. What I wanted to do today for those of you that are listening is bring Curt in to explain why there’s been increasing demand for the shares a little bit more of the details in the benefits of those shares. So that some of our, our investors that maybe aren’t up to speed on it can better understand the cash flow the returns the tax benefits on the ace. So Curt, all I’ll let you take it from here. But let’s, let’s pause a minute on our disclosure slide. So, folks, anybody wants to read this, I encourage you to do so you get to pause the video and read through the whole thing at your leisure can take it away, man Curt: You got it. So as most of our current limited partners know, we have a series A in a Series B offering inside fun too. And you know, just to note on the series A, the preferred return is 10% annualized paid out monthly. So a truly passive high yield option for those investors that choose the series A offering. Now, where it gets interesting is understanding how the preferred return is categorized by our accounting firms. Somerset. So you have investment income, rental income, and distribution income. So when those preferred return payments are paid, doesn’t matter whether it’s series A or Series B, those are categorized as distributions, not rental income, and net investment income. And the reason that that’s important, Ivan, is that when they’re labeled or categorized as distributions, you are not taxed on that income during the holding period of the asset. Does that make sense? Ivan: Yeah, it’s well said. It’s not just the 10% that you’re receiving folks, there’s more to it than this. And some of you be surprised to hear that some of our largest investors are writing million dollar checks for all A-shares. Of course, we’re getting a lot of investors that do a blend 5050 6040. so on, but I really wanted to drive home the why we’re seeing some of our largest more sophisticated investors taking large checks today. So I think this is a really great start. That 10% is tax-free. During the whole period. I’ll let you keep going from there. Curt: Yeah, perfect. And you kind of lead in to where we’re going to go to next, that 10% preferred return for the share packs a bigger punch than what the offering memorandum states. And you have to dive deeper and understand why and that’s what we’re going to get into here. So let’s first start with, you know, a $100,000 example. And on the left side, we have a $100,000 investment into BAM capital series A units, we have already started on the last slide, you’re going to receive $10,000 annually and a preferred return. So at the end of those five years, that’s about $50,000. Right, so that’s where you get your 10% IRR. Now, let’s start looking at different asset classes, different investments, and kind of see how they are equal. So let’s take stocks, but not only stocks, let’s categorize this column as long-term capital gains or qualified dividends that are paid to that investor via those long-term capital gains stocks. So, if somebody were to make $100,000 investment inequities, and they hold those for longer than a year, they would have to generate a 13.2% return annually on that $100,000 investment to equal the same 10% in this series A and the reason that is is that if I sell my equity position after a year, and they’re categorized as long-term capital gains Either taxed at 15, or 20%. That’s going to be dependent on the limited partner. In this example, we’re using 20% as the long-term capital gains tax, as well as you have to add the 3.8%. net tax. So when you add the 20 in the 3.8, which is the net investment, income tax, that’s what nit stands for. That 23.8%. tax is the reason why are 10% and series a pack a bigger punch. So I’ll kind of pause there for a second Ivan, you know, questions or anything you want to drive home? Ivan: Well, I think the punchline is for everybody listening is that you would have to have an equivalent investment, earning somewhere around a 13% annualized return, in order to achieve the same after-tax benefits that we’re delivering. via the shares. Let’s tee up a softball question here. There’s a couple of assumptions that you’re using to come up with these numbers, correct? Correct? Curt: Correct. So the assumption is in this category here, and we’ll, we’ll reveal a couple more categories. But in this column, we’re assuming 20%, long-term capital gains, it could be 15%. For some people, we found that most of our limited partners that invest in bam, tend to be in the 20%, long-term capital gains bracket. So that’s why we’ve aired on using the 20%. And 3.8%. That’s a tax a lot of people forget about, but their CPA and their accountants are doing that on the backside, that net investment income tax is brought into any type of you know, long-term or short-term capital gains in equities. Ivan: Yep. And we’re not here to be investment advisors, folks, or CPAs. But the last time I checked, stocks are a lot more volatile than real estate. And I don’t think there are any safe or blue-chip or choice companies out there in the equities markets that are paying anything close to a 13% dividend. Now, I know you’re you’ve got a few more stocks than I do curve, but I’m pretty confident in that answer. Curt: Yeah, yeah, you know, you’re right. I mean, historical averages, as we know, are somewhere between six and seven and a half percent net of fees. And obviously, that’s over the history of the stock market. But we we’re not here to dive too deep on equities in returns. But it’s a great point. So before we go on to the next slide, just to kind of summarize, if you invested 100,000 in equities, and you returned 13.12% each year, and when you went to sell that you’d have to pay that 23.8 tax, you would end up with the same 50,000 proceeds as you would investing in the Series A units with inside the BAM growth and income fund to Ivan: and I’m probably stealing your thunder here a little bit. But I believe you’ve got a slide coming up maybe next on how we can continue to defer those taxes? Of course, you do. What’s this? Curt: Well, so we have that coming up how you can defer those taxes even further, but just to kind of cash. The other examples. So the first column, I really wanted to explain to everybody without having too much on the screen, you know the difference in series A and just long-term capital gains. Now we’re looking at, let’s say you were trading crypto or equities, and you were a day trader and you were producing short-term capital gains. So short-term capital gains have a different Tax Scenario, we’re using a blended income tax of 27%. Once again, in talking to our national accounting firm, and the LPS that we have at bam, this tends to be a nice, conservative approach. But everybody else is gonna have a different scenario on their personal income tax. But when you’re dealing with short-term capital gains, the tax that you pay is tied to your personal income tax bracket. And you also have to add in the 3.8%. So as you can see in this example, 27 plus 3.8 is 30.8. And you would have to return 14.45 in this scenario to equal those series A units Ivan: well, Yep, I think this is a great illustration, folks, this is what we really want to drive home and why our sophisticated. In most cases ultra-high net worth families are gobbling up shares is because of what Curt showing you right here, from a before-tax and after-tax perspective. Curt: Yeah. And the final example, which we wanted to keep separate was, if you were on a salary of 100,000, and you were to get a salary increase of 13.7%, it’s the same scenario, that increase in your salary of 13,699, that’s going to get taxed at your blended income tax rate, we’re using 27% here, and you’re still going to end up with the same 50,000. So we wanted to give you examples of long-term capital gains and short-term, as well as what that would mean in an income or a wage increase. To show you, all of those different examples are equal to the IRR of 10%, or the preferred return of 10% in the series, a unit that are not taxed at all during the whole period. And Ivan, as you know, our target hold period is five to seven years. So you can start to see how it packs a bigger punch, and how that cash flow is important in that series. That unit. Ivan Yep, yep, absolutely. In this case, this asset is securitized by the real estate in the portfolio, versus some of these other asset classes. Curt: Exactly right. In the BAM growth and Income Fund, we have institutional-grade cash flow producing assets that are, you know, backed by those tangible assets as well, where, you know, investment, you know, whether it’s stocked, you know, what other avenues you want to look at, you know, do you have that same, you know, confidence, you know, and we can leave that up, you know, to the audience to kind of just, you know, question and determine for themselves. Ivan: Absolutely consult your advisors, consult your CPA is they’ll back up a lot of what Curt is saying here, we just happen to think we’ve got a very, very solid offering versus what you can find out there and some other areas of your portfolio. Curt: Yeah, as you alluded to earlier, the softball question. So this is great, right, we can not pay taxes on the preferred return in series A during the holding period. But what happens when we sell the portfolio of assets, and we do have a capital event? You know that that’s the next question we get. And I want to kind of walk everybody through this first. So when you make that initial 100,000 investment in bam, you are generating a $55,000 passive loss, that’s referred to on your K one. And that’s due to the accelerated depreciation benefits that we get in commercial real estate, which will save for another topic. So you have your negative 55,000, average there as a passive loss, then you can see the distributions in your one through five, and then we return the capital if our target hold period is five years. So at that point, the capital gain from the sale is 105,000. And where we get that number, is you’re adding up the sum of the distributions. So 10,000 times the five years is 50,000. And you also have to add in that passive loss benefit. So the 55 plus the 100, or the 50, is how you get the 105,000 capital gain from the sale. But your accountant would tell you that your net taxable income, though, is still only $50,000. So $50,000. The reason that is is that you get to use that negative 55,000. In the passive loss. Follow me there. Ivan: Yeah, yep, makes perfect sense, you’re able to cover