Tag: Real Estate

Categories
Real Estate

How to Be a Successful, First-Time Homebuyer in 2022

Mid-2022 is probably the worst time to buy a home. Median home prices hit an all-time high of $440,000 in July, and mortgage rates are at 5.5%, almost double what they were last year.

While buying a home now may seem a terrible idea, there are ways to bag yourself a good deal. So, these are some tactics you can employ to ensure your purchase doesn’t become a financial nightmare.

1. Do your Research

Before looking for a home, you must understand the market to know what’s within your budget. Sure, most home prices have skyrocketed over the past few months, but there are some places where it’s coming down.

For instance, according to Redfin, Salt Lake City, Boise, and Denver all witnessed at least 50% cuts in asking prices. Seven more cities, including Tampa and Sacramento, saw asking prices slashed by more than 44%.

So yes, you can still bag yourself a deal in the current environment, as long as you are willing to do the legwork and compromise on the places you wish to live in. 

2. Build your Credit History

It helps to build your credit history if you’re a first-time homebuyer. A poor credit score makes qualifying for a mortgage loan challenging or attracts high premium rates because financial institutions will view you as a risk.

If you have little or no credit history, you may need to take steps to build up your score. Here are some tips for doing so:

  • Pay all your bills in full and on time: Even if you don’t have any credit cards or loans yet, you should make sure that any bills you pay regularly (such as rent or utilities) are paid on time and in full. It will help establish your payment history and show lenders that you’re reliable with money.
  • Don’t open too many credit cards at once: If you decide to apply for a credit card, make sure that you only use one at a time so that it doesn’t hurt your credit score too much if the application gets denied (or approved but with a low limit).
  • Minimize utilization rate: Your balance-to-limit ratio (utilization rate) is just as important as payment history. It refers to the total balances racked up on all your credit cards divided by the total credit limit of all the credit cards. Aim to keep this figure below 30%. 

3. Make a Sizeable Down Payment

Making a sizable down payment toward buying your home is vital. The down payment is typically between 3% and 20% of the home’s purchase price.

You want to make a large down payment because it will lower your monthly mortgage payments, saving money in the long run. Additionally, making a large down payment means avoiding paying private mortgage insurance (PMI).

PMI is an additional fee that many lenders require as part of their mortgage loan package. It protects them if you default on your loan—but it can add hundreds or even thousands of dollars to your monthly mortgage payment.

You can avoid PMI by paying more than 20% of the home’s purchase price as a down payment. Alternatively, you can avoid a down payment by getting a piggyback or 80-10-10 loan, which covers 10% of the deposit while you deposit the other 10% from your savings.

4. Get Pre-approved for a Mortgage

When you’re a first-time homebuyer, getting pre-approved for a mortgage is one of the most important steps to ensure you find the right home.

Getting pre-approved means that a lender has reviewed your finances and determined that you can afford a home at a certain price range. Your agent will know how much house you can afford, so they don’t waste time showing you homes that are beyond your means.

5. Try Out for First-Time Home Buyer Grants and Programs 

First-time homebuyers have several financial assistance programs that will soften the sting of the hefty payments needed to purchase a home.

A first-time homebuyer’s grant refers to financial assistance you may receive to purchase your first home. It typically covers a percentage of the down payment and closing costs. Since it’s a grant, you may not have to repay the amount. Examples include:

  • Downpayment Toward Equity Act
  • Good Neighbor Next Door program
  • Bank of America’s Home Grant
  • Chase Bank Homebuyer Grant

On the other hand, first-time home buyer programs usually come from federal, local, or state governments and take the form of tax credits, forgivable mortgages and closing costs, and down payment assistance.

You may qualify for the Housing Choice Voucher if you face financial challenges due to a low income and receive minimum earnings as stipulated by your local public housing authority. A clever way to use the voucher is to fund a rent-to-own program.

Similarly, you can apply for an FHA loan. These are Federal Housing Administration-insured loans made by private lenders, usually featuring zero-interest loans and deferred payment loans. Moreover, they typically have lower down payments and require lower credit scores than most other mortgage loans. 

6. Use a Mortgage Broker and Agent

It pays to consult a mortgage broker in such a tight financial environment. They know the ins and outs of the mortgage industry, so they can find you a mortgage with lower fees, great rates, and financial perks and help you overcome borrowing challenges.

Similarly, procure the services of a real estate agent. Using an agent is one of the best ways to ensure a smooth process and a successful outcome. No wonder 87% of homebuyers used an agent in their home purchase.

Real estate agents or brokers know the market and can help you find your dream home at your price range. Ensure that the agent knows your unique needs so they can find the ideal property that fits your lifestyle.

7. Consider Variable-Rate Mortgage

A variable-rate mortgage can be a good choice at this point. You don’t want to go for a fixed-rate mortgage with fixed interest rate monthly payments throughout its lifespan, as the current mortgage rates are very high.

An adjustable-rate mortgage will have fluctuating mortgage rate payments, so you will pay lower fees when the interest rate is eventually lower. Further, an adjustable rate payment allows you to make higher monthly mortgage payments without penalty. That means there’s a chance you might pay much less than a fixed rate arrangement.

Additionally, variable-rate mortgages typically have lower initial interest rates than fixed-rate mortgages, which means they’re cheaper upfront. That could buy you some time until the interest rates finally dip.

Finally, you could refinance the variable-rate mortgage and exchange it with a fixed-rate mortgage when the interest rates eventually drop to reasonable levels and it makes financial sense to do so.

Final Word

Many potential first-time home buyers are postponing the purchase because of the hostile economic environment that has rendered homebuying virtually impossible.

Home prices have reached historical highs, and mortgage rates are double what they used to be in January 2022, with more hikes in the pipeline as the Fed is threatening more interest rate hikes.

If you must buy a home, try looking for one in states that have lowered their asking prices, utilize a mortgage broker and real estate agent to find deals for houses and mortgage rates, and build your credit history to score favorable loan terms.

Similarly, consider a variable-rate mortgage, make a sizable mortgage down payment to reduce your monthly mortgage payments, and try to secure a first-time home buyer grant or similar program.

 

By Gurpreet Singh Padda, MD, MBA

 

Categories
Real Estate

9 Things Help Investors Thrive During Real Estate Recessions

There is a concern among many investors in real estate about the possibility of a recession in light of recent economic uncertainties and how that will affect the real estate market.

In most economic downturns, people lose jobs, and mortgage rates typically go higher than most can afford, crippling their ability to purchase properties. But that doesn’t always spell doom for real estate, so here’s a look at how a real estate investor can survive, or even thrive, during a recession.

1. Branding and Marketing

The best way to survive a recession is to keep marketing your brand. It’s about building a brand that stands out from the crowd.

Branding isn’t just about getting customers to recognize your business; it’s about getting customers to keep coming back for more business as you have established yourself as a reputable brand. One of the best ways to achieve this is through positive marketing.

While most businesses would understandably cut down on marketing during an economic downturn, that’s the perfect time to rump up your marketing efforts, as it has healthy returns. For instance, the return on investment (ROI) for email marketing is $36 for every $1 spent. Here’s what you stand to benefit from good marketing and branding:

  • Gaining a larger audience
  • Increased cash flow
  • Help you take some of your competitors’ clients

2. Learn More About the Real Estate Market and the Recession

You need to have a working knowledge of the economy and how it will impact the real estate industry to stand a chance of surviving a recession. Get to know the causes of the recession and where the money is headed.

In a recession, not all economic sectors will slump; some might perform better than others. Use this knowledge to pivot your business to cater to those sectors that are doing better during the downturn.

Take the 2020 recession, for instance: while shopping in malls dipped by 70% and the office industry slumped due to work-from-home initiatives, the booming ecommerce industry led to a steep increase in demand for warehouses.

3. Invest in Technology

Investing in a customer relationship management (CRM) tool during a recession is one of the smartest moves you could make, as it has an average ROI of $8.71 for every dollar spent.

As a real estate brand, you can use CRM to track client information and make follow-ups. A sound CRM system should have features that enable you to access information about potential buyers and sellers easily and communicate with them using various channels. 

Similarly, you can use social media sites and real estate apps to showcase your listings and increase your reach.

Consider technologies such as virtual tours and virtual staging to cut down on costs of staging an open day and staging a listing.

4. Work on Customer Retention of your Current Clientele

Keeping your already existing clients should be a major priority. When you work hard to maintain good relationships with your clients, they’ll appreciate it and return the favor. That makes them feel special goes a long way toward building trust. Try some of these customer service strategies:

  • Maintain a customer feedback loop
  • Provide personalized customer service
  • Start a customer education program
  • Give offers and discounts
  • Provide incentives 

5. Grow your Network

Never underrate the power of networking, as it can help your business stay afloat during recessions. You can build relationships with friends and associates to expand your business’s reach and abilities.

A more extensive network will help in acquiring new business leads, which you can work towards closing to improve sales. Additionally, it will help you keep abreast of the latest trends in the market and identify best practices.

Further, networking will increase your connections and opportunities to explore new markets.

6. Cut Expenses

Tough times call for tough measures. Everyone has to make sacrifices to ensure the firm makes it through an economic downturn, which means cutting costs. Reducing expenses is a brilliant idea even in good times.

Lower your expenditure by eliminating items that don’t offer much to the business, such as a cable subscription in the office. Alternatively, realign your financial spending by reviewing your insurance providers to get a better deal, consolidating bank accounts, and avoiding unnecessary debt.

Improving efficiency will also help in cutting down costs as it minimizes wastage. Purchase the right tools, go paperless, and improve time and project management.

