Here at Nighthawk Equity, we think one of the most fascinating concepts in real estate investing is the concept of infinite returns. This means passive investors get cash flow distributions, based on their initial investment in a given property, yet they've already had the majority of their capital returned to them.
Nighthawk President, Drew Kniffin recently broke this down for potential investors. The idea behind infinite returns is that you have one slug of money – $100,000 – and you get to recycle it an infinite amount of times.
So you invest money into a deal, and then over time, we're able to return that money back to you. But even though we brought the money back to you, you still have ownership. You can get the benefits from that property appreciating as well as use that money again, on a second and a third and a fourth investment.
That's the “infinite” component in this type of investing.
Why do so many investors consider this investment tool to be so powerful?
The reason that infinite returns are so powerful is because you continue to have those funds work for you over and over again. Here’s an example – Drew’s father put in $100,000 on a syndication. About 24 months after we bought the property, we performed a refinance, and essentially gave investors back all of the money they put in, so he got $100,000 check.
He said, “Hey, Drew, so I'm out of that deal, right? Because I got my money back?”
Drew said, “No, you have the same exact ownership that you had in that deal, before you put in 100k, but now you are net $0 into it, and you still own it, you still benefit from the appreciation of that property, and you can use that money to invest again.”
Drew’s dad looked at him like he didn’t understand how that was possible.
Drew said, “That's why we love this industry, because you can take that same money and invest it over and over again.”
Can we expect all Nighthawk investments to provide this opportunity to do a refinance and reap these infinite returns?
The answer is, every deal is unique. We never say that the same thing is going to happen on every deal. But the vast majority of our deals do have this happen. And we do plan for it.
Here’s another real life example of one of Nighthawk’s deals. We bought a 321 unit in Memphis, and about 18 months later, we were able to refinance that property and reap the rewards of all the value creation that we got and give investors 84% of their initial investment back. That deal continues to perform really well. Those investors have taken those funds to their next Nighthawk deal.
There’s another deal where the investors reduced their basis so much, they're now getting monthly distributions back that equal a 14% cash on cash return. So there are many benefits to this infinite investing and it's one of our favorite topics.
We love sharing about one of our favorite topics.
? If you're interested in the concept of infinite returns, and you want to you want some projections based upon how much money you need to invest in order to get a certain amount of passive income, please check out the passive income calculator here.