over most of the most out of the gate at the end with that loss. Curt: Correct. And at that point, if the limited partner decides to take that money back and not reinvest that into another series A and potentially you know, the BAM fund three or four, you know, whenever that time happens, they would have to pay taxes on that $50,000. However, if they reinvest that money, this is the scenario that happens you have your capital gain from the sale of 105,000 like we just talked about on the last slide. Your net taxable income, though is on 50,000. But if you reinvest that 100,000 of return capital, you are generating another $55,000 loss, that $55,000 loss, offsets that net tax, that net taxable income of 50 and therefore, you’re left with taxes owed of zero, and you actually have a negative 5,000k one, carry over for Future taxes. So before I, you know, to summarize that your preferred return of 10% is, is labeled as a distribution. distributions are not taxed during the holding period. So from years one through five, you get $10,000 each year, and it’s not taxed. If you reinvest the money, when we have a capital event, you can offset any taxes owed, therefore generating a mechanism that is producing 10% tax-free, which we’ve given you those examples that it’s anywhere between 13 and 14.5%. Pre-tax. So I know I went through a lot there, Ivan, but you have any comments or you know, want to sum that up? Ivan: Well, I think you did a great job driving it home. And I hope our audience now sees why so many wealthy families are taking advantage of this share class because you can get an equivalent before-tax return somewhere in the range of 13%. indefinitely if you continue to reinvest the proceeds for the long-term. Curt: Yeah, and that, you know, being on the investor relations side, we have seen a lot of questions around that. And people, for the most part, didn’t really understand that these preferred returns are labeled and qualified as distributions. Yeah, they were thinking it was more rental income or investment income. So this is, you know, the reason we produce this quick segment is because of the confusion around that, and how are those preferred returns tax-free? And then how can I create a vehicle that is tax-free over the long run through reinvestment? Ivan: Yep, I don’t think I could have said it better. And I’m glad we’ve done these folks out there might have thought that this was treated as some of the debt funds we’ve seen or hard money lending funds we’ve seen which are 1099 interest, income, and tax in that year. And so, guys, Curt and I did this just so we could hopefully, educate our client base, get them to ask more questions to their CPAs Feel free to get us to get your CPAs involved. They’ll back up what Curt’s saying here. Somerset is a national accounting firm that Curt used to dot the i’s cross the T’s and cross-check all the math, we don’t want to take up any more of anyone’s time here. We just wanted to make sure that people had the entire picture of the advantages of the share class not to get too salesy here but I think we’re just about out of them for the 2021 deployment but we will have more availability the share class in 2022 Curt I don’t know what we’re down to maybe a million million and a half of a left for deployment for this year. Curt Yeah, just under 2 million at this point. So hopefully you know we’re going to send this quick webinar out and if anybody’s interested please reach out to myself or Andrew. Ivan: you know we’re whoa whoa. Now you said 2 million but you’re not counting for the folks that that are selling with us in a couple of months that wants some of those shares are you Curt No, correct? Yeah. Yeah. Ivan: You guys were closer to about a million left. Curt: Yeah, because of the capital event you have on another asset and the redeployment demand from that correct? Ivan: Yes, investors selling with bam, get first rights to reinvest with BAM for our new investors out there. I hope you are happy to hear that but that’s just the way we roll. Curt: Awesome, Ivan until we do this again, man. I’ll see you around. Ivan: Yeah, yeah. See you soon.
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Putting Equity To Work in Real Estate Investing With Ivan Barratt Interview with Purchase to Profits9/29/2021 Purchase To Profits Interview With Ivan Barrat of BAM CapitalThank you for watching Ivan Barratt’s interview with Purchase to Profits. If you are interested in working with Ivan and the BAM Capital team on Multifamily syndication, please see the options for booking a call to learn more – or if you are ready to invest click the invest now link at the bottom of this page. BAM Capital works with accredited investors to invest in B++, A-, and A multifamily assets with in-place cash flow and proven upside potential. This mitigates risk and allows the fund to target consistent monthly cash flow. Ivan is the CEO of BAM Capital and is pleased to have been featured on this amazing podcast. Special thanks to Seth Ferguson for inviting him on the show. Ivan Barratt is a 20 year veteran of the real estate industry and currently serves as founder and CEO of The BAM Companies. Ivan is a multifamily owner, fund manager, and syndicator who specializes in large apartment communities in the Midwest. Since 2015, he has raised nearly $100M in equity and acquired well over 4,000 units. He has also grown the BAM Companies to a three-time Inc 5000 Best in Series private equity and management firm. Today, Ivan focuses his time on equity finance, acquisitions, and company strategy. Currently, his firm manages $430M in assets. Ivan is an active member of the Young Presidents Organization, Entrepreneurs Organization, and the National Multi-Housing Council. Ivan serves on the Executive Board of the Indiana Apartment Association and is a member of The Penrod Society, a not-for-profit arts organization. He enjoys public speaking and has been on countless podcasts discussing real estate, entrepreneurship, and personal growth. Ivan lives in Carmel, IN with his wife and three children.
Putting Equity to Work in Real Estate Investing with Ivan Barratt 00:00 Welcome to another episode of purchase to profits. I’m Seth Ferguson. Make sure you hit the subscribe button so you don’t miss our daily interviews with successful real estate investors. Our guest today has raised nearly $60 million in equity and acquired over 2500 units. his company managed well over $200 million in assets made up of nearly 300 sorry, 3500 units. Ivan Barrett is the CEO of Barrett asset management. Ivan, welcome to purchase to profits. It’s good to have you on the show. 00:33 Thank you, Seth. It’s awesome to be here. Man. 00:35 I almost didn’t give you credit for 3500 units. I almost said you know, 350 00:40 Oh, that’s, that’s okay. That’s okay. As long as you got my assets under management number, right, I’m fine with less. 00:46 That’s right. So I’m really looking forward to talking with you. You’re a guy who’s done some really neat stuff in real estate. So to kick things off, tell us about your real estate goals right now. 00:58 Gosh, yeah, so 2019, I’m hoping is a big year for us. We’re continuing to scale our leadership. Here at bam, we are almost 80 employees, mostly on-site management personnel. And then here at abam HQ, we’ve got our asset management team, the three-legged stool construction, maintenance, property management, of course, and then accounting, finance, and operations. And so for us, it’s about having a great culture about getting players on our team. So we can continue to scale the right way, not just work harder, but work smarter to use that cliche. And my goal for this year is the same as it was last year. It still choirs 2000 units. Of course, the mass market may have other ideas. Last year, we had the same goal. And we were able to only close on about, oh gosh, a little over 800 units, not for lack of capital really just for lack of deal flow. However, we’re now in three states, looking at two more states here in the Midwest to acquire property. So the more markets that we find that we’d like that we want to plant a flag and scale, the more deals going into the top of the funnel, hopefully, the more deals coming out, the bottom ratio is still the same for us. It’s about one in 200 tails right now that actually makes sense. 02:29 Yeah. And what were you entering into different states, different markets, a direct byproduct of that lack of deal flow right now based on where we’re at in the cycle? 02:41 Sorry, direct by a direct 02:43 byproduct? So did you purposely expanded to other markets strictly because your deal flow was so thin? 02:51 You know that? That is a great question. For us. It’s not so much only thin deal-flow sure that helps. It’s a great byproduct, go into more markets, as you said, to get more deal flow, but also geographic diversity, not having all my eggs in one market, per se. Yeah. But absolutely, you’ve got to, you’ve got to play the hand, you’re dealt in a lot of ways. And so if there’s lots of global capital crashing into the United States in search for yield, in driving up prices, in coastal markets, that local regional capital is coming inland to places like Indianapolis, Charlotte, Nashville, for example. And so that’s driving up pricing, which makes it more difficult to find yield and find value. So you have to find that value to support your investment thesis. And so sometimes, we’re driven to tertiary markets, it’s still meet a certain population threshold, have good demographics, have stable diversified employments and a few other key metrics that get us comfortable with that, that tertiary market, for instance, we really like University cities, our two big 10 cities now, both Indiana University where I went Bloomington, Indiana, and also champagne, Illinois, Southern Illinois, home to the University of Illinois. Again, in both cases, we’re still sticking to our workforce, housing investment thesis, we’re not buying students, student housing, but we do like those University small cities where you’ve got a big college, all the ancillary jobs, and industry that spins off from that. Lots of government jobs and lots of medical and in fact, I didn’t coin this term, but I heard it a long time ago and it’s stuck with me. We call those are Jim, markets, government, education, and medical. And so for us, we first look for stability. those markets before we look for a value add potential, we have to know that we’re that our odds of losing money are very, very small. Yeah.
