Insider Secrets Podcast Season 2, Episode 31
Guest: Mike Morawski
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Guest Bio:
With over 30 years of experience in real estate investment, Mike Morawski has overseen transactions exceeding $405 million. As an accomplished entrepreneur, author, educator, public speaker, and personal coach, Mike serves as the Chief Investment Officer of a multifamily hedge fund. His career is marked by personal resilience and a dedication to empowering others to achieve significant success in their endeavors. He has mentored hundreds of aspiring real estate investors, helping them realize their ambitions.
Mike’s journey began in Chicago’s Northwest Suburbs as a general contractor, where he built a thriving business generating $5 million annually before selling it. He then transitioned into real estate, quickly becoming a top sales agent and leading a team that consistently achieved over $20 million in annual sales. In 2005, he founded a private equity firm, raising $18 million and acquiring $60 million worth of multifamily properties, totaling 4,000 units across five U.S. markets.
Today, Mike is driven by a passion for sharing his extensive knowledge and experience. He hosts the Insider Secrets Podcast and co-hosts the Multifamily Unplugged Vidcast. Through his platform, My Core Intentions, Mike provides training and coaching for real estate investors and industry professionals, focusing on strategies to generate immediate cash flow and create lasting wealth. His training includes both live and virtual sessions, along with three tiers of personal coaching.
What distinguishes My Core Intentions is its emphasis on developing exit strategies and fostering wealth through small multifamily properties. Clients achieve remarkable results, completing deals within 12 weeks and experiencing annual business growth of over 20%. My Core Intentions empowers clients to set high standards in their personal and professional lives, allowing them to realign with their core values, including family and personal growth. Mike’s mentorship helps clients discover their true passions, leading to a more balanced and fulfilling life.
https://youtu.be/Ef4KV1h_AO0
SHOWNOTES
Key Takeaways
Institutional investors may require a higher preferred return but typically accept a smaller equity share, offering flexibility in deal structuring.
Policies like rent control can hinder cash flow, especially in areas with rising costs, affecting property valuations and investor returns.
Population and job growth, along with household income, are vital indicators of a market’s potential to sustain rental growth and value appreciation.
Diverse employment sectors mitigate risks during economic downturns, providing stability in occupancy and rental income.
Working with city officials and economic development teams can ease processes like zoning, permitting, and provide incentives, benefiting both the property and local community.
Investors should clarify if they’re prioritizing immediate cash flow or long-term appreciation to align with property performance expectations.
Cost segregation is a powerful tool that enables investors to accelerate depreciation, significantly reducing taxable income and offering potential financial advantages.
Standout Quotes
“Institutional money will sit in the deal. They want a bit more preferred return but take less on the back, balancing out the return structure.” – Mike Morawski
“Markets make the difference between a good and a bad deal. A strong market can turn a tougher deal into a successful one.” – Mike Morawski
“Population growth drives job growth, which then increases household income—essential factors when evaluating a multifamily market.” – Mike Morawski
“In real estate, the NOI and cap rate are inversely related; as NOI increases, so does the property’s value.” – Mike Morawski
“Understanding local market crime and demographics helps in positioning properties to attract the right tenant base and improve asset value.” – Mike Morawski
“Providing safe and secure housing isn’t just a business goal—it’s about making a social impact for the families and communities we serve.” – Mike Morawski
“For investors, tax advantages in real estate are a powerful way to reduce taxable income, creating financial flexibility and generational wealth.” – Mike Morawski
Episode Timeline
[0:00 – 3:15] Introduction and background of the guest.
[3:16 – 8:3] Exploring the impact of institutional money in multifamily deals.
[8:31 – 12:45] The role of market conditions in deal success.
[12:46 – 17:20] Key metrics for evaluating multifamily markets, including population and job growth.
[17:21 – 23:00] Understanding the importance of NOI and cap rates in property valuation.
[23:01 – 26:35] The significance of demographics and crime statistics in asset positioning.
[26:36 – 30:10] Social impact through safe housing and community involvement.
[30:11 – 34:50] Tax benefits for real estate investors and wealth-building strategies.
[34:51 – 38:00] Final thoughts, tips for new investors, and closing remarks.
Contact
Website: https://mikemorawski.com
Email: mike@mikemorawski.com
TRANSCRIPT
Kristen: [00:00:00] Welcome to this edition of Insider Secrets, the weekly podcast that turns real estate investing goals into reality. Each show, we interview guests who are seasoned real estate professionals actively closing and managing real estate deals. Mike is the founder of My Core Intentions and would like to help you make your real estate investing dreams a reality.
Mike coaches you to buy investment real estate, creating short term cashflow and long term wealth. Your host and real estate coach, Mike Morawski has more than 30 years of real estate investing and property management experience. Here’s your host, Mike.
Mike Morawski: Hey, what’s up everybody and welcome back to this week’s podcast. Glad that you are here for sure. One of the things that I always talk about is intentionality. Are we being intentional about our activities and the things that we’re trying to accomplish? When it comes down to the multi family business, I believe that you have to be more intentional on the [00:01:00] things that you do.