7. Stick to your Business Plan

Economic recession is part and parcel of every business cycle. You don’t need to panic and sell everything. Just stick to your original business plan with just a few adjustments. To stay focused on the big picture, make it a point to refer to your long-term objectives and plans regularly.

Moreover, set short-term weekly and monthly goals, and tweak where necessary as long as they tally with the master plan. You may need to restructure the business plan as recessions can be unpredictable.

8. Re-evaluate the Business

A recession is the perfect time to take a step back and take a long hard look at the business. Since there’s plenty of time on your hands, use the time to evaluate the company and find any weak points that need fixing.

Maybe business is low because you’re not marketing right, your pricing doesn’t make sense, or you don’t understand prospects. Go over your data, try to work where problems are, and implement potential solutions.

9. Create a Unique Value Proposition

Creating a unique value proposition is one of the best ways to thrive in any market. In real estate, this means differentiating yourself from the competition. That means providing something the others don’t offer. 

That could mean anything that offers extras to clients, like diversifying your business by partnering with a mortgage broker, so you offer mortgage provision services in-house.

Final Word

One of the key lessons to surviving a recession is never to stop marketing. That will help build your brand as well as bring in new business. Alternatively, create a unique value proposition, invest in technology, and grow your network to improve sales.

On the other hand, save money by cutting back on expenditure, sticking to the business plan, and retaining your current clients. It also helps to keep abreast of the current economic environment to find opportunities you had not considered before. 

Despite the macroeconomic headwinds of recession, your individual economic success could be amazing, as long  as you can navigate and anticipate this crisis.  What outwardly appears to be chaos may be an historic opportunity.

By Gurpreet Singh Padda, MD, MBA

Categories
Real Estate

Real Estate Wealth Doesn’t Disappear; it Transfers

 

The economy is currently enduring a significant downturn, having recorded two consecutive quarters of a decline in the country’s GDP in July 2022 and also demonstrating a significant decline in productivity. The FED is purposely increasing the midterm interest rates to reduce historic inflation, it is not yet actually doing quantitative tightening per se, but is quelling economic by reducing consumer confidence. The FED is unlikely to recover until the 3rd or 4th quarter of 2023. For many, this is the textbook definition of a recession, and the signs are everywhere. There’s a bear market, consumer and small business confidence is in tatters, high inflation, and rising interest rates.

While the National Bureau of Economic Research refuses to call it a recession, many are feeling the heat, and the real estate industry is no exception. The Federal Reserve’s 20-year-high rate hikes have jacked up mortgage rates, putting the skid on a hot market. The last time consumer confidence in the housing market was this low (17%) was in 2011. The annual price appreciation rate dropped from 19.3% to 17.3%.

Two of the biggest real estate companies, Redfin and Compass, laid-off workers, with the Redfin CEO citing a 17% decline in expectations back in May 2022. Even REITs, traditionally investors’ safe haven, are taking a beating, with the S&P REIT index plunging 23% as of July 2022.

While the real estate industry may seem calamitous at the moment, it is often said that wealth, like energy, can’t be destroyed; it transfers. There’s a reason why real estate is touted as having produced 90% of the world’s millionaires. All you have to do is join the dots, follow the money trail, and you will be fine recession/downturn or not. Please keep reading to learn how to go about it.

How to Prepare for a Turbulent Real Estate Market

There is a lot of uncertainty in the markets, so real estate investors need to prepare for anything that comes their way. That means getting your house in order, including:

1. Reduce debt

The average American is $90,460 deep in debt, but that doesn’t mean you have to sink to such depths. Huge debts will dent your credit score, diminish cash reserves you can use to improve your quality of life, eat into your emergency fund, and obliterate your ability to save or invest. Settle debts with higher interest rates and keep away from them. It would be best if you only kept debts with more prolonged and lower interest rate payments. Similarly, only sign up for debt whose investment will yield higher returns.

2. Diversify your investments

If you’ve just started investing in real estate, it is essential to diversify your investments because not all real estate forms perform the same. It means having a mix of hard assets in different industries that will help you weather any storm that may come your way. For instance, don’t just invest exclusively in commercial office blocks. Try malls, single-family units, multifamily units, REITs, or others.

3. If you have the money, try a hedge fund

True, getting into and maintaining a hedge fund is costly, but it is one of the best vehicles during a downturn. Most hedge fund managers will employ different techniques such as derivatives, leveraging, and especially short selling, where you will make a profit if the value of an asset falls, which is perfect during an economic downturn.

4. Study about returns

Since the market dictates that we watch the pennies, you have to assess the return promised by each deal before making a decision. For instance, you must be smarter in evaluating whether to pay off debt or invest. For example, instead of increasing payments towards offsetting the mortgage, you would be better off investing that money elsewhere, especially if the returns are much higher than the inflation rate.

5. Take advantage of opportunities to sell your home

Median home prices hit a record high of 440,300 in July 2022, the Fed continues to jack up interest rates, leading to higher mortgage rates, and the supply of homes is still lower than expected. Now might be the perfect time to sell your home if you wish to make the most out of the market. Since there’s little supply, there’s little competition, but you have to act fast before the spiraling mortgage rates lock out all potential buyers.

6. Think long-term investment

It’s easy to get caught up in the excitement of a good investment opportunity, but it’s essential to keep things in perspective. You could lose money if you lose your head and make an impulsive decision. Instead, take time to consider all options before making any moves.

7. Curb appeal

If you have a home that needs some work before it’s ready to sell, now is the time to get started. Although home repairs can be costly, they add value to the property.

HomeLight research suggests homes with good landscaping fetch between 5.5% and 12.7% more than poorly landscaped ones. There’s even an instance where a new $20,000 worth of curb appeal returned $200,000 more for a home they had bought a year earlier. It would help if you considered painting the walls in neutral colors, manicuring the lawn, and replacing old and broken stuff and appliances.

8. Build relationships with other realtors

You don’t always have to compete, especially in a low-supply environment. Instead, team up with other realtors to create a network of peers for the common good. That should improve your craft, get referrals, and serve your customers better as you exchange valuable input from each other and find the best deals for your clients.

9. Make use of technology

Instead of requiring clients to make a trip to view the property, you can provide virtual reality tours to help save some money. Additionally, you could use customer relationship management (CRM) platforms to keep track of listings and customers to ensure they get the best service.

There are plenty of real estate platforms and apps that make it easier to market listings to a broader audience. Some even utilize AI to match buyers to their most preferred listings, making it easier to find suitable homes.

Wrap up

Whenever there’s an economic downturn, you should note that wealth doesn’t disappear; it just transfers. It may not be transferring to another visible entity, but may be transferring in time, or it may be transferring in nominal currency (for example, the US$ is increasing in value compared to the Euro, and although US$ denominated Real Estate prices are declining, they are increasing against the Euro). Your job is to follow the trail to ensure you maintain a profitable real estate business.

Some ways you can achieve this include diversifying your real estate portfolio, reducing debt, trying other forms of investments such as hedge funds, making use of technology, and opting for investments that provide the best returns.

 

By Gurpreet Singh Padda, MD, MBA

Categories
Real Estate

How Successful Companies Handle Crises

 

 

Handling Crises 危機 (“Kiki”)

危機 (“Kiki”) is the Japanese word for crisis, it is composed of two letters:

(危) means “dangerous”

(機) means “opportunity”

Combined, crises are both an opportunity and a threat.

 

No matter your company’s age, size, or legacy, it is vulnerable to a crisis. Recently, some of the world’s most prominent brands have come under fire from the media. Like when Uber lost 200,000 customers after the hashtag #DeleteUber trended when they operated during the Trump strike. Or when United Airlines lost $800 million in value in a matter of hours.

A 2021 PWC study showed that 35% of respondents had a crisis plan in place when the COVID-19 pandemic hit, and only 20% felt the pandemic positively impacted their organizations. Seeing the consequences Uber and United Airlines faced, companies must have a crisis management strategy.

Crisis Management for Real Estate Companies

The pandemic brought unprecedented challenges to businesses, not just the real estate market. Statistics showed that nearly 100,000 businesses closed shop permanently. That forced many companies to reevaluate their crisis management strategies.

Many developers experienced stoppages and delays in their real estate projects, requiring companies to think outside the box to create safe and smart solutions.

Many companies tend to be reactive instead of proactive regarding crisis management, but lacking a crisis strategy may lead to the following issues:

● No designated spokesperson to coordinate communications can lead to a communications breakdown.

● A lack of clear messaging to stakeholders to address the situation can make them confused, scared, and angry, which is bad for business.

● Outsiders looking in will place your company on the list of companies facing a PR disaster in that year.

● Solving the crisis will take far longer, so you may hit some snags.

● If you do not take control of the situation, the company will face negative financial ramifications.

Crisis Management Examples

1. Cracker Barrel

In 2017, Bradley Reid posted on the restaurant’s corporate page, asking why they fired his wife, Nanette, after working at the restaurant for 11 years. Soon enough, the hashtag #JusticeforBradsWife began trending online. Shortly afterwards, someone started an online petition at Change.org, seeking answers. 17,000 went ahead to sign it.

The response the restaurant gave to the crisis was silence. They ignored the hashtags, petitions, and firestorm surrounding the situation. Cracker Barrel did run through the crisis without so much as a tumble in its net worth.

The key takeaway from this is that sometimes silence works best. It is a risky choice, but like Cracker Barrel, it may turn out well. A new video trends every other day, and people are quick to forget and move on. This strategy may just work out if keyboard warriors find something else to focus on.