05:10 And you just, you mentioned before, just where we’re at in terms of the market, what changes have you had to make in your business, let’s see over the past five years to really move with how things have changed.
05:23 Yeah, so with interest rates, staying low, capital markets, staying very liquid, lots of capital, looking for real estate. And the fact that frankly, we all know we’re at a later stage in the cycle today than we were five years ago, we focus on a strategy that is less likely to end in disaster. And when I say that, I mean, we have gravitated towards higher quality, newer assets, north of 20 million in most cases, in some cases, even 30 to 40 million. Up there, the altitude, the air is a little thinner, there’s less buyers. And at a newer aged assets, say later, the 1990, early 2000s, you’re capping your upside, there’s not as much value add left. However, you’re also greatly reducing your downside risk. And so if we can still achieve our return requirements to our investor, but lower the risk, right, so we’re taking a little bit lower return call it maybe a 1415 1617 IRR at most. But we’re able to reduce the risk, we’re actually still seeking an outsize return. We’re just taking a lot more risk off the table. In my high net worth. Investors appreciate that. Yeah.
06:57 And you’re talking about, you know, B plus plus to a minus properties is that kind of the area you’re working in.
07:04 Exactly, yeah, we’re looking if it’s a B, we’re going to make it a B plus, the typically now we’re looking at that d plus a minus range. And sometimes people confuse that and they think we’re getting close to the central business district brand new, we would call a plus plus core product or core plus product, what we’re really looking for, is that still that middle to upper end of workforce rent. So here in the Midwest, we’re talking, gosh, seven to maybe 1400 a month. And if you’re renting at 1400 a month, you’ve probably got a two or three bedroom townhome in my case. So we have to pair that with strong sub markets, great school districts, lots of diversified employment. And we still want to have a fairly large delta between our our renovated rent or our value add rent. Sometimes we’re not renovating sometimes it’s just a management play. But again, our our projected rent, that value proposition still has to be hundreds of dollars less than what the brand new class A plus communities are offering. Yeah,
08:21 well, you know that that a plus plus they’re they’re offering all the bells and whistles that nobody can compete with right now.
08:27 Yeah, we still don’t we don’t target properties with with you know, infinity pools and concierge service and, and all the all the fancy new stuff. We certainly don’t want to be the operator renting out Midwestern. You know, one bedrooms for 2000 a month in downtown Indianapolis, we still target that workforce. But we’re targeting a segment a cohort of that workforce. That pairs well with our call it getting seven to 14 $100 a month. Rental range on an as improved basis. Yeah, after we go ahead
09:05 and right now, are you are you pushing out your whole period to let’s say, before everybody was holding, let’s say three to five years? are you pushing that out to seven to eight now?
09:15 You’re asking all the great questions that says it’s it’s funny, so we always started looking at seven to 10 year holds. And that’s a product of me going through 2008 and seeing what happens when you’ve got short term capital and what what can happen if you’re in the midst of a correction and you have to roll over debt or you have a balloon payment or you’re beholden to the bank. So early on in my career, I decided okay, let’s start with HUD financing, agency financing where we can lock in terms at a much longer clip. But then we’re also looking for deals where if all the cylinders fire so to speak, we can still exited deal early. But if if we’re not, if a seven to 10 year hold doesn’t say need a three to three and a half x, a multiple of invested capital, then it’s probably not a deal we’re going to do. Certainly Our hope is that most deals would average of five year hold. But you know, deals I bought just two years ago we’re refinancing and a couple or even selling. So you know, everybody gets into this business and you think you’re gonna buy a bunch of rental properties and hold them forever, right. And then as you get into it, you realize that that it’s better to balance your portfolio and run different analyses every so often as to whether you should refinance, sell, or continue to cash flow. And a big number we look at a lot here at band is what’s the return on equity. If I doubled the value of your investment, and let’s say you’re you’ve invested 100 grand with me, and we’ve doubled the value of the asset, your equity essentially is 200 grand now, right? Just Just for example, purposes? Well, if you’re getting a seven or eight pref, on that 100, you think you’re getting a percent, but if your equity now is 200, you’re getting three and a half to 4% yield on that on that new value add. And so oftentimes, that’s when guys like me, or operators like me, seek to sell or to refinance, not because we necessarily want to let go of a great asset. But because we need to recycle that capital and continue to put it to work at a return that makes sense, which is going to be much higher than 4%. Yeah,
11:40 no, 100%. I wanted to circle back to you were talking about right now you’ve got I think, 80 employees in your property met on the property management side. Going back in time, how did you think about your business in terms of how to build it to bring you from when you first started to where you’re at now? Yeah. So
12:01 back to being a product of 2008. So I had been working for a developer for about eight years, started in in early 2000s. And basically got my foot in the door by saying, I’ll work for free, I just want to work to learn. Well, I was able to continue to make that work for me, because there was lots of stuff to sell, there was land or condos. My developer, great guy, smart guy was doing a lot of transactions. And so I would get a piece of those when I sold them for him. At the same time, I was getting a great education. What when 2008 hit all that came to a screeching stop. And all of a sudden, you know, I’m underwater and cashflow, I’m thinking okay, gosh, I’ve gotten way off track here, I didn’t get into real estate to speculate, I didn’t get into flip, which is basically what development often is a little bit longer of a term, but it’s still flipping. And so I really just had to hit the reset button on my mind in my mindset and decided that I needed to start my own company, but I needed to do it in a way that would provide consistent cash flow. It would be scalable, because just buying real estate is a very, very get rich, slow method if you don’t have some sort of funnel of cash coming into it to buy more assets. So I hated property management. I had a couple rentals but hated property management, but ultimately decided that I had to do what I hate to get to where I wanted to go. And so I started bam, in my spare bedroom as a one man show with a bookkeeper that came in every other week to make sure I didn’t screw anything up and just started taking on little management deals from investors and also landlords by necessity. Back then, when people couldn’t sell those condos they bought or those those homes that they bought were underwater, oftentimes they were seeking to rent them out and I was their management solution. And I continued to scale that and at the same time I started buying small multifamily deals and I learned how to how to renovate with hard money and how to make that work. And so I I was able to use private debt to get some more deals under control during the renovation game. Then I started buying small apartment buildings in the process, hiring people and firing people and hiring people and firing people and learning how to grow it. And in kept growing the apartment side as well. And just really started with the end in mind. I knew I wanted to be a big company one day, but I had to just get some momentum and take those small steps and just as importantly, I knew I was gonna make a lot of mistakes. But I also knew that if I made them early and they were smaller would pay less tuition. And those would aid me later. So, you know, for instance, there’s a couple of deals that that almost killed me, but didn’t because of their size. And so when I bought a 30 unit deal where I did a big renovation on it, I knew I was going to screw up some stuff. But I, I said to myself, I would rather learn it on 30. The 300 Yeah, and so I just plowed forward, and every time I’d make a mistake, I would learn from it, make sure not to make the same mistake twice. And after a while, we started gaining a lot of momentum, I found a great business partner, four years ago, this June, he’s the opposite of me. 10 times smarter, way better day to day operator than I am. And so now we have our respective lanes, we stay in our lanes. And together, we’re a lot more powerful, a lot more impactful and can do a lot more than we could on our own. Yeah. And
16:05 lots of the viewers watching this show. They might they might be smaller operators. Without that, you know that, that network of support behind them? What advice would you give them if they’re looking to scale up and grow their business? And right now they’re they have that small team? What does it take to go from that small team to a larger operation?
16:27 I really think it depends on where you want to go with this. There’s so many different paths that people can take, and there’s so many different ways to be successful at it. So I think it takes a lot of a lot of study for those that want to truly treat it like a business which is the the true way to get really wealthy at this and to grow it to a large extent and for at one day to really support your life, right. So I’m at, I’m doing this because I’m designing a life for my my family, not designing my family around my business, designing my business around my family. Now’s an amazing time to start a business. The best time to start a business is like the best time to plant a walnut tree, right? It’s 20 years ago or today. And the good news is there’s never been so much great technology and free resources and access to information to help you become a better, more efficient business machine. When I started, there was like one or two property management software options. Now there’s there’s dozens, right? There’s so many more creative ways to market those properties, there’s so much more access to virtual assistants all around the world that can help with certain aspects of business that don’t need to be in your timezone. Or in your office, there’s just so many great tools out there. The people can help with what I think, you know, sidetracks a lot of folks is it takes a lot of effort, it takes a lot of time, you really have to want it and stick with it, you have to go into it, knowing that you’re going to fall on your face a lot. And you you also have to realize that people are most of the time, especially early on going to make real estate seem easy. What I mean by that is managing people is even steeper learning curve. But it’s not rocket science. It just takes some trial and error, some tinkering. And if you if you can come to grips with that and just realize that’s just part of the process. And everybody goes through that and you’re not, you know, you’re not an idiot, right? It it. It is meant to be. You just have to realize that this is what all of us go through to grow something, then there’s something really special waiting for you. If if you just don’t quit and you persevere and you stay relentless.
