Category Archives for "Cryptocurrency & Real Estate"

How to: 3 main ways to invest in Real Estate

#singlefamily #grandeama #amagrande #cashflow #privateequity #accreditedinvestor #nonaccredited #equity #notelending #partnership

Here are 3 main ways to invest in Real Estate to suit your needs.

1. Equity – Be the owner or partial owner.

2. Debt – Be the lender

3. Private REITs or Funds

There are fundamental risks associated with any investment. Do a google search for “rules of investing” and you will find a number of them on the internet.

We can all agree that it is PARAMOUNT you start with a PLAN!

One fundamental rule for real estate investing is to have the knowledge of the main investment structures in order to choose the model that works best for you and your plan (If you have not started one yet… Please reference above and start there) Let me emphasize .

Make A Plan! Now that I have made my point, let’s move on.

If you have a Self-Directed IRA, a 401K or Solo 401k, Pension Plan, another type of Retirement Vehicles or Cash and depending on what your plan is… i.e.- wealth generation, immediate monthly cash flow, or both.

The question you need to ask yourself is:

Do I want to do it, or do I want someone to do it for me?

DIY (Do-it-yourself) vs. DFY (Done-for-you)

I have talked with many investors over the years who strictly adhere to the do it yourself approach, and some have been very successful! They might take on a buy and hold, then might flip, but in every case these investors are committed to spending their own time and skills on making certain that they are the ones who win or lose. They have effectively created a side hustle or “2nd Job” for themselves. And that works for them. But it isn’t for everyone.

The other category of investors choose the “done for you” options. This is what I refer to as passive investors. They invest 50-100K or more with companies or in projects in the trusting that they select the right management teams and the best projects for their goals.

An even larger number of real estate investors straddle both categories optimizing their bandwidth and profitability by leveraging others. Opting for the “hands-on” profits that can happen on a DIY and putting a portion of their funds into DFY so that their money can continue to grow.

Here are some pros and cons to consider. Over the next 3 articles we will deep dive on each method that you need to know and fully understand in order to make well-informed decisions.

  1. Equity Investing – Be the owner or partial owner

Pros

  • Highest potential return
  • Depreciation shelters income
  • Tax deferral with 1031 exchange potential
  • Highest level of control in selecting investment
  • Highest Level of Control of Asset and Management

Cons

  • Highest risk if you don’t know what you are doing
  • Illiquid for 3-7+ years (Equity should be considered a long-term strategy)
  • May require state tax returns to be filed, depending on your state
  • Usually requires accredited investor status, depending on if you invest yourself or work with a firm that partners with Non-Accredited Investors
  • Little to no control or timing of sale, unless you have a properly structured exist strategy
  • Little to no control of direct Management depending on if you choose DIY or DFY (Tip: Make sure to properly vet your management company)

2. Debt Investing – Be the lender

Pros

  • Lowest risk
  • Short time horizon (typically 12 months- 36 months)
  • Typically backed by the asset in 1st lien position
  • Typically monthly interest payments
  • No state tax returns required
  • High level of control in selecting investment

Cons

  • Very tax-inefficient
  • Requires foreclosing in event of default
  • Usually requires accredited investor status
  • No control in management of investment

3. Private REITs and Funds – Debt or Equity

Pros

  • More diversification than individual investments
  • May not require accredited investor status
  • More liquidity than investing directly
  • No need to select individual investments

Cons

  • 0% control in selection of investments
  • 0% control in management of investments
  • You are at the mercy of what the REIT or Fund chooses to charge for Management.
  • Okay, let’s discuss the companies that I think are worth considering for your investment dollars. Note that I’m not going to discuss individual funds in this post nor individual syndicators.

4 Strategies for Investing As a Non-Accredited Investor

#singlefamily #grandeama #amagrande #cashflow #privateequity #accreditedinvestor #nonaccredited #equity #notelending #partnership

Are you a non-accredited investor? Are you trying to find a reliable, safe and lucrative investment to place your capital for mid- to long-term wealth generation?  

In your experience, does it feel as though non-accredited investors are being penalized or disregarded?  

I’ve had so many conversations recently with investors frustrated by forced changes to their investment strategies. You build rapport, build trust and finally invest with a fund. Then some time later… months or even years… you get that call telling you the fund managers are shifting their strategies, and they will be returning your capital because the fund is no longer providing placement for non-accredited capital.  

WHAT? But you have been an investor with the fund for so long! Where is the loyalty? Whatever happened to the old adage “What’s good for the client is good for us”? You receive your wire, but with little or no offer to assist you in finding a new home for your capital.  

So why are Funds and REITs turning away capital from sophisticated, educated, and experienced investors?  

Here’s why… 

The JOBS Act of 2012 created lots of opportunity for syndication and it added regulations that allowed for non-accredited investors (506a and 506b). 

HOWEVER, when non-accredited investors are involved, firms are then required to provide AUDITED financial statements. This may not sound too difficult on the surface, but when you are considering a 506b offer that represents a $10 million acquisition with 20 or more investors, and adding in the complexity of funding and operations, all while maintaining transparency, the task is not an easy one. Audits of this nature can run $50-100K per year, which seriously reduces the amount of money available for returns. 

When private equity offers accept only accredited investors, they are often able to deliver a higher return with less workload on the managers of the offer. They are not constrained by the requirement to provide audited returns. 

Don’t get me wrong, oversight to protect investors is a must! But at what cost? The standards for accredited investors should be amended (how) and indeed this has been discussed in congressional committees over the last couple of years. 

So back to your investment problem: you’ve been booted from your fund, and now you are on the hunt….yet again…to find a new company to build trust and rapport so you can find a new home for your investment dollars. However, fewer and fewer companies are willing to work with non-accredited investors… 

So what is the solution? Where can you safely place your capital as a non-accredited investor?  

As a non-accredited investor, if you have cash, a self-directed 401k, a self-directed IRA, a pension plan, or one of a multitude of other investment vehicles, here are a few places you can direct your investment dollars to work for you and get the returns you are looking for: 

1. Equity Investing: Joint Venture/Partnership 
2. Debt Investing: Specific types of Note Lending 
3. Select REITs 
4. Select Funds 

Don’t lose hope…You are not alone!  

And more IMPORTANTLY, you are not out of luck. There are plenty of opportunities to invest directly, indirectly, and passively into real estate that provide great opportunity with low risk. These investments are very appropriate for sophisticated investors who want passive income and growth.  

Contact Grande AMA and Associates at investorrelations@amagrande.com today to see if we can assist you in identifying the right place for your investment. Visit our website at https://amagrande.com or give me a call directly at (480) 542-7772. 

I look forward to assisting you with any questions you have regarding non-accredited and/or accredited investments for your portfolio. 

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