3 Ways to Increase Your Real Estate Portfolio This Year

Building wealth through real estate is a tale as old as time. There are countless experts and charlatans selling courses on how you can build wealth, quit your job, and live the good life.

What if you really love your job and don't want to quit?

What if you don't want to create a new job as a landlord?

You may have heard about how real estate has created more Millionaires than any other investment vehicle. It sounds sexy right?

​​Maybe you tried and you aren't all that handy.


Here are 3 Ways to Increase Your Real Estate Portfolio This Year.

1. BUY SINGLE-FAMILY HOMES OR SMALL MULTIFAMILY PROPERTIES

Advantages: Easy to manage, only a single-tenant, long term leases, potential to offset W-2 Income, depreciation, non-accredited investors.

Disadvantages: Low cash flow, high investment buy-in, value based on sales comps, not performance, high risk, low diversification, illiquid, challenging taxes.

2. INVEST IN A REIT

Advantages: Just like stock, easy to invest, highly diversified real estate portfolio, liquidity, non-accredited investors.

Disadvantages: Own paper stock, no depreciation to offset W-2 income, dependent on REIT Manager, returns are typically fixed.

3. REALLOCATE VOLATILE STOCK MARKET INVESTMENTS TO APARTMENT COMMUNITIES (Hint: Easiest and Most Profitable)

Advantages: Higher Cash Flow, higher return potentials, truly passive, Depreciation pass-through, own % of real estate, fixed returns + upside equity, inflationary hedge, doubling effect in 3-5 years, invest from retirement funds, no debt required, easy K-1 pass through for taxes, Multi-Million dollar assets, SEC regulated.

Disadvantages: Hard to find, sponsor's track record, illiquid for 3-5 years, most for accredited investors only.

The fastest and easiest way to grow a real estate portfolio is through #3, the syndication investing strategy. Syndications are set up for more than just multi-million dollar apartments. They can be set up for commercial real estate, storage facilities, and so much more.

You may not have a broad knowledge of syndications as an investment option as the SEC rules changed in the last decade. Essentially a syndicate is recognized by the SEC as a security being traded, however, it is actually crowd-funded participation in the purchase of real estate.

So which is it? Is it real estate or is it security?

It's both actually. The SEC recognized that in order to sell securities there must be a licensed securities broker involved. Real estate does not require a licensed broker. However, because of the scope and structure of the syndication, the SEC provided exceptions to the licensing under certain conditions.

Now real estate operators have the ability to hire an SEC attorney to help with the acquisition of large mult-million dollar assets, such as 200+ unit apartment complexes, through a crowd funding platform called syndication.

When a non-active partner wants to invest in a syndication deal, they become limited partners in the deal with ownership of the asset directly related to the amount of their investment. Any liability in the deal going south is limited to the principal amount of the investment only.

Limited partners do not sign on debt and are not party to lawsuits relating from disgruntled tenants and employees. The general partners, aka syndicators, carry the liability for lawsuits and debt obligations.

We see high-income earners like doctors, lawyers, and engineers, as well as people with healthy retirement accounts, become investors in these types of assets to supplement their retirement. In a recent article, How to Invest in Real Estate Using Your IRA, we break down what it takes to supercharge a retirement account with real estate.

​As you consider your Investment strategies this year, consider these 3 ways to increase your real estate portfolio as well.

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