19:10 Yeah. Those are some good messages and you know for you Do you have any routines or rituals that you go through? Maybe daily or weekly that helps keep you focused?
19:21 Oh, yeah, yeah, big time. daily rituals, you know, getting up early, working out. I’ve got several notes that I go back to that focus on my, my big, weekly, monthly, quarterly and yearly goals. A big part of my success is also coaches. So I have I have a coach personally, spiritually. My marriage and then I’m in a few different mastermind groups of other entrepreneurs, not just real estate, but other operating companies in completely different industries. But we come together as our entrepreneur so it’s called eco entrepreneurs organization big global network. I’m I’m in a couple of masterminds within that I just had my my personal business coaching call this morning, we’re really focused on on accountability to my my big rocks that helped move my life helped move my business. Now that, you know, we’ve got a bigger organization, I’ve got to really focus on the the high level strategy, right, the big initiatives that continue to move us forward. For the small business owner, it’s still the same routines, listening to great content. I don’t watch the news. I feed my body more content, when I’m in my car, when I when I’ve got a few spare moments. That that helps nurture the entrepreneur, the desire not to quit the business, I’ve got to develop that sort of thing. It’s, you’ll often hear me quoting, it’s like doing push ups or pull ups. If you want to get better at doing push ups and pull ups, you have to do more of it. And you have to do it every day. And that’s that’s the secret. You don’t just go to the gym once a month to get a six pack. It’s these little things that you do every day, that over time. Start building up really strong, in some cases, unstoppable momentum. Yeah,
21:33 no, for sure. So let’s talk about one of your Keystone deals. So deal that made a big impact for you.
21:41 Gosh, you know, the first deal going from scattered site, which are smaller apartments, right where you don’t have an onsite manager to my first big deal was 112 units. And I went straight to HUD. Luckily, I had some really good people around me a great HUD originator servicer here in town and for the audience. You don’t have to use HUD primarily on income assisted property or subsidized property, you can use HUD on A, B and C and D assets. And so I went I went straight for the jugular and went went to HUD financing locked in a 35 year loan 10 year prepayment at 5% leverage did a HUD renovation. So really just jumped into the deep end of the pool. And it helped put me on the map, not just for my investors, but also deal flow from other brokers and industry insiders here in the Midwest. So that was sort of a coming out deal for us. Another one we just purchased a couple years ago in a small sub tertiary market within the Indianapolis solar system. I knew it was going to be a deal but had no idea it was going to turn out like this. We wrote to go buy a property and deliver two and a half x net to our investors in just over two years. Nice ended up being like a low 60s IRR, I think Yeah. And that you know, that may have spoiled a few people. So now I have to tell them hey, remember guys this this doesn’t always happen to work out quite this good. Yeah. It still was very gratifying.
23:27 Oh, for sure. So how did you source that deal? Was it through a broker? Did it? Or did you go directly to the seller? Yeah, so
23:34 both those deals were via brokers. Once you get north of 100 units, it’s oftentimes going to come through a broker, there’s definitely some sellers here in the Midwest, I keep in touch with. But you really have to take care of the brokers once you get up into that higher level site managed deal. They’re really your frontline 24, seven acquisition team, right? And they’re only paid on success. So taking care of those those folks is a really smart move. We did three off market deals. The only deals I did in 2018 were all off market, but they all still came via a broker. And we love those guys. Yeah, it’s who you are.
24:18 Yeah. And so with that deal where you did, I think it was two and a half x. He said, Yeah, what initially attracted you to that property? Was it the location was there, they what was that big, blinking light?
24:33 Yeah, you know, we looked at a lot of deals in that market. And so when this one came along, we knew it was better than the rest. It was owned at the time by a really respected construction guy. And he had done most of the heavy lifting on the improvements and then after touring the units, we realized that there was still a lot of management efficiency that we could add with our growing management. company. And then we also suspected that that market, which was lagging the rest of the region, as the apartment market continued to heat up would would catch up with, with cap rates and multiples of comparable properties, you know, within an hour’s drive and other parts of the Indianapolis market, so we just, we had these little suspicions, but we, we ran the numbers, and we looked at our conservative, pro forma, we said, okay, even if we don’t hit everything, and we only achieve the conservative outlook, we’re still gonna look pretty darn smart. If these other things fall into place, we’re going to look like, like geniuses, right? And so that was the perfect example of getting, you know, what we thought was going to be a single or a double, and it won’t be hold as a homerun. You just you never know it going into the deal. That’s just not how this works. Yeah, it’s it. If you swing for the fences, oftentimes you strike out. Every now and then every now and then you pop one out there.
26:06 Yeah. So so like you said, you’re always looking to hit singles and doubles instead of the full homerun?
26:13 Oh, yeah, yeah, yeah, yeah, we’re, we would rather again, limit the downside risk by these, especially at this stage in the cycle, buy a newer nicer asset with less value add potential, but where there’s still enough room to get into that, that low to mid teens IRR on a seven year hold. If it looks better than that, obviously great. But again, my first rule is don’t lose money. My second rule is remember rule number one. And the third rule is how do we get cash flow off of it? Yeah,
26:44 those are good. Those are good. Three rules. So uh, so going back to when you first started in real estate, how has getting into this business changed your life?
26:57 Oh, wow. You know, I’ve been at this a long time. And these days, having a lot of fun, it’s great to watch a big company. And now I’ve got these great people that work with me and my partner that really are the leadership team for the company, the directors now in those different aspects of HR and finance and operations, asset management, construction, maintenance, it’s really fun to develop these leaders and help them get leaders underneath them. And that’s really how you scale and so is the is the guy that started this whole thing, but now it doesn’t get, you know, nearly as much of a credit because it’s deserved elsewhere. watching these folks grow and accomplish these great things on their own. It’s just it’s really, really gratifying. And you know, real estate is a great way to design an abundant life. I get to work how I want when I want, where I want. And I get to take great, great vacations with my family, I get to spend a lot of time with other entrepreneurs and and exchange ideas and information ways of doing things. And I get to fill some other other buckets as well, we get to give back, I get to stay in shape and stay stay on top of what’s important to me. What’s what’s really the magic here, and I alluded to it earlier is, you know, real estate is great. But it’s even greater if you can pair it with another quadrant in rich dad’s Cash Flow Quadrant, right? If you’re a really successful s, and you can add a really successful I quadrant amount of real estate, it’s a great model. For me growing a big business, funneling those extra funds into my own real estate investing because we invest alongside our investors is a great pair as well. And then Gosh, we have investors that are just really well paid employees and they also want to play in the the AI quadrant as well. So when you can do two of those quadrants really well. A beautiful thing happens. And you get to design a really fun life now. A filling life yeah.
29:16 So I mean if somebody is looking to learn more about what you’re doing or get in touch, where can they find you?
29:23 Thanks for asking. I’m really easy to find online. I’m lucky My name is spelled a little differently. My last name Barratt ba RR att first name Ivan IV and I’m all over the the interwebs phone number. If you’d like to schedule a call, my assistant can help with that. 317-762-2625 31776 to 2625. I launched a new site recently called Ivan Barrett education calm and that’s a site for high net worth investors. To get a better idea of who we are our investment thesis and how we do things. Our corporate site is Barrett asset. management.com.
30:04 That’s great. Well, Ivan, just want to say thanks so much for taking the time today to share your success.
30:10 Absolutely. Seth, thank you for having me. Perfect.
30:13 And to you, our viewers, I wish you well in your journey from purchase to profits. See you next time.
The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.