There are so many moving parts. And what we’re going to do this week on this week’s episode is I’m going to spend some time answering some questions. So, over the last couple of weeks, I’ve gotten a lot of questions from participants at the multifamily summit and a couple of other webinars that we’ve done.
And it seems like a lot of these questions that come up are are actually repetitive questions. And what I’d like to do is just kind of try and address some of those. So one thing I want to talk about, though, that I’m super excited about before we get started today is my new books out, Multifamily Investment Secrets: Your Guide to Explosive Wealth in the Multifamily Business.
I hit 7 categories on the bestseller list in the US, 3 categories, international bestseller. It’s a great book. We’ve had a ton of downloads. We’ve had a ton of purchases. And if this is a book that might help [00:02:00] your multifamily business, or give you a little bit of education, or just some weekend reading, download a copy of it for yourself, or go to Amazon and grab a copy.
I actually will be having a sale happening where you can get the book for shipping $4.98. So we’re going to be starting at the link will be in the show notes, and you’ll be able to go for $4.98 shipping only get the book and be able to read through that and see how it can be of help to you.
And remember, if I ever can be of help or answer any questions, what we’re going to do today, don’t hesitate to reach out. Okay. So, the 1st place, I’m going to start is 1 of the questions is why is multifamily real estate still a viable investment in 2024?
The reason it’s still a viable investment is because people need a place to live. We still have such a housing shortage in the U.S. somewhere between 4 and 7 million households don’t have places to [00:03:00] live. And because of the affordable housing concept, it’s interesting, you could go buy a $300, 000 dollar house. Your mortgage payment is going to be somewhere around $3500 dollars a month.
And that doesn’t include taxes and upkeep of the house or insurance. So, when you look at that number as a homeowner today, it’s It is cheaper to rent. It costs you about half to rent. And, there’s still that complaint that rents are going up. Well, it’s still cheaper to rent than to own your own home.
We’ve really become an investor nation. So that’s what makes multifamily still viable in today’s market. The other point around that is that there’s market cycles. And market cycles will last anywhere between eight, 16 years, depending on how long that cycle goes. And there’s four different quadrants.
The market will go up. You’re going to have a lot [00:04:00] of rent decreases in the first quadrant. And then you’re going to have the expansion phase, where we’re going to get into rents going up and more new construction coming to the market. And that’s where that market is really starting to climb up to the top to come over the top.
And then what happens is it reaches its peak, and then it starts to come down for a period of time, and we are on the downside. We are actually in the 4th quadrant right now, and we are going to be coming out of this. And all the data, all the indicators, all the economists are all on the same page of this too, that there’s not going to be a recession, that it’s going to be short lived, that it’s going to be a soft landing, and this thing could turn any day.
And, actually with the election being just passed, we’re going to see how quickly now we cycle out of this and start to go back up. And the one thing I tell people is right now is the time to get in multifamily. [00:05:00] Right now is the time to get in real estate investing because you position yourself, you position your investments in front of that next bull run, then what’s going to happen?
Boom, you’re going to be in front of it. You’re going to have the wind at your back. Your investments are going to become more profitable because of rent increases and higher operations and higher occupancies. And all of a sudden your capital does better than double in a period of time. And sometimes that could be 3 years.
Sometimes it could be 5 years. One thing I would say is that it’s a proven fact that at a 15 percent IRR, your money will double every 5 years. And strategically, we try to come to the market with investment opportunities where people are going to see a 17 percent per year return, which puts them somewhere at about a 2. 8 multiple, giving them [00:06:00] a better than doubling their money in that 5 year period.
So, hey, if you’re a passive investor, and you’re looking to invest in multifamily, this could be a great time for you to add to your portfolio, build some generational wealth, get some tax advantages, and create more cash flow for yourself.
And everybody likes more cash flow. Okay, next question. What are the best ways to increase a multifamily property’s value? That’s a great question. So multifamily values are dictated by the NOI. The NOI is the net operating income. The net operating income is derived as a result of rents that come in, other income that comes in, all the vacancies taken out of that concessions, bad debt, lost to lease, which gives you a line item called effective gross income.
That’s the [00:07:00] money that’s left over to go pay your bills. Now, you pay all of your expenses and you have NOI. Your NOI is everything that comes in, everything that gets paid out before your debt service. That’s the money that you have left over to pay your debt service, your interest and your principal on that multifamily asset.
Now, how do you increase value? Well, there’s two ways. There’s appreciation and then there’s forced appreciation. In the multifamily space because values are derived because of NOI, you want to force the appreciation. So you’re going to force that appreciation through things like capital improvements.
If you can buy a property and you can go in and take classic units, maybe you buy a 1970s product or 1980s product, and there’s units that are still old style, and you can go in and update those. You can push rents as a result of that. Now, one [00:08:00] caveat to this is that it is market specific.