2. Johnson & Johnson

In 1982, Johnson & Johnson faced a crisis where 7 people in Chicago died after ingesting over-the-counter Tylenol capsules laced with cyanide. To date, the incident remains unsolved. How the company handled the crisis is a textbook example of crisis management today.
Following the deaths, Johnson & Johnson immediately responded by stopping advertising for all its products. The company then sent out 450,000 messages to healthcare facilities and stakeholders, informing them of the crisis. Johnson & Johnson also sent out safety warnings to consumers.

Evidence later showed that the substance was accidentally introduced through store shelves and that it was not the company’s fault. However, the company still took full responsibility. This incident led to the company eventually manufacturing tamper-proof packaging.
Experts roundly regard the response as one of the best in the history of crisis management. The media praised how J&J handled the situation and how it also helped Tylenol recover as a brand. The key takeaway is that integrity and transparency go a long way towards building consumer and public trust again.

Crisis Management Planning Tips

Having looked at how some companies managed their crises using essential principles, below are a few steps to create a successful crisis management plan.

1. Anticipate Crises

Instead of waiting to scramble a team and a plan together after a crisis, plan ahead for the worst-case scenarios. During brainstorming sessions with the team you put together, quickly determine which situations are preventable. You can include variables in the plan that allow tweaking in response to a real crisis.

2. Create a Crisis Team

By default, the crisis team should include the management team, the CEO, and the PR manager. If possible, have web and social media managers on the team. Social media managers are on the frontline and can detect the public’s consensus and mood.

They can also gather insight from online mentions, hashtags, or posts that the company can use to steer the crisis on the right track.
Next, you want to choose the right spokesperson in place—one who is comfortable in front of cameras and people. If possible, the spokesperson you select should have some media training.

3. Know your Stakeholders

The internal and external stakeholders are the first people you should communicate with. Develop communication channels that will resonate with stakeholders individually.

4. Develop Holding Statements

With the proactive planning in place, you should already have pre-planned holding statements ready to release inside the company’s online newsroom. The main aim of a holding statement is not to plead for forgiveness or grovel; the idea is to acknowledge the situation and provide contact information that the public can use.

5. Post-crisis Review

As insignificant as it may seem, this is a step that major companies focus on that helps evaluate and update the crisis management process. Develop, assess, and discuss strategies to update potential scenarios that may happen.

This is a crucial process as you now have data and facts regarding how the company reacted to the crisis, the public’s response, and stakeholders’ reaction to the situation. You can use the information to ensure the company creates an even better crisis response.

In conclusion

Any company can implement the same strategies big companies use for their crisis management. Combine the swift and transparent response that Johnson & Johnson used, with the crisis plan outlined above, to ensure your company stays ahead in any crisis it may face.

I personally look forward to times of crises, it dramatically improves my returns and allows me an opportunity to test myself against unknowns. The most important thing that crises brings to the forefront are my inherent weaknesses in my structures, it allows me an opportunity to prune dead wood and recharacterize / recast the future. Look to crises as an opportunity, not a threat.

Categories
Podcast

How Time Is More Valuable Than Money And How To Use It To Negotiate With Dr. Gurpreet Padda

Capital Gains Tax Solutions

So the big tax question is this: how do wealthy people keep their money working for them when selling their business, real estate, or other highly-appreciated assets, without paying hundreds of thousands to millions of dollars in tax? What if we, as business and real estate owners who have poured blood, sweat, and tears to growing our wealth, and who didn’t hire expensive tax attorneys and CPAs to map out an exit strategy, knew their secrets? Instead of recreating the wheel, why can’t we just model the way they deferred 30 to 50% in tax, paid off debt, funded their next business stream, and most importantly, leave a financial legacy to give to the causes we believe in most? What if their secrets weren’t complicated at all, and you just need a guide who is a few steps ahead of you? That is the question, and this podcast will give you the answers. My name is Brett Swarts, and welcome to “Capital Gains Tax Solutions.” Welcome to the “Capital Gains Tax Solutions Podcast,” where we believe most high net worth individuals and those who help them, they struggle with capital gains tax deferral options, not having a clear plan is the enemy and using a proven tax deferral strategy, such as the deferred sales trust, or cost segregation, or 1031 exchange when it makes sense is the best way for you to grow your wealth. Hey, I’m your host Brett Swarts. In each episode, I am joined by some of the best real estate minds, financial minds and wealth minds in the world where they share their ideas, deal stories and inspiration. So together we can make complex tax deferral strategies simple and passive income plans achievable. I’m excited about our next guest, he’s a physician by trade, but he’s had real estate in his bones, in his blood since a young age of 14, he’s gonna share that part of his story, and he wants to… He’s on a mission to help create and preserve wealth for himself and his family and his partners, and also help people to understand real estate as a whole.

Love the show? Subscribe, rate, review, and share!

Here’s How »

Join the Capital Gains Tax Solutions Community today:

capitalgainstaxsolutions.com Capital Gains Tax Solutions Facebook Capital Gains Tax Solutions Twitter

Categories
Real Estate

The Journey of a Physician and Real Estate Investor with Gurpreet Padda, MD

This week’s episode is the first in a two-part series that features Gurpreet Padda, MD. He is a private practice physician out of St. Louis, Missouri, who runs Reversing Diabetes MD and Padda Institute Center for Interventional Pain Management. Dr. Padda also runs Red Pill Kapital, which is a real estate investment development and management company. He is an advocate for educating private practice physicians on passive wealth strategies through owning real estate.

In this episode, we talk about…

[5:05] Getting into real estate as a teenager

[6:08] The desire to have a life outside of the hospital

[9:05] Characteristics that are more relevant than your education when it comes to owning a business

[10:30] The applicability of medical training to real estate

[11:09] How Dr. Padda decided on his medical specialty

[12:39] How capital flow impacts our health as well as the real estate market

[15:17] The importance of investing in real estate for your practice(s)

[16:31] How to decide where to purchase real estate for practice locations based on patient perspectives

[17:33] The effect of the pandemic on retail real estate

[21:28] Selling restaurants before the pandemic began

[24:14] Educating clinicians on creative passive cash flow and equity growth

[25:22] Why physicians tend to make financial decisions based on narcissism

Links to resources:

Reversing Diabetes MD: https://reversingdiabetes.com

Padda Institute Center for Interventional Pain Management: https://painmd.tv

Red Pill Kapital: https://redpillkapital.com

Categories
Real Estate

About Physician Retirement

A retirement savings plan is supposed to help you retire, but the problem is you’re still working and your money is retired.

Real estate is the most powerful way to accumulate wealth. More people have become millionaires through real estate than any other means. We know how to find the property, create a plan for improving the cash flow, negotiate the deal, and manage the asset. Your passive investment provides you with the opportunity to earn an income without the nine to five. We create a unique business strategy that fits your financial and investment goals. Get the financial freedom you need to do more of what you love. We are Red Pill Kapital, with a K.

About retirement

Close to two-thirds of seniors cite finances as the primary reason why they remain at work, according to Provision Living, which is a provider of senior living communities. That means that the vast majority of people when they approach retirement age are unable to retire.

How long will your money last you in retirement, especially when you consider that one year of nursing home care in a semi-private room is projected to be $128,000
a year in 2021?

A 65-year-old couple retiring in 2019 can expect to spend $285,000 on health care costs in retirement alone. A working senior only has an average of $133,000 in retirement. How long will your money
last? Even if you’re a super-wealthy physician, have you anticipated an additional $285,000 in medical expenses? Have you anticipated $128,000 a year for the next 10, 15, or 20 years if you have to go into a nursing home facility?

You may think that the standard recommendations of putting 15 percent of your paycheck towards a retirement plan were impossible to achieve.

Even if you want to live on just half of your final salary, you need to put in about 40 percent of your income. This is dramatically different than what most people anticipate, and this assumes a historical return rate of eight to 10 percent, and I’m going to tell you that the future return rates on most traditional portfolios are going to be well below eight to 10 percent. They’ll probably be between six or seven percent, and when you take out inflation, and taxes, and everything else, your net rates of return are going to be two to three percent, so that’s going to have a dramatic impact on your retirement growth plan.

Future stock market returns will not match the historical returns.

The reality is the historical returns are eight to 10 percent. We expect the future to be six percent. When you take out the one to two percent in portfolio management or asset management fees, and you take out the two and a half percent, also, for inflation, you end up with essentially about a two to three percent rate of return. That’s not enough to sustain yourself long-term on a passive income
alone. It would just be setting aside a lump sum of money, and just eating through that at a very low rate.

If you bring in somebody who knows what they’re doing, it dramatically increases the likelihood of your success. You would call in a specialist if you had a pulmonary disease; you would call in a cardiologist if you had somebody with an unusual cardiac dysfunction that you couldn’t quite figure out. You would call in a neurosurgeon if you had somebody with a glioblastoma – so call in a specialist, call in somebody to help you navigate this. But, be careful who your specialist is, because usually the specialist that you call in is selling their plan, and it’s selling what they do really, really well, and what they make most of their money on.

If you do call in a specialist, you will get a more formalized retirement investment plan in place.

Almost half of the people that do that get a formal plan out of it. It’s really important to understand what your expenses are going to be, what your income is going to be and to analyze it before you get there. This is not a set and forget it. This isn’t an, “Oh, I’m going to have this, and I’ll be okay.” This is not something that you can make a change then. Your “then” has to be “now,” and you have to be able to predict where you’re going to be 30 years from now.

What does this have to do with physicians?

I mean, physicians have money. Why is it that it’s so relevant? The problem is that most physicians are active-wage employees, and most of them would invest most of their assets in the stock market, or they invest their assets in employer-sponsored retirement plans, which invest in
the stock market. These paper assets are precisely the things that are most damaged and most volatile, and the things that are consumed by assets under management fees. Most physicians rely on professional advice, but their investment options are limited to the financial instrument offered by their plan or their advisor.