The post Putting Equity To Work in Real Estate Investing With Ivan Barratt – Interview with Purchase to Profits appeared first on BAM Capital. Via https://capital.thebamcompanies.com/2021/09/putting-equity-to-work-in-real-estate-investing-with-ivan-barratt-interview-with-purchase-to-profits/ Real Estate Golden Rules - Percentages To Invest ByTable of ContentsBuying and owning real estate can be a lucrative investment strategy, but only if you do it right. There are many factors that come into play, and it pays to know the ins and outs of real estate before you start investing. After all, knowledge is the new currency. And generating positive cash flow truly is king. These real estate investing tips are merely that, tips. Not financial advice. While BAM Capital only does multifamily syndication investing, BAM Management started as a Property Management company doing smaller deals. BAM’s CEO/Founder, Ivan Barratt, started the company in property management. To learn more about how BAM Capital can help you or your clients achieve positive cash flow through real estate investment strategies including multifamily syndication, make sure to contact us. Here are some real estate percent rules that you may encounter while you’re learning about real estate investing and acquiring an investment property. These percentages serve more as guidelines rather than strict rules that investors have to follow. Use the one percent rule and all the other percentage rules mentioned here wisely to secure your financial independence as a real estate investor. What is the 2% Rule in Real Estate Investing?The two percent rule in real estate is used by real estate investors in order to identify the best rental property investment opportunities. Out of all the commonly-known percentage rules, this is probably the most extreme. This rule refers to the idea that investors should only buy properties that produce a monthly rent of at least two percent of the purchase price. This is often used to determine whether or not a real estate investment would make a good deal. [1] So for example, if an investment property is listed for $100,000, it would have to generate at least $2,000 in monthly gross rent just to satisfy this rule. This rule isn’t set in stone because it is not realistic under all situations. It’s not always practical. It may even be impossible to achieve in certain markets. In most markets, 0.8 percent to 1.3 percent is more realistic. This may help you find more stable tenants. Consider factors like lot size, number of bedrooms and bathrooms, and included amenities. [2] If you do follow the two percent rule, you may find that the investment property is able to generate enough money to cover its expenses while also providing a cushion for things like maintenance and vacancies. [1] The challenge is in actually finding properties that conform to this rule in practice. BAM Capital can help you find these opportunities when it comes to multifamily investment properties. What is the 50% Rule in Real Estate Investing?In the world of real estate investment properties, the 50 percent rule provides a ballpark estimate of a rental property’s expenses, which can help investors make better decisions. This percentage rule states that 50 percent of a property’s gross income would go to its operating expenses, and investors should anticipate that. This includes insurance, property taxes, vacancy losses, repairs, owner-paid utilities, and maintenance expenses. [3] It means you should expect that only half of the rental income will be left for you after covering all the standard costs of property ownership such as repair costs. It means when the investment property generates an income of $2,000 in monthly rent, $1,000 will go to the different property expenses listed above, except for any mortgage payments. Factor that into your monthly cash flow analysis when considering investing in rental properties. Another example of this in the real estate market is if a property makes $30,000 per year in gross rental income, you should assume that $15,000 of it will go towards other property expenses like repair cost, operating costs, property taxes, utilities, and property insurance. When it comes to rental properties and analyzing deals, it’s important to make a decision quickly. Investors need to determine if something is a good investment quickly or else someone may pick it up before them and make more money out of it. So as a good rule of thumb, the 50 percent rule can determine if something is worth investing on. Think of it as an investing criteria that lets you know whether or not you should proceed with the deal. Your real estate agent may advise you not to rush through your analysis for the sake of your personal finance, and while that is true, you also need to secure that deal before you lose it. So the best solution is to use this ballpark figure that is based on monthly income and operating costs. At the very least, it gives you a place to start your analysis. Just like the two percent rule, this is just a rule that serves as a guideline because your property’s expenses likely won’t be an exact 50 percent of your income every month. It’s just a good rule of thumb, but doesn’t always apply in real-world situations. Still, it’s a pretty solid estimate. What is the 4% Rule in Real Estate Investing?This next percentage rule isn’t specifically about real estate, but there is a connection that’s worth mentioning. The 4 percent rule is actually a theory introduced by financial advisor Bill Bengen in the ‘90s that suggests that an individual should be able to retire and safely withdraw 4 percent of their savings each year—and the money should last 30 years. [4] Bengen proposed this idea after taking a look at historical stock and bond market returns and determining that 4 percent was a safe withdrawal rate for retirees. Unfortunately, this may not be relevant in today’s world. The theory itself raises several questions like: what if someone lives for more than 30 years after retiring? After all, Americans who reach 60 can expect to live into their 80s. The 4 percent rule also does not guarantee 30 years of income. [5] Real estate investment somewhat ties into this because it gives investors a bigger retirement fund to pull from in the future. Although real estate is not for everyone, it could be a powerful asset towards building your future. What is the 1% Rule in Real Estate Investing?The one percent rule in real estate is exactly the same as the two percent rule, except you are screening for potential rental properties that produce a monthly rent of at least one percent of the purchase price. This rule is used by investors to analyze whether or not an investment property is worth putting money into. [6] An example of this would be a rental property with a total purchase price of $200,000 that has a monthly rent of $2,000 per month. According to the one percent rule, this is a good investment based on the rental income. Compared to the two percent rule, this one applies to more properties because it is a much more realistic figure. And while it shouldn’t be the sole factor for judging potential investments, it does highlight the importance of having a disciplined mindset when it comes to buying real estate properties. This percent rule is not necessarily a strict rule that you need to follow, but rather a guideline for improving your investing style. As a real estate investor, having a disciplined approach to real estate investments is important so you don’t lose money. Investors should check if properties meet certain income criteria that will help them avoid common investing pitfalls. [6] Use the one percent rule as a prescreening tool so you can train yourself on becoming a wise and disciplined investor. What is the 70% Rule in Real Estate Investing?The 70 percent rule applies to real estate investors who fix and flip properties. According to this rule, an investor should aim to pay no more than 70 percent of a property’s ARV or after repair value. This includes the price paid for the investment property itself and the estimated repair costs. [7] This rule relies on a simple calculation: After-repair value (ARV) ✕ .70 − Estimated repair costs = Maximum buying price [8] This maximum buying price should give you an idea of how much you should spend on a home that you are planning on renovating and reselling. Because this rule requires a bit of estimation, you need to use a realistic estimate of the property’s value after repairs are completed. You should also estimate what the repairs will cost. It’s actually very easy to use this rule: just multiply the property’s ARV by 0.7. This will help you determine your maximum all-in cost. So for example, if a property’s estimated ARV is at $200,000, you should spend no more than $140,000. [7] Why Partner with BAM Capital for Multifamily Syndication DealsInvestors who are looking for a safe investment should consider multifamily syndication. BAM Capital is an experienced multifamily syndicator that prioritizes B++, A-, and A multifamily assets with in-place cash flow and proven upside potential. We help analyze the gross rental income as well as potential property’s monthly cash flow including comparable market comps in the area. Knowing what a competing property rents for, helps plan out gross rent and generate positive cash flow. The one rule of buying investment properties is that if it makes dollars it makes sense. BAM Capital knows our Midwest market more than any other real estate investing company because we are local. We know rental rates for potential real estate deals, we know how to calculate a monthly mortgage payment, net operating income, and how to factor in all the property management costs and repair costs including taxes, insurance, and closing costs. BAM Capital provides unmatched expertise when working with accredited investors via vertical integration and transparency. It is trusted by investors because of its low-risk model that achieves maximum benefit. BAM Capital is committed to buying the right assets and staying disciplined in its investment thesis. Currently, BAM Capital has $593M AUM and 5,000 units. [9] Schedule a call with BAM Capital and invest today. Related articles- REIT vs Multifamily Sydication The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.” Sources:[1] https://www.millionacres.com/real-estate-basics/real-estate-terms/what-2-rule/ [2] https://houwzer.com/blog/real-estate-investing-for-beginners-whats-the-2-rule [3] https://www.millionacres.com/real-estate-basics/real-estate-terms/what-50-rule/ [4] https://www.listenmoneymatters.com/the-4-rule-vs-real-estate/ [5] https://www.biggerpockets.com/blog/4-percent-retirement-rule [6] https://www.coachcarson.com/one-percent-rule/ [7] https://www.millionacres.com/real-estate-basics/real-estate-terms/what-70-rule/ [8] https://www.rocketmortgage.com/learn/what-is-70-rule-in-house-flipping The post Real Estate Percentage Rules To Invest By appeared first on BAM Capital. Via https://capital.thebamcompanies.com/2021/09/real-estate-percentage-rules-to-invest-by/ What You Need To Know About Investing in Multifamily Real Estate FundsTable of ContentsWhen people think about investing in multifamily real estate, they think about buying a property and then renting it out in order to generate income. And while that sounds like a good way of generating passive income, most investors don’t