Scaling Your Multifamily Real Estate Investment
In our latest episode on Entrepods, we spoke with an intriguing guest. John Casmon, the Founder of Casmon Capital Group. He gave us insight on how to build equity, start the process of multifamily investing, and save on taxes. If you’re looking to get into real estate investing as a beginner then you know buying an investment property is the essence of it. Making smart choices and good investments can lead to your success later on.
HOW TO START INVESTING IN MULTIFAMILY PROPERTIES
“I talked about making my family a priority but the truth is, at that moment my family was not the priority. Work was the priority.”
As many people know, being an entrepreneur is difficult, although, real estate investing, can often give you the freedom and flexibility that other corporate jobs may not provide. Being smart about your purchases and owning multifamily properties will ultimately give you the upper hand. Often in the real estate industry, many house flippers state that they wish they started bigger and came out of the gate with multifamily investing.
When talking about multifamily real estate, it’s important to note that there are two different types of investments. One is residential units which usually have two to four units. The other is a commercial multifamily investment that can hold 5 units and up. It is recommended to start with residential properties to understand the ebb and flow of real estate investing before moving onto bigger projects such as commercial real estate.
A problem that many beginner investors run into is funding their investments. You can be independent in your investments as much as you want, but you may find a point where you aren’t seeing the profit you would like. As John put it, “don’t rely on how much money you have in the bank in order to invest, start partnering with other people.” A collective fund with trusted partners means you can invest in something much larger than you could’ve on your own.
“Learn while you earn,” is solid advice John gave us in our episode. Start out your real estate investing journey by doing it more passively to start while keeping your day job. Understand what works for you and what doesn’t work and then change your course of action. The benefit of passive apartment investing is you still get all the perks.
BUILD EQUITY AND BECOME AN INVESTOR
There will come a time in your investment journey when you start to become confident enough to expand your horizons and learn more about equity and lowering your taxes. When doing this, you can start by depreciating your assets. This sounds counterintuitive but doing so will generate a negative or paper loss.
This comes in handy when you start to make money in your own business, getting K1 distributions, or passive income from other investments. You can then use these negative or paper losses to offset the income you are generating. You still get the cash flow distribution from your investments, but you’re able to reduce your tax liability at the same time.
“It can be a tool that not only gives you income, not only gives you equity but also helps your lower your taxes and keep more of your money”
Making money in investing is much more than doing it “just because,” making money to have an impact on your community and properties you own is interwoven in the experience. The amazing thing about owning multifamily properties is that it is recession resistant (which is much different than recession-proof), essentially, people will always need a place to live, and providing them quality housing will only benefit you in the end. Invest in the property that you believe is a good real estate investment and by doing so, you can make even more money.
“What missions are important to you? When we think about investing we think about impacting our circle, our community, and our causes.”
When it’s time for you to sell your investment you will have more control over when you sell, this gives you more stability in the ever-changing real estate market. For example, if the market changes while you are flipping houses, your income and profit could see a big impact, but with multifamily investing that risk is reduced.
Do your research when it comes to real estate investing to determine if this is the path for you, then start taking action. Any action that you put forth towards your end goal is a win, even if it’s something small that you can do in the next week. Remember that being an entrepreneur takes work but with determination and a willingness to learn, you can become the successful investor you want to be.
“Take some action, do whatever it is to get to the next step so you can actually move closer to being an investor.”