What happens is they get this false sense of security, and that false sense of security makes them think that they’re going to be okay until they get to retirement, and by then it’s too late to make a change. There was an AMA study done in 2018, and they asked retired physicians: Do you feel
comfortable? Over half of them were worried about volatile market conditions depleting their savings. 40 percent of them felt like they hadn’t saved
enough, 28 percent said that they started saving too late, and about a third of them realized that their medical expenses were going to be out of control. Nearly three-quarters of all physicians were under duress by the time that they retired, which is almost exactly the same number that’s in the general population of non-physicians.

Physician salaries and income may be high, but their expenses are also high. Physicians’ hyperspecialization in medicine has kept them from understanding the financial world, and that lack of understanding is going to have a huge impact on physician retirement and financial stability.

We went to medical school to care for and improve humanity

We assume that by doing good for others, we would do well for ourselves. Unfortunately, that’s not true. Those financial rules have changed. We have to adapt to this new world – or we’ll die extremely highly educated but broke.

About me

I’m Gurpreet Padda. I’m a physician. I also have an MBA. I’m board-certified in anesthesia. I’m board-certified in interventional pain, and I’m board-certified in addiction, so I have a lot of experience in the medical field. I graduated from the University of Missouri-Kansas City in 1988. I’ve been in both an academic and private practice. I’ve been at a hospital-based practice, and I’ve been in independent medical practice as well. I’ve used insurance-based plans, and I also have a cash-pay practice when we deal with issues associated with cosmetic surgery. I’ve run 11 outpatient clinics. I’ve developed surgery centers for myself, and I’ve developed surgery centers for other people. I have both a medical and a non-medical turnaround specialty.

I started in the medical field after I started in the business world. That doesn’t mean I started a lot later. I started in the business world when I was 16, and
I didn’t go to medical school—a six-year program—until I was almost 18. I’m driven by compliance. I want to figure out what the rules are and I want to make sure I don’t violate those rules, so that’s my personality. That’s how I come to this.

Is Red Pill Kapital right for you?

Are you looking to enhance your financial wealth and truly live the life that you deserve? Are you an accredited investor who’s interested in learning more about passively investing and cash-flowing
commercial real estate? Are you interested in investing alongside us? Because we don’t need your money. What we’re trying to do is do bigger projects with more leverage, and the bigger the project, the less the risk because the leverage improves. We only make money if you make money. If you have any questions, please email me at info@redpillkapital.com and that’s Kapital with a K.

What’s Red Pill Kapital?

Red Pill Kapital is a physician-owned commercial real estate investment and education company. It allows you to invest passively alongside us. We find the property, or we find the investment group. We create and validate their plan. We look at how to improve the cash flow, we negotiate the deal, and we manage and oversee the asset. Your passive investment provides you with an opportunity to earn an income without the 9 to 9 because physicians don’t work 9 to 5. We probably work 6 to 9.

We create a unique business strategy that fits your financial investment goals because we understand the specific needs of physician professionals. I
specialize in turnaround situations. I originally got my MBA in finance, because I was interested in pharmacoeconomics studies, but then, I was applying
those principles – the cost-benefit analytic tools and cost-utility studies – and helping determine rates of return for healthcare. I started applying them to physician care. I had already started my first company when I was at the age of 14, and it was a construction company. I went to medical school and started right before my 17th birthday – I turned 18 in November, and I had started right before. My first year was really when I was 18, and it was a six-year program, so it was combined.

The reality is that early exposure to construction, and dealing with people when I was 14, 15, 16, and then, understanding how the dynamics of human beings are, has made a huge difference, and it’s allowed me to look at things in a little bit different way. I’ve eventually gone on to develop about 2 million square feet of commercial real estate. I’ve owned and operated five restaurants. I’ve got over 30 companies that I’ve worked in as in terms of ownership, and currently, have managed assets of more than $200 million, but I still practice clinically every single day. I practice because I want to practice.
I practice because I love the patients that I take care of. I practice in the urban core, and most of my patients are indigent. Most of my patients are on Medicaid, and I do my medical practice because it’s my calling, but my money is made outside of medicine.

We search for value-added real estate for our passive commercial real estate partners, and we actively manage that investment long-term for a successful exit. We are Red Pill Kapital.
Find us at Redpillkapital.com

Categories
Real Estate

Nine reasons to invest passively in somebody else’s commercial real estate deal

We’ve done over 2 million square feet of commercial real estate development in our company directly, so why on earth would we ever invest passively in somebody else’s deals?

Real estate is the most powerful way to accumulate wealth. More people have become millionaires through real estate than any other means. We know how to find the property, create a plan for improving the cash flow, negotiate the deal, and manage the asset. Your passive investment provides you with the opportunity to earn an income without the nine to five. We create a unique business strategy that fits your financial and investment goals. Get the financial freedom you need to do more of what you love. We are Red Pill Kapital, with a K.

About me

I’m Gurpreet Padda. I’m a physician. I also have an MBA. I’m board-certified in anesthesia. I’m board-certified in interventional pain, and I’m board-certified in addiction, so I have a lot of experience in the medical field. I graduated from the University of Missouri-Kansas City in 1988. I’ve been in both an academic and private practice. I’ve been at a hospital-based practice, and I’ve been in independent medical practice as well. I’ve used insurance-based plans, and I also have a cash-pay practice when we deal with issues associated with cosmetic surgery. I’ve run 11 outpatient clinics. I’ve developed surgery centers for myself, and I’ve developed surgery centers for other people. I have both a medical and a non-medical turnaround specialty.

I started in the medical field after I started in the business world. That doesn’t mean I started a lot later. I started in the business world when I was 16, and I didn’t go to medical school—a six-year program—until I was almost 18. I’m driven by compliance. I want to figure out what the rules are and I want to make sure I don’t violate those rules, so that’s my personality. That’s how I come to this.

I specialize in turnaround situations

I originally got my MBA in finance because I was interested in pharmacoeconomic studies, but then I was applying those principles — the cost-benefit analysis, analytic tools and costs, utility studies, and helping determine rates of return — for healthcare. I started applying them to physician care. I had already started my first company at the age of 14, a construction company, and I went to medical school right before my 17th birthday. I turned 18 in November and I had started right before, so my first year was really when I was 18, and it was a six-year program, so it was combined. The reality is that early exposure to construction and dealing with people when I was 14, 15, 16, and then understanding how the dynamics of human beings are, has made a huge difference, and it’s allowed me to look at things in a little bit different way.

I’ve eventually gone on to develop about 2 million square feet of commercial real estate. I’ve owned and operated five restaurants. I’ve got over 30 companies that I’ve worked in, as in terms of ownership, and currently have managed assets greater than $200 million, but I still practice clinically every single day. I practice because I want to practice. I practice because I love the patients that I take care of. I practice in the urban core and most of my patients are indigent. Most of my patients are on Medicaid, and I do my medical practice because it’s my calling, but my money is made outside of medicine.

I have personally owned and operated apartment buildings and several hundred units of owned and operated mobile home parks. I’ve owned and operated restaurants, mixed-use developments, medical office buildings, surgical centers, industrial warehouse spaces, office buildings, and retail strip centers. I have a lot of experience in real estate, which gives me the opportunity to have made a lot of mistakes. The reality is you only learn when you make mistakes. If I’m dealing with somebody and I’m going to invest passively with them, I want to know what mistakes they’ve made, because if they’ve never made a mistake, there’s going to be a problem. I don’t know how they’re going to react.

On directly owning and operating real estate

There are some issues and advantages to investing passively

Advantages
• Quick, immediate decisions
• Control
• Leverage bank money 5:1 ratio
• Tax-advantaged accelerated depreciation
• Pride of ownership
• High yield and appreciation

Disadvantages

• Too quick, and too immediate
• Control = Responsibility
• (Tenants, Toilets, Termites)
• Recourse loans, eventually you run out of down payments
• Inability to qualify as a qualified real estate professional
• Predators know what you own
• Forced to use 1031 with an ever-increasing deal size


These are nine reasons to invest passively in somebody else’s deal instead of actively doing it on your own

When you’re investing passively, you don’t have to be an expert at that asset type. You don’t have to be the expert at that asset class. You don’t have to be the expert at that specific demographic because you have to realize that real estate is hyper-local. It’s blocked to block. It’s road to road. It’s not stated to state. It’s not even the United States. You don’t invest in the U.S. You invest in the U.S., in a state, in a city, in a neighborhood, on a particular side of the street.

1. Don’t need to be the expert

It’s very hyper-local. You don’t have to develop all of the expert lender environment relationships because these lenders are very finicky and you have to be in constant contact with them. You don’t have to develop expert relationships with brokers, which takes a lot of friction. You don’t have to take them out to lunch. You don’t have to hang out with them and have a drink. You don’t have to constantly contact them so that you’re getting a good deal because the reality is most commercial real estate is driven by broker relationships and you have to maintain those broker relationships.


2. Non- recourse, not on loan

When you invest passively, it’s a nonrecourse loan to you. You’re not on the loan.

You don’t have any risk beyond your capital invested.

You’re passive. Who is at risk is your general partnership, and they’re heavily invested in doing the right thing because they’re the ones at the highest risk. You’re along for the ride. You can step off this bus any time you want.

3. No responsibility except to vet the deal, the operator, and monitor

You don’t really have any responsibility inside the deal except to vet the deal. You need to vet the deal. You need to vet the operator and you need to monitor the deal. We’ll have other presentations on how to vet the deal, but you want to look closely at the underwriting. You want to look at the debt service coverage ratio. You want to look at the rates of return. You want to look at how long it’s going to take to get that return. You want the underwriter to have stress-tested that deal.