like the idea of becoming a landlord and actually managing the property. This is where multifamily real estate syndication investments come in. This is a great option that allows investors to generate income in real estate investing without having to be a landlord full time. Understanding Multifamily Real Estate Investment OpportunitiesReal estate is generally the preferred investment strategy for investors who want to avoid the volatility of the stock market. With real estate investing, you can take a more active role in growing your capital. [1] Rental property investing is also a great source of additional monthly income, which is why it’s a good idea to look for these investment opportunities. You can even enjoy a slow but steady appreciation in the value of your portfolio. There are two main types of properties you can invest in when it comes to residential real estate: single-family and multifamily. Single-family properties only have one unit that’s available to rent, while multifamily properties have multiple units of rentable space. Multifamily properties are usually apartment complexes and duplexes. [1] Why High Net Worth People Choose Multifamily vs. Single-Family InvestmentsWhen it comes to residential buildings, multifamily properties are typically easier to finance compared to single family properties despite being more expensive. Banks are more likely to approve a loan for a multifamily property than the average home. That’s because these larger properties can generate a consistent cash flow every month. Multifamily properties have many advantages that are appealing to the experienced investor. In the eyes of lending institutions, this is the safer investment. [1] This is also the reason why high net worth (HNW) people prefer to invest in multifamily properties. Multifamily rentals can be more stable. They tend to avoid major value swings and also produce better cash flow. They even offer that diversification element to your rental income. [2] If you purchase a triplex and one unit is vacant, you can still collect rental income from the two remaining units. But if you are renting a single-family home and it sits vacant, you won’t get anything. This gives you the opportunity to build a portfolio without a huge risk of negative cash flow. [2] High net worth individuals also see multifamily properties as an easy way of building a large portfolio of rental units. Think of it this way: acquiring a 20-unit apartment would be a lot easier than acquiring 20 different single-family homes in different addresses and from different sellers. Many investors also don’t want to open 20 separate loans for each individual property. That’s too much of a headache compared to just going for the single 20-unit apartment complex. [2] What is a Multifamily Fund?A multifamily investment fund is made up of equity investment positions in several large multifamily properties. It pools many properties together into one fund and then divides the equity among multiple investors. [3] These properties may be in one area or in multiple states. It depends on the sponsor’s investment strategy. Multifamily real estate funds are recommended for real estate investors seeking passive income. How Do You Finance a Multifamily Property?For those who are not interested in buying a multifamily property all by themselves, and do notFirst you want to seek out a property in a good location. Location is very important when choosing a multifamily property to invest in. Choose apartment buildings in locations that renters will want to live in. Places close to a school, to the city, or close to multiple attractions make good investments. These are the places that attract high quality tenants who will want to pay to live in the property. [4] Partner up with a local real estate agent so they can offer quality advice when it comes to multifamily real estate. They can even help you determine if a property is overpriced. We have the experience to help you navigate the waters of multifamily property investing. At BAM Capital, we work with investors across the country despite our midwest focus with our assets. We focus on the midwest due to our investment strategy to target tertiary markets with upward trending white-collar jobs, population growth and quality school systems. Next, choose a loan. Pick a loan program and provider that’s right for you. Keep in mind that some online lenders will only finance a 2-unit property but not anything larger. [4] However, conventional mortgages are the most popular when it comes to real estate investing. Once you’ve arranged the financing, you are ready to make an offer on the property. You may need your agent’s help when it comes to making an offer on the multifamily home you are interested in. They will meet the selling agent on your behalf and negotiate based on your budget, financing limits, and the highest offer you are willing to make. Counteroffers are common during this stage. [4] Once the seller accepts the offer, you will move toward the closing process. Now you only have to think about insurance, inspections, and handling the closing costs. want the burden of being a landlord, the best way to finance your multifamily property is through multifamily syndication. What is Multifamily Real Estate Syndication?A multifamily syndication is a type of real estate investment wherein multiple investors pool their money to purchase a single asset. A sponsor is in charge of locating the deal so you don’t have to bother looking for one yourself. It’s all about choosing what syndication deal you want to invest in. [5] The sponsor, also known as the syndicator, is also in charge of managing the investment once the deal has closed. They will put it all together and serve as the general partner who coordinates the transaction all throughout the process. Technically, any type of real estate property can be used for a syndication deal. But we’re discussing multifamily real estate syndication because it is one of the safer investments you can make—and it is also a source of consistent income. On top of all that, you don’t even have to be a landlord since another party will serve as the property manager. [5] How it works is that the passive investors provide most of the capital required, and in exchange, they receive equity in the multifamily property. It is basically crowdfunding for real estate. Sponsors can be individuals or companies. Either way, they will take charge of the deal. They will look for a deal, acquire the property, and manage the real estate. These syndicators have a ton of real estate experience. This means they also have a deep understanding of due diligence for potential deals. Investors, particularly high net worth individuals, usually take interest in multifamily syndication because it offers plenty of benefits. It is a particularly smart move if you want a passive investment, wherein you don’t need to be involved with the property, its tenants, or its management. The investment is protected by the real estate asset. By investing in multifamily syndication, you can get profit from the cash flow, from equity build, and appreciation. The fact that multiple people are investing their money means that some of them could participate in larger deals that they otherwise wouldn’t be able to. Real estate is also one of the best investment vehicles because of its tax benefits. If you want to enjoy the benefits of real estate without the hassle of managing a property, this could be the type of investment for you. Multifamily syndications may differ in terms of the fees, the deal, the investment strategy, and the way equity and cash flow are split. To form a syndication deal, investors and syndicators will form an LLC or a limited liability company. The syndicator will serve as the managing member, and the investors are all limited partners. [5] A certain percentage of the property is owned by each party in the investment. While sometimes ownership is split equally, other times the syndicator takes a larger percentage of equity. Cash flow is also shared amongst the partners based on the percentage they own. Some deal structures include a preferred return to the investor. Before the syndicator can make any money out of it, the deal needs to hit a minimum return. This motivates syndicators to fulfill their role. The individual investor also bears less risk in this arrangement. [5] The specific details of the investment are outlined in a private placement memorandum. This also details all fees associated and all the risks involved. After this, the required SEC registrations and notices are filed. The syndicator secures a loan for the investment and signs on the loan. This means the investors are not liable for the repayment of the loan. Once financing is secured, the sponsor looks for potential investors who would pool their money for the deal’s capital requirements. Once enough money is raised to cover the down payment and the closing costs, the deal is closed. Some syndicators choose to hire a third party property management company to manage the property instead of doing it themselves. [5] At BAM Capital, we are a vertically integrated company with our own construction and management teams. The cash flow is then distributed to the investors based on the structure they agreed upon. As for the exit strategy, it usually involves selling the property at some point—typically between 5 to 10 years in the future. The investors then receive their share of the equity from the sale. BAM Capital aims for a 5-7 year hold period. Is a Multifamily Property a Good Investment?Multifamily rental properties tend to be more in demand, which is a huge benefit for investors. Even if there are vacant units every now and then, the cash flow doesn’t necessarily stop. Learn the differences beween an REIT and Multifamily syndication. Bigger real estate deals often means there are more investors involved. You get the added benefit of having an experienced multifamily asset manager. The cherry on top is you get to add rental real estate into your investment portfolio. Multifamily syndication is a generally low-risk approach to real estate investment. Investors can profit from the equity and appreciation from paying the principal balance on the loan. The goal is to earn more money than the original investment. How Do You Know if a Multifamily Project is a Good Deal?When picking a multifamily project to invest in, there are a few factors you need to consider. Regardless of your strategy for finding these deals, you will surely have a lot of options. It’s all about picking the right one for you. BAM Capital works with accredited investors looking for high value syndication opportunities that will generate more income. If you are looking for lower risk investments that can give you the maximum benefit, consider working with BAM Capital. This Indianapolis-based company has been focusing on buying the right assets and staying disciplined in its investment thesis. Currently, BAM Capital has $593M AUM and 5,000 units. [6] BAM Capital specializes in the acquisition and management of income-producing multifamily apartment communities. BAM Capital also focuses on , B++, A-, and A multifamily assets to provide low-risk opportunities with lucrative assets. Accredited investors reap the benefits of their cash flow-positive assets. Schedule a call with BAM Capital and invest