Welcome back to MOR Financial’s REI Blog, “A Shot of Baile”. I’m in the rehab business. That’s my job right now. I don’t know that I will always be a rehabber full time, but it is a business that I love. Down the road, I’ll probably just do it because I love experiencing the transformation of properties. I’ve done some goal setting for the year and it has allowed me to look at my long term plan…my “exit strategy.” So, what is your exit strategy?
If you are like most people, you don’t want to work your entire life. You want to work for a while and then retire to some nice tropical island to sip Mai Tai’s all day. Me, I want my Irish castle. Yes, my job is great, but there is no pension attached. Unless you properly build your 401K or have another investment strategy, you will only have Social Security to live on…maybe.
So, what do you do? Pay deeply into a self-directed 401K so that you can gap for others and be more passive? Do you just put it into mutual funds and let a fund manager control your future? Put money into syndication? There are a dozen ways to create your future, but what you need to do is to plan for it so that it plays out as you want it to.
I am not a financial adviser, but I do know what myself and others within my circle of friends are doing to plan for our future. We all need to have our exit strategies firmly in place by the time we are ready to head off and finally retire. If anyone would like to talk with a financial adviser who deals with real estate (and is one of the smartest women I know), contact Christina Suter at Ground Level Consulting…she’s brilliant! Christina will be co-hosting a Webinar with MOR Financial on July 1st. I highly recommend you check it out as she will be discussing Diversification. You can register for it here: https://attendee.gotowebinar.com/register/4511269088074090497
First and foremost, figure out how much monthly income you need to have the lifestyle that you want. After you know that number, you can pinpoint a good strategy for you and how much you will need in holdings.
One exit strategy involves having enough rentals, whether they are single family residences or multi-family residences, to allow for passive income flow every month. If you need $10,000 a month and you are getting $100 from each door, then you would need to have 100 doors in your portfolio. I’ve always said that real estate is a numbers game. This is where you just plug in the numbers and make it work. Having 100 doors is a lot of work unless you have a management firm doing the majority of it and you are just overseeing the firm itself. You can use this strategy as you buy rentals to add to your portfolio piecemeal. Remember that you aren’t buying the houses outright but only putting together enough of a down payment to make the numbers work.
A second strategy is to work with syndications. This involves pooling your money together with other investors’ money and buying larger projects. There are a few people that I know who put these together. This is truly mailbox money. You have no control over the project but are only investing in a project that someone else is controlling. You are trading the control factor for the complete passive income in the project. For anyone who wants to park his or her money, this is a good strategy. Of course, you need to vet the company that is putting the syndication together to make sure that they are good at managing the apartments, or whatever the investment is.
Similar to syndications, or perhaps just another type of syndication, is a REIT. REIT.com defines a REIT as “Real Estate Investment Trust (REIT), is a company that owns or finances income-producing real estate. Modeled after mutual funds, REITs provide investors of all types regular income streams, diversification and long-term capital appreciation. REITs typically pay out all of their taxable income as dividends to shareholders. In turn, shareholders pay the income taxes on those dividends.” Like syndication, it is a hands-off approach to investing in real estate. These have just recently been popping up in the news and are very popular with individuals who know very little about real estate but want to invest. Again, do your due diligence on anyone that you do business with. They have been around since 1960 and are regulated like stocks, but are enjoying a boom in the industry.
Some hard money lenders, like MOR Financial, have private investors that earn good returns on their investments. Basically, you become part of the hard money lending that we all depend on to do our rehabs. They typically provide a return on your investment that is above the market average and invest in entrepreneurs like you and me. It is a fairly simple and straightforward way to invest money and still stay in the real estate game.
There are many “typical” types of investments, such as stocks and bonds, but they have little to do with real estate. If they appeal to you, by all means investigate them to make sure that they fit your investment strategy.
Each type of investment has different risks and different rewards. Figure out which one meets your risk tolerance and then start planning. Call a financial planner like Christina and let her sit down and talk to you about the risks and rewards of each. The sooner you know what you want, the sooner you can start taking steps towards accomplishing it!
If anyone has more questions or wants more one-on-one coaching, don’t hesitate to contact me. This REI Blog is a passion for me and I truly enjoy sharing what I know with others. Thanks for coming by and getting a bit of the education. Until then, remember that you, too, have that inner warrior that it takes to achieve greatness and success. Feel free to drop me a line at Coaching[at] BaileProperties.com.
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