• What happens if this drops to a historic vacancy level?

• What happens if interest rates go up?

• What happens if demographics change for this community?

When you do vet the operator, you want to check their backgrounds. Every single general partner, you want to have checked their backgrounds. You want to look at their prior deal experience; you want to run UCCs on them. You may even want to do criminal and legal background checks on them.

That’s what we do. We’re Red Pill Kapital. We look at those deal sponsors. We figure out if we’re going to invest passively, and I want to know everything about the operator.

The operator is the most important part of a particular deal. It’s even more important than the deal itself.

4. No time commitment

When you’re passive, you don’t have a time commitment because what you’re doing is you’re using other people’s time and paying for it with your dollars. It’s the concept of leverage. Now, most people talk about other people’s money, but as a physician you have money. What you don’t have is time, and the reality is time is always way more valuable than money. If you can leverage other people’s time with your money, you’ve created far greater leverage than the five to one ratio of money leverage that you would create in a recourse loan.

5. Not limited by geography or travel distance or time zone

When you’re investing passively, you’re not limited by geography. You’re not limited by travel distance. You’re not limited by time zone. You can do geographic arbitrage. You can live in one place and pay rent and then invest in another place and earn a high income.

There are some people that want to live in California, but they invest in Oklahoma. They don’t want to live in Oklahoma. There are some people that live in Florida and they don’t think that Florida is a great place for them to invest long-term because of the hurricanes – even though I have to tell you the hurricanes are not as big of a deal right now. Now they might become
a big deal in 10 years, but they want to invest somewhere else. Geographic arbitrage is what passive investment allows you to do. You don’t have to go drive by your property every single day. You don’t have to go look at it. You don’t have to manage that asset directly. You’re passive. You live where you want to live and rent if you want to rent, but you invest where it makes money.

6. Bigger projects, more eyes on the project, professional management

The other reality is in a passive deal, it’s going to be a lot bigger than you doing a small deal. The bigger the project, the more eyes on the project. There’s more professional management and the reality is it’s going to have to get a loan and the bankers are as interested or more interested than you are because you’re leveraging a five to one ratio. The general partners are on the hook, and the bank wants to make sure that this is an awesome deal because they want their money back. They’re going to stress-test this deal.


You know, if it’s a gigantic deal, you’re going to have a full-time leasing agent. You’re going to have full-time maintenance. You’re going to have supplies in stock. You’re not going to have trip charges because you own one house on this side of the street and one house five blocks away and then one house three miles away. In a passive deal like this, you’re going to own 200 units
or 150 units and it’s all going to be in a one-acre plot of land or a two-acre plot of land, and it’s right here and all the systems are exactly the same. All the HVACs use the same filters. All of the plumbing is the same. You need to replace a toilet; you have six of them in stock. Your maintenance guy knows how to do this. You have full-time management, you have full-time
maintenance and you have full-time leasing capacity, so your turnovers don’t cost as much. Trip charges are gone when everything is in one commonplace.

7. Deploy capital at a higher rate of return in an asset type that you can affect and impact

You want to deploy capital at a higher rate of return and asset type that you can affect an impact.

The reality is when you deploy capital in the stock market, I don’t care how many iPhones you buy, you’re not going to affect the price of Apple.

When you deploy capital in a property and you have an interest in it and you get on those property management calls and you can give some feedback, if you’re interested, it’ll have a huge impact. It’ll have a huge impact on the operations of the project and you can have a very significant outcome difference.

8. Can use IRA money, since I don’t control

You can’t use your IRA money if you own the deal because you’re self-enriching. But if you’re a passive investor alongside somebody else who’s the general partner, we can show you how to use your IRA money.

• You’re not a prohibited party in a passive deal.
• You don’t have any issues with 1031s because if you’ve structured this correctly and you’ve structured your taxes, you’re not going to have any issues.

There are a lot of issues associated with capital gains. There are a lot of issues associated with taxes if you use your IRA, and navigating that can be a very significant factor. So let’s take an example: let’s
say that you’re investing through your IRA and you get $100,000 gain. It’s all good until you realize that you might be at risk for 37 percent UDFI tax if that project had a loan on it.

But if you structure this correctly, you can prevent that by using a qualified retirement plan. So you shift your IRA to a QRP, and the QRP is immune from those taxes. Let’s say that instead you had purchased this with non-IRA money and you sell it and you got $100,000 gain. Well, you’re going to be subject to a tax on that money because it’s capital gain. Using the right plan at the right moment, with the right stuff, will prevent you from having to pay taxes, and taxes are your biggest impediment to wealth generation.

9. Pride of ownership, without the predators

You get the pride of ownership without the predators. The government can’t go after you. The tax authorities leave you alone. The attorneys, the patients, the employees, and all of the predatorial problems that you have disappear when you’re passive, and you can hide your passivity even further by buying it through a trust. There are all kinds of tools that you can do to protect yourself as a passive that are not available to you as an active investor. Your name is not on the loan. Your name is not in the public record.

So what’s Red Pill Kapital?

Red Pill Kapital is a physician-owned commercial real estate investment and education company. It allows you to invest passively alongside us. We find the property or we find the investment group. We create and validate their plan. We look at how to improve the cash flow. We negotiate the deal. We manage and oversee the asset. Your passive investment provides you with an opportunity to earn an income without the nine to five because physicians don’t work nine to five; we probably work six to nine. We create a unique business strategy that fits your financial investment goals because we understand the specific needs of physician professionals.

Is Red Pill Kapital right for you?

Are you looking to enhance your financial wealth and truly live the life that you deserve? Are you an accredited investor who’s interested in learning more about passively investing and cash flowing
commercial real estate? Are you interested in investing alongside us? Because we don’t need your money. What we’re trying to do is do bigger projects with more leverage, and the bigger the project, the less the risk because the leverage improves. We only make money if you make money.

If you have any questions, please email me at info@redpillkapital.com and that’s Kapital with a K.

We search for value-added real estate for our passive commercial real estate partners, and we actively manage that investment long-term for a successful exit. We are Red Pill Kapital.
Find us at www.redpillkapital.com

Categories
Real Estate

What is a Cap Rate?

Today, I’m going to talk a little bit about cap rates. I think that cap rates are very important for professionals to understand and frequently they’re misinterpreted. I want to spend a few minutes going over what cap rates are, what they actually mean, and how do you best utilize them.

Real estate is the most powerful way to accumulate wealth. More people have become millionaires through real estate than any other means. We know how to find the property, create a plan for improving the cash flow, negotiate the deal, and manage the asset. Your passive investment provides you with the opportunity to earn an income without the nine to five. We create a unique business strategy that fits your financial and investment goals. Get the financial freedom you need to do more of what you love. We are Red Pill Kapital, with a K.

Risk and reward: the greater the risk, the greater the opportunity for reward.

In real estate, one of the most important things that you can figure out is how do you define what something is worth. I think that this is one of the most important formulas in real estate, so I’m going to spend a few minutes on it. It is essentially net operating income divided by the value equals the cap rate. The cap rate is inherent and specific to different asset types, different locations, different quality of asset, whether it’s an A, B or C type location, whether it’s a major metropolitan area, or whether it’s rural.

What is the asset?

Is it an industrial building? Is it a farmhouse? Is it farm rental land? Is it a multi-family apartment unit? There’s an inherent cap rate that we measure one asset against another and this is a different way to look at risk than just reward and having a generalized principle, and we do that through cap rate. If something has a 10 cap or a 10 percent cap rate, that’s going to have a different value than something that has a five cap. Let’s go over that net.

Net operating income is equal to income minus expenses. You take all of the income, you take all the expenses away, and that’s what you’re left with. For example, if an investment property has $50,000 of net income before you look at any debt service, you have $50,000 of net income and its value in the market is a million dollars. That means that its inherent cap rate is 5 percent.

Now let’s take a look at it a different way; let’s play with the formula. Let’s say that I want to figure out what the value would be if I changed my net operating income. What would the value be? What would be the value in a different market if my net operating income was higher, but I was able to buy it for the same amount of money? Let’s take that example. Let’s say that I went to a different market and the thing was generating $80,000 as opposed to $50,000, but I was only having to pay a million dollars. In both situations, the value’s the same.

One cap rate, the first one where I was generating $50,000, is a cap rate of 5 percent. Where I’m generating $80,000 in net operating income, my cap rate is now 8 percent. That’s a 3 percent difference in cap rate and that can be very substantial. It can tell you a lot about the demographics. The higher the cap rate, the higher the perceived risk for that asset group by people that are far smarter than you and I.

It’s a summary total. It’s people that have already invested in this kind of asset class, in this kind of city, and they’ve kind of sat down and said, «Hey, this is what I am willing to pay.» “Well, this is what I’m willing to pay.” You and I have probably done a few real estate transactions, but this is the summarization of 10,000, 20,000, or 50,000 real estate transactions of that asset group, of that asset type in that community with that demographic.

The cap rate is an easy way to compare different rates of return. It also can have the formula manipulated so that if you know the cap rate, you change the net operating income. You haven’t changed the property—it’s the same property—so the cap rate stays the same, but you change your net operating income. What happens to the value?

Cap Rate: comparison of net income for the same dollar investment between different investments

Cap rates allow you to compare what you do with net income for the same dollar investment between two different investments, whether they’re the same class of investment like, for example, multi-family compared to another multi-family or the same class of investment such as a retail shopping center compared to another retail shopping center or comparing between classes of investment, comparing a multi-family to a commercial office building.