today. The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.” Sources:[3]: https://trionproperties.com/real-estate-investment-education/articles/multifamily-investment-fund/ [4]: https://www.rocketmortgage.com/learn/multifamily-homes [5]: https://www.millionacres.com/real-estate-basics/real-estate-terms/investing-multifamily-syndication/ The post Multifamily Real Estate Funds & Investing appeared first on BAM Capital. Via https://capital.thebamcompanies.com/2021/09/multifamily-real-estate-funds-investing/ What Is The Difference Between Real Estate investment Trust & Multifamily Syndication?Table of ContentsWhile many investors want to put money into real estate and enjoy the benefits of passive income, not everyone is interested in becoming a landlord. Managing the property and dealing with emergency situations isn’t appealing to everyone. For investors who still want to put money into real estate but don’t want the responsibilities of being a landlord, you still have a few options. REITs and multifamily syndication immediately come to mind. Both of these are common options for real estate investors who want to enjoy passive income. But before you can choose one or the other, you need to know the differences between them. Defining a REITA real estate investment trust or a REIT is a company that invests in income-producing commercial real estate. [1] A REIT buys, sells, operates, or finances commercial real estate. These companies tend to specialize in specific property types such as office buildings, shopping malls, or multifamily apartment buildings. [2] You can invest in publicly-traded REITs by buying shares through a broker, just like how you would buy stocks. Defining Multifamily SyndicationIn real estate, “syndication” refers to a temporary alliance of investors who are interested in purchasing a larger property—typically one that they would not be able to purchase otherwise. It is when a group of investors pool their money together to buy a single property. [2] Multifamily syndication refers to a real estate investment wherein multiple investors would purchase a single multifamily property, usually an apartment building. In a multifamily syndication, there is a sponsor—for example, BAM Capital—that is in charge of locating the deal, coordinating the transaction and financing, and manages the investment once the deal has closed. Investors will supply most of the capital required in exchange for equity in the real estate. [3] This is another popular choice for passive investors because you get to have a sponsor who takes care of the investment. The Differences between REIT and Multifamily SyndicationREITs and multifamily syndication have plenty of differences, and some of the most notable ones are the following: number of properties, ownership, accessibility, minimum investment, liquidity, tax benefits, and returns. [1] You should always consult your trusted CPA and/or attorney when looking at a new investment opportunity. Number of Properties InvolvedA REIT would involve a lot more properties since you are investing in a company that already has a real estate portfolio of properties across multiple markets. You don’t get a say in which apartments are purchased by the REIT and where. In real estate syndication, you have a few options. Depending on the syndicator, you may invest only in a single property or invest in multiple assets included in a Fund. For example, since BAM Capital follows a Fund model, investors get a piece of each asset in the Fund. Either way, you will know exactly where the assets are, and how many units are included. You also know all the financial specifics including what the business plan is. [1] There is naturally a higher number of assets involved when investing in a REIT compared to investing in real estate syndication. However, there is no way to tell exactly what number of properties are involved in a REIT, whereas in real estate syndication there may be one or more assets involved. The number of assets involved in the investment is one of the biggest differences between REITs and real estate syndication. Ownership vs. InvestmentIn a multifamily syndication, you actually have direct ownership of the property because you are investing in it directly through a group investment. Together with the other investors and general partners, you will own the LLC or entity that holds the asset. On the other hand, investing in REIT means you are simply buying shares in a company. This means you do not own the real estate properties purchased by the REIT. When you invest in REITs, you do not own any underlying real estate. Instead, you own shares in the company that owns those assets. [1] Investors who want to diversify their investment portfolio may consider REITs and real estate syndication. However, ownership of the real estate asset is an important factor for some investors who are looking for a passive investment. Real estate syndication can be the way to go for investors who want to invest directly into a single property and get a positive cash flow. Ease of AccessREITs are generally more accessible because the majority of them are listed on major stock exchanges, much like other public stock. Being publicly accessible, it is therefore potentially easier to invest in REITs. Real estate syndications are a bit more difficult to find. Some syndication deals are not advertised publicly, and so you would have to know someone who has access to such investment opportunities. On top of that, several real estate syndications are only open to accredited investors, which may be an obstacle for some investors. [1] Fortunately, BAM Capital can help you find the right multifamily syndication deal for accredited investors, which means accessibility is no longer a problem. Minimum InvestmentInvesting in a REIT is just like buying stocks: you purchase shares and that’s it. You can even invest just a few bucks. This is perhaps the biggest advantage that REIT has over real estate syndication. Being able to invest a very small amount of money is appealing to many investors, particularly those who are just getting started with real estate investing. [1] That said, multifamily syndication deals have higher minimum investments and are recommended for more experienced investors. The minimum investment amount depends on the property. While the minimum investment is higher, you can also rest easy knowing that multifamily syndication is also the safer real estate investment. LiquidityREITs keep your investment liquid, which means you can buy or sell your shares at any given time. Your money is not locked in for a set period of time. Investing in multifamily syndication means your money is locked in until the end of the deal. That’s because you are directly investing your money into a real piece of property. Depending on the deal structure, investors may or may not get an equity share at the end. For example, BAM Capital’s Series A units offer a higher targeted monthly return with no equity share, while the Series B units offer lower targeted monthly return with an equity share at the end. Tax Benefits: Syndication vs REITsWhen investing in real estate directly, such as in multifamily syndication, you benefit from a variety of tax deductions including depreciation. These benefits can be substantial in some cases such as when there is accelerated depreciation. Some investors see these tax benefits and tax savings as reason enough to invest. [1] On the flip side, the tax benefits you get from investing in REIT are not as significant. Although you still get the benefits of depreciation, those are factored in before you get your dividends, so there are no tax breaks on top of that. You also can’t use that depreciation to offset any of your other income. Overall, real estate syndication offers more tax benefits for real estate investors. You can still invest in a REIT, but this is just another factor to be considered when looking at prospective investments. ReturnsThe returns for each investment can vary wildly depending on a number of factors such as the property, the manager, and timing. Between the two investments, multifamily syndication generally has the higher average return, with investments that can reach upwards of 20 percent annual returns. REITs on the other hand may average about 12 percent per year. [1] For publicly-traded REITs, the returns can be volatile. REITs can be affected by economic factors including interest rates and unemployment. Multifamily syndication is the safer real estate investment and it can also give you greater returns, which makes it the smart choice for investors who want passive income from real estate. Want to Explore Syndication Investments? Work With BAM CapitalInvesting in real estate can give you a positive cash flow whether you choose to invest in a REIT or go for real estate syndication. Both types of investment have their pros and cons involving cash flow, tax deductions, tax breaks, direct ownership, depreciation benefits, and investment minimums. REITs are more liquid and require a smaller minimum investment, while multifamily syndication deals are safer, and offer greater returns and tax benefits. Accredited investors who want to enjoy the benefits of the latter should work with an experienced multifamily syndicator like BAM Capital. BAM Capital specializes in the acquisition and management of income-producing properties, primarily multifamily apartment communities. Trusted by accredited investors, BAM Capital has a low-risk business model that achieves maximum benefit. BAM Capital has been focusing on buying the most profitable assets and staying disciplined in its investment thesis. Currently, BAM Capital has $593M AUM and 5,000 units. [4] From start to finish, BAM Capital handles the process of finding the best real estate opportunities and negotiates the purchasing and financing on the investor’s behalf. Want to learn more? Schedule a call with BAM Capital today. The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.” Sources:[1]: https://goodegginvestments.com/blog/reit-vs-syndication/ [2]: https://fnrpusa.com/blog/reits-vs-syndication/ [3]:https://www.millionacres.com/real-estate-basics/real-estate-terms/investing-multifamily-syndication/ [4]: https://capital.thebamcompanies.com/
