The real world is not HGTV. If you are a high-earner looking to get into the real estate game, it is important to understand just how much work is involved in being an active investor. There is a lot of competition in the space, and good deals are hard to find. Add to that the complexities of managing a rental portfolio, for example, and the headache may seem like more than it’s worth. But why work harder than necessary to make less than you could? You can take advantage of all the benefits of commercial real estate investing as a passive investor, letting an expert handle the minutiae while you reap the rewards.
Paul Moore is the Founder and Managing Director at Wellings Capital, a commercial real estate investment firm that focuses on self-storage, mobile home parks, and multifamily property. Paul has 18 years of experience in real estate: He has flipped 50-plus homes and 25 high-end waterfront lots, appeared on HGTB’s House Hunters, rehabbed and managed rental properties, built new homes, and developed a subdivision. Paul is also the author of The Perfect Investment: Create Enduring Wealth from the Historic Shift to Multifamily Housing and cohost of the wealth-building podcast How to Lose Money.
Today, Paul joins me to discuss the advantages of commercial real estate over stocks, bonds and mutual funds. He shares the challenges of being an active investor, explaining why high-earning professionals might be happier as passive investors in commercial assets like apartment buildings, self-storage facilities, or mobile home parks. Paul also offers insight around the commercial value formula, describing how operators can force appreciation with simple strategies to increase a property’s income or compress its cap rate. Listen in to understand the extraordinary tax advantages of multifamily real estate and learn what makes commercial investing an attractive option for high-net-worth individuals looking for a consistent return and minimal risk profile.
The pros and cons of stocks, bonds + mutual funds
- Long track record of growth, great liquidity
- Highly unpredictable
The pros and cons of commercial real estate
- Not at all liquid
- Stability, predictability for long term
The challenges of being an active investor
- Hard to find good deals + be profitable
- Time consuming to run large SFH portfolio
The commercial value formula
- Value = net operating income/cap rate
- Increase income or compress cap rate to force appreciation
Simple things operators can do to increase income
- Rental space for trailers, RVs + boats in mobile home park
- Professional property management in apartment building
Simple things operators can do to compress the cap rate
- Franchise group of self-storage facilities, find right buyer
- Multifamily value-add from C+ to B and refinance
The tax advantages of commercial real estate investing
- Accelerate depreciation via cost segregation study
- Bonus depreciation (up to $1M) + QREP write-offs
Wellings Capital’s strategy moving forward
- Expand to self-storage, mobile home parks via partnerships
- Wellings brings equity and partner-operator finds deal
Connect with Paul
The Perfect Investment: Create Enduring Wealth from the Historic Shift to Multifamily Housing by Paul Moore
10 AMAZING Tax Benefits for Real Estate Investors
Tax-Free Wealth: How to Build Massive Wealth by Permanently Lowering Your Taxes by Tom Wheelwright
Financial Freedom with Real Estate Investing: The Blueprint to Quitting Your Job with Real Estate—Even Without Experience or Cash by Michael Blank
Podcast Show Notes
Apartment Investor Network Facebook Group
Great podcasts- glad I found them. I have a good deal of money in my/our self directed 401ks with a major institution. I also have some cash outside of that in a few separate checking, savings, money markets, etc. With most passive syndications you need to have around (50K) minimum. Does Nighthawk Equity or others take dollars from self -directed IRA’s- or will you in the future? Any thoughts around that subject? Or guide me to one of your podcasts on this subject?
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