Cap rate says this is my net operating income for this dollar invested. Cap rate is a comparison of net income for the same dollar invested between two different investments. An example is, if I have $1,000 invested and I get $100 of net operating income per year, that gives me a cap rate of 10 percent.
Another example would be that I get an $80,000 return for an $800,000 investment, and that’s a cap rate of 10 percent. Let’s say that I get a $90,000 return for an investment of $800,000; that’s an 11.25 percent cap. If you go further and you get a $60,000 return, which is less, for the same $800,000 investment, your cap rate is 7.5 percent.

or, a comparison of value-driven by NOI

If you look at it a different way, if you take the cap rate formula and you take the net operating income and divide it by the cap rate, you end up with a presumed value, and this is very relevant because this is how frequently brokers discuss what a particular value is. They’ll say, «Oh, this is an eight cap and its net operating income is X, Y, Z, and therefore its value must be Y.» This is a value derivative and this becomes very, very important when you’re starting to talk to people and ask them, «What’s your cap rate? What’s your net operating income?» That’ll give you what the presumed value is but this can also be very, very confusing and we’ll go through that in a few minutes.

Given a Cap Rate of 5%

Let’s give you an example. Let’s say that you know what the cap rate is for the area, for this kind of property. It’s about 5 percent and you know what the net operating income is, it’s $100,000, so what’s the value of that property? Well, if you’re paying more than two million dollars, you’re an idiot because based upon cap rate it should be two million dollars. Now, that’s what it should be and there’s some manipulations that you can do to that but that’s, in essence, assuming all things equal, a five cap with
$100,000 of net operating income should give you a translated value of $2 million.


∆ NOI and ∆ Value

Let’s say that you change your net operating income slightly — $10 per unit per month for 100 units. You go up 10 bucks, which doesn’t seem like a lot, but you do it for 100 units and there are 12 months in a year, so you get a $12,000 increase in your net operating income. On that five cap, you changed your value by $240,000, which is a very significant portion of your purchase price, so a small subtle change creates a huge leverage effect on value.

Changes in cap rate, with the same NOI

A change in cap rate with the same net operating income dramatically changes the value. The higher the cap rate, the lower the value; the lower the cap rate, the higher the perceived value.

∆ NOI and ∆ Value

You can also use the cap rate formula to decide if you make a change in the operations of a particular facility or particular commercial office building or particular multi-family. If you change the net operating income, given that the cap rate stays the same, what’s going to happen to that value? Let’s take an example.

Let’s say you have a 100-unit apartment building and you change the rent just merely $10 per unit per month. That works out to about $12,000 per year. Let’s say that the going cap rate for that kind of
building is 5 percent. That changed the value for a $10 rent change for 100 units by $240,000. That’s a very significant leverage effect that occurs because of this division by cap rate.

Slight change in NOI can have a disproportionate effect

Any slight change in net operating income has a disproportionate effect and it’s in the same direction as the value. In a low cap rate environment – i.e., if the cap rate’s about 2 percent – a $1,000 change results in a $50,000 value change. In a high cap rate environment, so let’s say 10 percent, a $1,000 change in net operating income only results in a $10,000 value change. Why is this relevant? This
is relevant because there’s certain markets, such as in California and other places that are relatively mature, like New York, that are very low cap rate environments for the same asset class as would be compared in the Midwest.

You would think because the cap rate is higher, you’re getting better bang for your buck, but that’s not necessarily true. In a low cap rate environment, a smaller change in net operating income drives a
greater value change. This is very important because you can make money whether the cap rate is high or low. It’s really a derivative of net operating income. Keep in mind that cap rates are an explanation of risk, so if the cap rate is super high for a particular asset group and in a particular city, that just might be because that’s a very high-risk area or a very high-risk asset.

Is it really that simple?

No. Cap rates are an artifice. They’re a calculation; they’re a derivative; they’re not real. Cap rates are looking at your back or rearview mirror trying to figure out where you’re going to get to. Cap rates are a translation of existing market behavior into a number that allows a comparison between asset groups or between demographics. Cap rate is an explanation of market sentiment, and it doesn’t mean much more than that. It’s like a numerical pain scale. One person’s pain might be an eight, another person’s pain might be a two, another person’s pain might be a three. It’s a scale and it’s highly subjective.

We objectify it by putting the formula in of essentially net operating income divided by value equals cap rate, but it doesn’t mean much – it’s looking at it backwards. Cap rate is a measure of forward-looking financial safety and
wealth preservation. It’s really a marker for potential market risk in a particular environment. You should never be lulled into a sense of safety by looking at a cap rate.

The cap rate is often used by brokers to obscure the real facts, and it confuses the individual investor. You have to remember that real estate is a hyper-local environment and cap rates are typically regional. They’re usually citywide.
Nobody really defines a cap rate for a neighborhood or a three-block area. I know that in the city that I live in, if I literally drive 250 feet from one residence to another residence or one street to another street, I can go from a war zone into some of the most expensive areas in the city, so the hyper-locality of real estate is not explained by cap rates and it’s very easy to confuse.

You can make money whether your cap rate is highor low.

It’s really the property that matters. It’s the management and what the management does with the net operating income. The hyper-local environment determines the value of that particular property, and the time horizon in which you’re going to hold property. The cap rate is really a look at supply and demand and risk. If the demographics are declining for that area—i.e. people are leaving the city – you can expect that the cap rates would go up because the risk goes up. It’s proportional to the risk. Keep in mind the cap rates do reflect the net operating income, so if you have a low cap rate and a high-interest rate, you’re going to find a very tough time financing a particular property because your net operating income may not be sufficient to pay for the debt service.

We search for value-added real estate for our passive commercial real estate partners and we actively manage that investment long term for a successful exit. We are Red Pill Kapital.
Find us at Redpillkapital.com

Categories
Real Estate

Questions for the syndicator

I thought I would share the exact questions I get asked as a general partner, which are the same questions I ask of people that I invest with who are general partners. I invest in other people’s deals, and I have my own deals, and I want to share the commonality of questions that are super important to ask. I’m on both sides, and I want to share this information.

Real estate is the most powerful way to accumulate wealth. More people have become millionaires through real estate than any other means. We know how to find the property, create a plan for improving the cash flow, negotiate the deal, and manage the asset. Your passive investment provides you with the opportunity to earn an income without the nine to five. We create a unique business strategy that fits your financial and investment goals. Get the financial freedom you need to do more of what you love. We are Red Pill Kapital, with a K.

How long have they been actively engaged in real estate investing?

I want to vet the general partner. I want to figure out how long they’ve been engaged in real estate investing.

• Did they just start a year or two years ago, or have they been in this for 20 years?

• What’s their track record?

• What’s their experience?

I want to look at their comparative analysis of this offering versus other offerings, look at an analysis of the things that they’ve actually completed, and look at their actual results delivered.

I want to know what they offered before and what the result was from that offering. In other words, what was their pre-offering package, and what was their final result? I want to get a copy of their previous deal. I want to get a copy of their investor communication that they’ve provided, because more than likely, how they communicated with other investors is how they’re going to communicate with me.

I want to know how long they’ve been doing syndication. I want to know what their investment strategy is. Is their strategy to just kind of shoot everywhere, or are they a highly refined sniper? Both things are good. You could have a wholesaler that was buying houses, and that might be one way to approach it – not the way that I would approach it. You could have a targeted sniper that looks at hundreds and hundreds of potential real estate deals or targets, but then picks the one out that’s super important and super necessary.

I want to know about their strategy.

• Does it correlate with the current and future market conditions?

• Can they describe their strategy?

• Can they describe how the macro trends affect their hyperlocal neighborhood, where this specific piece of real estate is?

• Do they understand what’s going on with this local neighborhood and how the job trends are going to make a difference?

I want to ask them before I do their background check:

Is there anything negative that they want to discuss with me? Is there anything negative they want to disclose? I pay very close attention to the vocabulary that people use and their style of communication. That vocabulary is going
to determine how clear and standardized they are and how their verbiage is going to come out, because if they’re not clear with me, and they’re not using standard vocabulary in the real estate vernacular, then there’s going to be a problem, because they’re not going to be able to deal with the banks. This might be their way to learn, and I don’t want to pay for people’s education.

That doesn’t mean that people don’t make mistakes. It doesn’t mean that things won’t happen.

What it means is I don’t want to pay for somebody else’s education.

I want to know if what they’re telling me is a fact or it’s an opinion, or if they’re mixing opinion as if it’s fact. Everything has a rational basis underneath it, but do they understand what that rational basis is, or are they just opening? I want to make sure that they’re using industry-standard metrics, not something that they made up, not something that they think they can derive.

I need to know what locations do they invest in?

• Do they invest in the location that this project is in, and why are they investing there?

• Are they investing there because there’s a demographic reason?

• Are they investing there because they heard this was a good place from their buddy Joe, and they’ve listened to some real estate shows and everybody says, «Austin is hot, so I’m going to Austin»?

I want to know how well they know this hyperlocal environment that they’re currently investing in. Do they have a team that’s ready to undertake the investment? That doesn’t mean that
they have to have a team that has a general partner with an attorney, an inspector, a loan broker, insurance broker, and property management. All of those things can be hired out, but is it assembled? Is it ready to go? Do they have an attorney? Have they specified out who the inspector’s going to be?

• Have they picked out the loan broker?

• Do they have a relationship?

• Have they talked to an insurance broker?

• Have they even talked to somebody who’s going to help on the taxes? Because who knows?

In certain areas like Arizona, once you buy a property, your tax rate may go up a few percentage points, whereas if you buy a property in Texas, it may go up a few hundred percentage points.

Really, the functionality is to make sure that they’re prepared for this, and that they’ve anticipated this. Not all the team members are part of the general partnership. Some are just simply independent contractors.