The post REIT vs Multifamily Syndication – Real Estate Investing appeared first on BAM Capital. Via https://capital.thebamcompanies.com/2021/09/reit-vs-multifamily-syndication/ Accredited Investor Requirements & What You Need To KnowBeing an accredited investor opens a lot of investment doors that are closed to the general public. In fact, those who are selling unregistered securities are only allowed to sell to accredited investors. And today, we are going to discuss what that means. Table of ContentsAccredited Investor DefinitionAn accredited investor is someone who is considered “financially sophisticated” enough to buy unregistered securities. Generally speaking, unregistered securities are riskier because they don’t have the normal disclosures that come with SEC, Securities and Exchange Commission, registration. [1] But since accredited investors tend to be knowledgeable and financially secure, they are able to handle the risks of buying these unregistered securities. The SEC believes these accredited investors have a reduced need for the protection provided by regulatory disclosures. [1] Both individuals and business entities may be considered accredited investors as long as they meet designated requirements. These requirements are related to their income, net worth, or professional experience. Cash on Hand or Liquid Holdings: What Do You Need to Become an Accredited Investor?In order to become an accredited investor, an individual or an entity must meet a few requirements. A person is considered an accredited investor if their net worth exceeds $1 million. This can either be cash on hand or liquid holdings. This can be achieved individually or jointly with their spouse. However, requirements vary depending on individual versus spousal. According to the SEC, an accredited investor can also be a general partner, executive officer, or director for the company that is issuing the unregistered securities. [1] Yearly Income Requirements for Accredited Investor StatusAnother requirement in order to become an accredited investor is to have an annual income exceeding $200,000 for the last two years, with the same or higher expected income in the current year. For joint incomes, it must exceed $300,000. [1] If a person shows one year of their individual income and then shows a joint income for the next two years, the income test cannot be satisfied. What people need to understand about accredited investors is that there is no specific “process” that individuals or entities have to go through in order to get accredited. There is no government agency or independent body that reviews an investor’s credentials. [2] There is also no certification exam or a document that shows someone has become an accredited investor. The responsibility of determining whether or not someone is qualified to buy unregistered securities falls upon the companies that issue them. They need to conduct diligence prior to the sale. [1] Does Your Home Equity Count Toward Accredited Investor Status?Although it used to be that someone’s home equity could count as an asset, it is no longer the case. This means your primary residence is no longer counted as an asset in the calculation of your net worth. Because of this, a lot more investors are no longer able to meet the requirements for the accredited investor status. [2] For those who feel that they qualify to become an accredited investor, the issuer of securities may give a questionnaire to see if they fit the bill. You may also be required to attach your financial statements and information of other accounts. Some companies may evaluate your credit report to assess any debts. Why Would Someone Want to Be an Accredited Investor?Being an accredited investor comes with its perks. They are legally authorized to purchase unregistered securities. A lot of companies even offer these securities to accredited investors directly. This opens up plenty of exclusive opportunities for them. This is called a private placement. [1] Accredited investors are legally authorized to buy securities that are not registered through the SEC and other regulatory authorities. In addition to this benefit, accredited investors also have access to hedge funds, angel investments, venture capital, and deals that involve higher-risk investments and instruments. Why Does the SEC Put Restrictions on Accredited Investors?Despite the benefits, being an accredited investor also comes with its cons—the main one being the fact that unregistered securities are naturally riskier. The reason these investors need to be “accredited” beforehand is because authorities want to make sure they are financially stable and knowledgeable enough about ventures that may be slightly riskier. Accredited investors need to know exactly what they are doing. That is the whole purpose of the SEC restrictions and all the requirements.[1] Regulators also want to protect less-knowledgeable investors who may not have the financial cushion to survive high losses. That’s why these provisions exist. Accredited investors are financially well-equipped and experienced. [1] Individuals who want to be accredited investors can simply approach the issuer of the unregistered securities and respond to their questionnaire. If the applicant is qualified, they can become an accredited investor. Some companies may ask for attachments such as salary slips, tax returns, W-2 forms, and even their credit report. Because of these risks, it is important to vet any business that works with accredited investors. You should always use a sponsor who can provide details on their track record and reputation. Example of an Accredited InvestorNet worth is one of the biggest requirements for becoming an accredited investor. Net worth is calculated as assets minus any liabilities. So if someone had an income of $200,000 for the last three years, they need to calculate their net worth to see if they are qualified to be an accredited investor. If their net worth is over $1 million, they are considered an accredited investor. So for example, someone with a primary residence value of $1 million and a mortgage of $200,000, plus a 401(k) account with $500,000, a car worth $100,000 with an outstanding loan of $50,000, and a savings account with $450,000, they have a net worth of exactly $1 million. This is because their net worth cannot include the value of their primary residence. So, if there are liabilities that drop someone’s net worth below $1 million, then they are not qualified to become an accredited investor. Doctors, lawyers, and entrepreneurs are among the professionals who typically reach accredited investor status, but anyone who meets the requirements can be accredited. Can Companies Become Accredited Investors?A company can become an accredited investor if it is a private business or an organization that has assets exceeding $5 million. If an entity consists of equity owners who are considered accredited investors, it is also an accredited investor by extension. However, organizations cannot be created for the sole purpose of purchasing unregistered securities. [1] Benefits of Being an Accredited InvestorThe main benefit of being an accredited investor is that it opens a lot of doors and gives you a significant financial advantage over others. Being an accredited investor allows you to see investments that are closed off to other investors with less wealth. This could help you increase your wealth even further. [2] These unregistered securities may have higher rates of return as well as better diversification. These investments have many attributes that allow you to build more wealth—and in a shorter period of time. Being an accredited investor also allows you to invest in hedge funds, which is one of the many benefits of getting accredited. The reason why hedge funds are only accessible to accredited investors is that they require a high minimum investment amount. The risks associated with them also tend to be higher—with a great return potential. [2] Why Do I Need to Be Accredited to Invest in Products or Securities?The benefits also come with a few risks from the investments themselves—and that’s primarily the downside of being an accredited investor. You need to invest wisely or else you could lose a lot of money in the process. For example, the strategies used by many funds come with a greater risk just for the goal of beating the market. Regulatory authorities aim to promote these investments, but they also want to make sure investors are protected. That’s why you need to be accredited before you can invest in these securities. Accredited investors tend to commit to a few hundred thousand dollars—or even a few million dollars to invest in these securities. If the investment doesn’t work out, they can lose a significant amount. Not to mention there are higher fees associated with these investments. Being an accredited investor has its perks, but you also need to be very careful. [2] The benefits also come with a few risks from the investments themselves—and that’s primarily the downside of being an accredited investor. You need to invest wisely or else you could lose a lot of money in the process. For example, the strategies used by many funds come with a greater risk just for the goal of beating the market. Regulatory authorities aim to promote these investments, but they also want to make sure investors are protected. That’s why you need to be accredited before you can invest in these securities. Accredited investors tend to commit to a few hundred thousand dollars—or even a few million dollars to invest in these securities. If the investment doesn’t work out, they can lose a significant amount. Not to mention there are higher fees associated with these investments. Being an accredited investor has its perks, but you also need to be very careful. [2] Why Accredited Investors Work with BAM CapitalBAM Capital is an Indianapolis-based company founded in 2010 that specializes in the acquisition and management of income-producing properties, primarily multifamily apartment communities. Also known as multifamily real estate syndication. BAM Capital is trusted by accredited investors because it provides an array of real estate services that achieve maximum benefit. Investors love the low-risk business model that the company offers. BAM Capital has been focusing on buying the most profitable assets and staying disciplined in its investment thesis. Currently, BAM Capital has $593M AUM and 5,000 units. [3] BAM Capital finds opportunities for accredited investors. From start to finish, BAM Capital handles the process of finding the best real estate opportunities and negotiates the purchasing and financing on the investor’s behalf. BAM Capital focuses on B++, A-, and A multifamily assets to provide low-risk opportunities with lucrative assets. Investors reap the benefits of their cash flow-positive assets. [3] What makes BAM Capital different is its people. The award-winning team makes all investors, partners, and employees feel like a part of our BAMFAM. Want to learn more? Schedule a call with BAM Capital today. The contents on this site are for informational and entertainment purposes only and do not constitute financial, investment, or legal advice. BAM Capital cannot guarantee that the information shared on this post or page is appropriate for you and your financial situation. By using this site, you agree to hold BAM Capital and any and all entities related to the writing & publishing including BAM Capital’s parent company harmless from any ramifications, financial or otherwise, that occur to you as a result of acting on information found on this site. Always consult your investment advisor, CPA, and other professionals before making an investment. BAM Capital is excited to help you grow your investment assets. Please contact us to see how we can help you.” Sources:[1]: https://www.investopedia.com/terms/a/accreditedinvestor.asp [2]: https://www.investopedia.com/articles/investing/092815/how-become-accredited-investor.asp The post What Is An Accredited Investor? appeared first on BAM Capital. Via https://capital.thebamcompanies.com/2021/09/accredited-investor/ Multifamily Real Estate Investing
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About UsBAM Capital is the best team for private real estate funds and investing in multi family units. BAM Capital leverages local expertise and long-standing relationships with sellers, brokers, and builders to allow for expert knowledge on assets being purchased. Speak to BAM Capital today. Archives
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