• If there’s going to be major construction, have they identified the team that’s going to do the construction?

• Have they identified the rehab budget?

• Who’s going to manage that construction?

• Has that construction management cost been built into this?

• Has a pro forma that matches the construction, that’s specifically going to determine the cash flow, been done on a monthly basis, rather than some sort of nebulous percentage basis of the whole year?

Because the reality is you can’t take a percentage basis to the bank. What you can do is take the monthly income to the bank, so you need to know exactly what your pro forma is going to be per month – not as a global number, like an IRR, you need to know what the cash flow’s going to be. Cash flow you can deposit. IRR you can only look at.

I want to know what asset classes do they regularly invest in and what grade of asset. If they invest in multifamily, which makes sense, but they only invest in grade A, and this is a grade C, I don’t think they’re going to do as well, because what they’re going to try to do is take a grade C and upgrade it to a grade A, and that’s never going to happen. You might be able to get to a
grade B-minus, but you’re never going to get to a grade A, and you’re just going to spend a ton of money for nothing.

If they’re used to grade C, and they’re buying a grade A, they probably may not have the skillset to deal with the grade A tenants, because grade A tenants have a much higher need basis, and you’re basically creating an experience
for them in which you take care of things. Grade C, not so much. You want to know how many years of experience do they have with a particular asset class and how many years of experience in this grade of asset.

I want to look at their credibility

Are they going to put their own money in the deal beyond the acquisition fee? A lot of times all they’re putting in is the acquisition fee, which is the money that you’re putting in, and the acquisition fee might be 3 to 5 percent of the deal. It might be 7 percent of the deal. Just depends on the deal. But if that’s all of the money that they’re putting in, they’re not putting in anything. They don’t really have anything to lose.

Yeah, they spent a lot of time. They may have looked at a lot of projects, but I want them to feel the pain of failure if there is failure. I want to know: have
they ever had a deal gone bad? I don’t invest with people that have never had a deal gone bad, because a deal gone bad creates a whole different feeling and creates a whole different set of skills for the syndicator.

I want to know if they’re sponsoring other investments. How many other investments? Where are they at? Because I don’t want their attention overly diverted. That doesn’t mean that they can’t do other investments, but I need to know how much of their bandwidth of time is going to be spent on this investment, because this is the one that’s important to me. Can they give me names and contact information of past or current clients? Can they provide contact information for other investors so I can talk to them for a reference?

Credibility questions

• Do they put their own money into the deal, beyond the acquisition fees?

• Did they ever have a deal go bad? If so, how did they handle it?

• Are they sponsoring any other investments? If so, how many?

• Can they give you the name and contact information of their past/ current clients?

• Can they provide contact information for other investors, that you can speak to them from a reference?

Deal structure

I need to know what the deal structure is.

• Is there a preferred rate of return?

• Is there a waterfall?

• What’s the split?

• How do we structure this deal?

• Do they change the split between the general limited partner after a certain threshold?

It might be 70/30 going in, but then it might become 50/50, and you need to understand that.

• Are they only allowing accredited investors in, or is it also sophisticated?

• How are they making that decision that they allowed certain sophisticated investors in? Because that could impact the entire investment.

• How many key principles do they have?

• If there are no other partners, what’s going to happen if the investment goes south? Because if there’s only one general partner, and something happens to that one key person, everything is going to go south.

• What are their sponsor fees?

• How long are they usually holding an asset for?

• What’s their investment strategy?

• Is this a value-add?

• Is this a buy and hold?

• Is this a value-add with an intended refinance?

• What are we doing here?

• Where are we going to?

I want a map that tells me exactly what they’re actually thinking. If they can’t describe this to me in probably two or three sentences, they haven’t thought hard enough about this. This investment strategy is an elevator pitch – it should be that refined.

Reputation search

I will always do a reputation search

That might include just a simple online search looking for complaints. I want to look for positive comments. I want to look for negative comments. I want to do a UCC background check. I want to do a criminal background check. I want to check if they’re a prohibited party from the Securities and Exchange Commission.

I want to look for references on social media about this specific syndicator.

• Are they on a podcast?

• Do they have other websites?

• Do they have YouTube channels?

The more web presence they have, the less likely that they are going to be anonymous, and more collateral information is available that keeps them from behaving poorly later. I want to know if I can discuss this offering with one of my trusted advisors. More likely than not, I’m going to have to sign an NDA to make sure that everything is okay.

I want to contact the syndicators’ past or present colleagues or employees, and I want to know what their opinion is. I want to ask details about the past deal that the syndicators handled.

Legal documents

When I look at the documents, I want to make sure that they’re professional – that they’re legal, they’re accurate, they’re complete. For me, they have to come over by DocuSign or one of the other electronic means. If they’re sending me paper, I kind of wonder about that, because in this day and age, that’s highly unusual. I want to make sure that all the documents are there, and that they look professionally prepared – that there’s not any typos in there.

I want to make sure that it’s an actual syndication attorney that signed off on this and not just some online tool that they’ve used to create a private
placement memorandum. I want to analyze the property, the market, the major employers in the area, the location, and the proximity to shopping centers and employment hubs. That should be described all in the offering memorandum.
I want to cross-validate it later, but I want to make sure that’s in there.

I want to review their pro forma and their underwriting and their hold period, and I want to determine for myself if this is conservatively written. Has this been stress tested? If need be, I’ll use a third-party underwriter to validate. Using a third-party underwriter to validate a plan, to validate somebody’s pro forma, is a very cheap insurance policy and can save me a ton of heartache later. Typically, this runs about $2,000 by the time that I’m done.

When I’m getting my offering memorandum, I want to make sure it was professionally prepared, that it’s not full of typos and mistakes. I want to make sure that it’s concordant with the property. I want to make sure it hasn’t been copied.

When I deal with people, I want to know:

Is this a pressure situation? Because if this is a pressure situation, it is possible that they’re making a mistake. I want to make sure that there’s been plenty of time for me to analyze it and that I’m getting the appropriate amount of attention that I need in this deal. Are they answering my questions, or are they brushing me off?

I want to make sure that they understand my particular situation, my goals, and my needs. What does that mean?

Well, if I’m investing with an IRA, it means something totally different than if I’m investing with my own cash. If I’m investing for a five-year horizon, and this is a ten-year opportunity zone project, I’m not in the right deal. You can’t manipulate an opportunity zone project for ten years and expect to make a five-year return.

I want to know:

is this a pressured sale, or was this a pressured piece of information that they’re putting out? How many other deals did they look at before they selected this one to present? Did they look at three deals and this is the one? Because usually I find that, at minimum, I’m looking at 20 to 40 deals, and sometimes
a lot more, to find one that is worth analyzing. I want to make sure that they’ve verified, that they’ve evaluated, other similar assets of similar grade in a similar demographic. I want to know why they rejected those deals.

Pressured sales?

• Is the deal sponsor giving you enough time and attention?

• Are they answering all your questions?

• Do they understand your situation, goals, needs?

• How many deals did they look at before they selected this one to present?

The actual deal

When you actually get to the deal, and you look at the market comps that are provided by the syndicator, you want to make sure that it’s in the right neighborhood. If you look at the market comp, and it’s plotted out, and it’s from two miles away, it’s probably not the same neighborhood. So, that’s not reliable. There are all kinds of online tools that you can use to validate a particular neighborhood.

You want to look at their projections of those market comps, and are they in line with neighborhood comps, not from something two miles away? I
guarantee you that if you invest in St. Louis, and you’re investing in University City, which I’ve invested in, if you go two blocks, you’re in a hellhole. If you go two blocks in the other direction, you’re in the business district, and the cost differential in housing is that one side sells for 40,000 and the other side sells for 400,000. One side rents for $350 a month, and the other side rents for
$1,800 a month – and they’re within blocks of each other.

You want to make sure that the overall offering makes sense in terms of the returns and the duration of the syndication. You want to make sure it makes sense for this particular syndicator and their background and the proposed plans. You certainly wouldn’t put up a high rise in the middle of farmland, so you want to make sure that this specific plan makes sense.

• Have they stress-tested this deal?

• Have they looked at what would happen on this deal if you went to historic vacancy rates – 30 percent vacant?

• Would they still be able to pay debt service?

• What would happen if taxes jumped 150 percent?

You want to look at the reversion cap rates. That’s what would happen to the value at a particular net operating income if the cap rate goes up.

Let’s say that you’re buying at a cap rate of six and you’re going to sell in five years. I usually increase the cap rate by 0.2 percent per year. So I’m looking at a reversion cap rate of seven, and then I want to know what it is for value. You also want to know if and who the lender is that’s underwriting. If it’s Freddie Mac and Fannie Mae, then it’s probable that you have additional eyes on this loan, because Freddie Mac and Fannie Mae have amazing underwriters. Those are the people that I use to underwrite my deals, and I think it’s very important to have that level of underwriting because it means the deal will stand on its own. Freddie Mac and Fannie Mae do not lend you money unless this deal is going to stand on its own.

You want to look at your cash-on-cash return. You want to look at your equity multiple. You want to look at your average annualized return, and the bank wants to look at your debt service coverage ratio. If your debt service coverage ratio is below 1.2, this is a no-go deal. If my average annualized return is below 7 percent, for me, that’s a no-go deal. If my equity multiple is not at least 1.9, this is a no-go deal.

I want a cash-on-cash return that’s significant. I don’t want to do deals that I’m not going to make a decent return on because I know what I can get in the market, and so I want to be very careful. When I look at the actual deal, I also want to impute what the depreciation value is to me, specifically.

The actual deal

• Evaluate the market comps that the syndicator has provided. Are the target rents competitive for this neighborhood in this grade property?

• Are the projections in line with the comps?

• Does the overall offering make sense in terms of returns, duration, syndicator integrity and background, and proposed plans?

• Have they stress-tested this deal? Vacancy rates? Taxes?

• What are the reversion cap rates?

• Is this a loan being underwritten by Freddie or Fannie?

• What’s the COC, Equity Multiple, Average Annualized Return, DSCR?

Thoroughly understand the capital stack and distributions

Equity Distribution

• Equity split at refinance or sale
• Asset management fees before or after pref
• Catch-up clause
• Refinance contingency
• Waterfalls

You have to understand what the capital stack is, so I’m going to just go over what a full capital stack is because I think it’s relevant. When you buy a piece of property, a portion of it is going to be equity and a portion of it is going to be debt. The debt is what you’re going to get from the bank. There are two levels of debt: senior debt and mezzanine debt.

Senior debt is the debt on the property if you’re not doing a rehab, so let’s just take an example. Let’s say that you’re going to buy a property.

Of that 70 percent debt, if there’s a rehab in it, it’s likely that about 50 percent of that is senior debt, and the other 20 percent is mezzanine debt. It’s a lender that is not going to give the full amount of money. It’s going to be at a slightly higher interest rate, and they’re second in line should anything bad happen. But if there’s no significant construction, then the whole thing is going to be senior debt.

So you’ve got 30 percent left that you have to raise equity for. The preferred equity gets the preferred return. The common equity gets the non-preferred return. The preferred equity is you; you’re the limited partner. So you’re going to get a split, and it could be a 70/30 split, or it could be a 50/50 split, or some combination thereof.

Inside that preferred equity, there’s usually a percentage. The first 6 percent goes to the preferred equity, and then it’s equally split, so you want to take a look at those numbers very closely. I usually map out my full capital stack. I usually just take this diagram and I put it down on paper so I can visually interpret this.

• What’s the mezzanine debt?

• What’s the senior debt?

• What’s preferred equity?

• What’s the common equity?

This is the easiest way for me to figure out exactly who’s going to get what, and what my expectations are going into this.

Then, when you look at the equity distribution – and you need to look at the equity split – what’s going to happen if it refinances versus sells? A lot of places, a lot of folks, will do an equity split at refinance or sale of 70/30, but if they’ve refinanced it, and you’re still in the deal, then the subsequent part is usually 50/50. It’s difficult to tell, but you’ve got all your money back, so for you it’s an infinite return anyway. Really, the ongoing risk is to the syndicator.

So, you want to take a look at that equity split at refinance or sale. You want to look at those asset management fees. Do they come out before or after pref? I’ve seen it done both ways. I think it’s very reasonable to do it before, and I’ve seen it very reasonable to do after. Most of them are done before the preferential payment.

There’s also something called a catch-up clause. The catch-up clause is we had enough money to pay the asset management fee. We had enough money to pay the 8 percent pref or the 7 percent pref, but we didn’t have enough money to do an equity split at all. So next year we do the same thing, and the next year we do the same thing. Eventually, the general partner catches up at the time of sale.

It’s very important to know whether there’s a catch-up clause or not. You want to know about any refinance contingencies. You want to know about waterfalls. Waterfalls are shifts in percentage based upon particular targets. There might be waterfalls because of construction. There might be waterfalls because you hit certain numbers. These are additional kickers. It’s very important to understand them.

So what’s my process?

My average time to preliminarily analyze a deal is about four to six hours. I have people, though, that help me. I’ve got two full-time paralegals. We’ve got a full-time attorney. We have an in-house financial analyst, and we outsource our Freddie Mac underwriting for an extra look at deals that have gone forward.

I look at the people first. I look at the syndicator first. Then I look at the general demographics of the area, specifically looking for jobs. Then I look at the hyperlocal environment of the particular deal, and then I look at the deal. I don’t get to the deal until I’ve vetted the people and I’ve vetted the demographics. I’ve looked at the hyperlocal environment, then I look at the deal, and the least important thing that I look at is the entry cap rate.

People always talk about, “Oh, so-and-so has this cap rate. So-and-so has that cap rate.” Almost all of my deals are value-add. So what I’m looking for is not the entry cap rate. I’m looking for the exit cap rate, and I’m looking at the net operating income. Based upon the net operating income, that’s going to drive my value. I look at that delta between current net operating income and anticipated net operating income. That’s my value-add because that’s going to drive that value up.

I rebuilt the entire pro forma. I don’t want to use unintended math errors that might be hidden in a formula in their pro forma. So I basically copy the rent roll. I look at the T12, which is the last trailing 12 months, and I also look at the T3. I copy out all of the data, and I apply the rule of thumbs to costs. I want to make sure that I’ve done my own independent pro forma.

If my preliminary analysis is good, then I usually go visit the site. If I have to visit the site, that’s me adding about another 24 to 36 hours into my analysis. I don’t need to visit every single unit in the site, but I need to get a feel of it. I don’t invest remotely.

Last 6 months of 2019

Passive investment     

  • per 17 Offers (total received 51 offers, 43 different syndication groups)
    • 6 Preliminary analysis
    • 2 Site visits
    • 1 Investment
  • did 3 passive investments last 6 months
  • added 17 syndication groups to my no-fly list

    Active direct investment

  • >150 properties analyzed (actual site visits on 19)
  • 4 offers made (full due diligence)
  • 1 purchased and closed

In the last six months of 2019, in my passive investments, per 17 offers, I received basically 51 offers in 43 different syndication groups. From these 17 offers, I had six preliminary analysis, I had two site visits, and I had one investment. So it went from 17 to 1. I’ve basically done three passive investments for the last six months, and I added 17 syndication groups to my no-fly list.

These are 17 syndication groups that sent me offers, and I did the preliminary analysis on the people in the syndication group, and they had significant red flags. I know that I don’t have to reanalyze their deals. I might wait a year or two and let them back into my group to fly, but for the next year or so they’re locked out. I’m not even going to bother looking at their offers, because there’s something in there that I’ve identified in that particular group or those particular people that’s super dangerous.

It could be an SEC violation. It could be a pending bankruptcy. It could be a bunch of UCC liens. It could be some other criminal behavior. So, they go on my no-fly list so I don’t have to analyze them again. When I look at my
active direct investments, I looked at over 150 projects. I did actual site visits on 19 of them. I made four offers, and then did full due diligence with those four offers. I purchased and closed one. Greater than 150 down to 1, versus passive investment 17 down to 1.

Final thoughts

Syndications are long-term prospects. You really need to understand the people that are in the syndication, because most syndications are going to outlast the average marriage in the U.S., which is about 8.2 years. The average syndication deal is between five and nine years right now. If you’re investing in an opportunity zone, that’s a minimum 10-year hold, which definitely outlasts the average marriage in the United States.

You’re creating a contract and offering memorandum. You’re looking at disclosures. You’re looking at PPM. These are all just the prenup to the marriage. The longer the syndication, the higher the risk, the greater the mischief that can go wrong, and the less likely that that prenup will even apply.

You want to make sure that there’s always a contingency plan to remove a bad actor. You don’t want to be stuck with a bad syndicator, and you don’t want to get bamboozled by beautiful graphics and beautiful pictures that somebody’s put together. I want the data. I want the math. The pictures are nice, but they don’t mean much. I can’t eat a picture. I can’t put a picture in the bank. I want to know what the cash flow is that’s associated with these beautiful graphics and pictures and how I’m going to get that into my bank.

Again, it’s a combination of the syndication team, the demographics, the hyperlocal environment, the actual deal, making sure it’s stress tested, looking at the exit, and how does it interact with my specific situation?

If you need help underwriting a deal, let me know. Just send me an email: info@redpillkapital. com. If you need us to help you underwrite a deal, it’s pretty cheap. It’s about $1,900, but that’s not specific, because some deals are very, very complicated. But $1,900 is really cheap compared to getting into a really, really bad marriage.

Now this doesn’t mean that we’re going to go do a site visit for you, because that takes a lot more time, but at least we can help you with your underwriting and the reputation analysis research.
That’s one way to do it. But if you just have a couple of questions, that’s always free. Just email me info@redpillkapital, and just put in the subject line, call me. Give me your number, and we’ll chat, because we want to help other investors. We don’t want people to go into bad deals.

So what’s Red Pill Kapital?

Red Pill Kapital is a physician-owned commercial real estate investment and education company. It allows you to invest passively alongside us. We find the property or we find the investment group. We create and validate their plan. We look at how to improve the cash flow. We negotiate the deal. We manage and oversee the asset. Your passive investment provides you with an opportunity to earn an income without the nine to five because physicians don’t work nine to five; we probably work six to nine. We create a unique business strategy that fits your financial investment goals because we understand the specific needs of physician professionals.

Is Red Pill Kapital right for you?

Your passive investment provides you with an opportunity to earn an income without the nine to nine, because physicians don’t work nine to five. We probably work six to nine. We create a unique business strategy that fits your financial investment goals, because we understand the specific needs of physician professionals.

Are you looking to enhance your financial wealth and truly live the life that you deserve? Are you an accredited investor who’s interested in learning more about passively investing and cash flowing
commercial real estate? Are you interested in investing alongside us? Because we don’t need your money. What we’re trying to do is do bigger projects with more leverage, and the bigger the project, the less the risk because the leverage improves. We only make money if you make money. If you have any questions, please email me at info@redpillkapital.com and that’s Kapital with a K.

We search for value-added real estate for our passive commercial real estate partners, and we actively manage that investment long-term for a successful exit. We are Red Pill Kapital.

Find us at Redpillkapital.com