So let’s talk about markets for a quick minute here. Markets 3 types of markets, primary markets, like your Chicago, New York, L. A. Secondary markets like your Madison, Wisconsin. And then tertiary markets, which are markets outside of those secondary markets. And depending on the market you’re in, a tertiary market might not give you the value you’re looking for.
It might give you cash flow, but it might not give you the increase in value that you’re looking for. Secondary markets, primary asset class, you’re going to get more value added.
So you’re going to go in, you’re going to do repairs, renovations, bring those classic units up to premium units. You might put new cabinets in, new lighting, fixtures, some upgrades in flooring. Some upgrades in bathroom fixtures and be able to get more bang for your buck [00:09:00] calling. You’re going to get more rent and more growth.
Now, if you’re in a market, like Tampa, Florida, where the market has just been exploding for the last several years and population growth is growing and job growth is growing. You can really push your rents. I’ll tell you a quick story. We bought an asset in Tampa, Florida in 2021. And when we bought it, our going in rent on a two bedroom was $950 a month.
Well, my partner and I that we could raise rents. I thought we’d get rents up to about $1, 250 a unit. He said, we’ll never achieve $1150 a unit. We went back and forth on it finally settled about $1200 a unit, and we are currently renting those 2 bedrooms at 1600 dollars per unit. So, we have almost doubled the rent on those properties since the end of 2021.
Now, that’s all great. It adds [00:10:00] value. It adds NOI. But when you have rising costs of insurance. When you have rising costs of taxes and labor, it causes that value to still kind of stay flat or stay stagnant. And then you have old rents that need to catch up with the new rents. So, it’s almost like a double transition period.
Where you go in, you do the transition, and then again, you do a transition again in order to increase even more value to those properties. So, you can force appreciation through adding value to the units and being able to raise rent. Another way is operations. How does a property currently operate?
What are the owner’s expenses? What is his management team currently doing? And can you go in and run things better? Can you run things more efficiently? Where can you save dollars on your expenses along the way? Remember, in business, there’s [00:11:00] 2 ways to create money. You can either raise the income by raising the cost of your product, raising your rent and decrease expenses and the perfect world is a good combination of both.
Raise your rent, decrease your expenses, create better operations, add amenities, and this is going to continue to add value. If you add $1 of NOI to a property that has a cap rate of 6. 5 percent on it, for every $1 of NOI you add, you increase the value of that property, $240. So the math says that I can increase my NOI by adding dollars to my NOI.
So that equals $240. Do you want to add your NOI on an annual basis during the ownership period? Okay, it’s another question. How should I approach financing [00:12:00] a multifamily investment? That’s a great question. There’s this thing called the capital stack and is all the different tranches of money or funding that you bring in to finance a multifamily opportunity.
So, it doesn’t matter if that multifamily property you’re buying is a 5 Million dollar property to 50 Million dollar property. Capital stacks can work the same depending on the asset, the asset class, the operations. So, part of that capital stack is your debt. Your debt is typically going to be about 65 to 70 percent of the capital stack.
That’s going to be your major portion. Debt is financed through local banks. It’s financed through the agencies. Agencies being Freddie Mac, Fannie Mae, HUD. That’s agency debt. And then there’s also institutional debt that’s available for multifamily operators with the right experience [00:13:00] and enough experience and enough knowledge and that institutional debt can come through plumbers unions, teachers pension unions, it can come through insurance companies.
There’s a lot of different types of institutions out there that put debt into property because they like the coupon. They like that coupon. Then there’s a tranche of money that could be preferred equity. Preferred equity might be something to look at when you’re doing a larger property, but preferred equity comes in and in maybe a second position on a loan.
It lessens the amount of common capital that you need to go raise or GP capital that needs to come to the table. But preferred equity might take that loan up to 85%. So, if you’re going to get a 20 percent tranche or a 15 percent tranche of preferred equity, that equity usually runs at about [00:14:00] 15% per year.
Now, it doesn’t all have to come from cash flow. Some of that will come from back end. Some preferred equity will sit in a deal for a long period of time. Some preferred equity will sit in deals for shorter periods of time. And you have backfill it out. But preferred equity could be the 2nd tranche.
The next tranche might be common equity. Can I go to the street to private investors to limited partners and raise equity? If you’re going out and you’re doing a 50 million dollar acquisition, that’s going to entail you maybe to raise about the common equity. Preferred equity will offset that.
Maybe now only you have to raise half of that or seven million dollars in common equity. And then there’s the GP side. How much is the GP or the sponsorship team going to have in that particular deal? 5 to 10 percent and the rest is common equity, preferred equity, and then your debt. [00:15:00] So there’s different ways to fund these.
And your equity comes from different places. Another question that people ask a lot is where can I go get equity? Well, when you’re raising capital equity or common equity will come from family and friends in the beginning. People that you know that might have a lot of wealth or income earners, high net worth earners. So that’s where the first piece comes.
And then I always tell people, I say, then you got to go to everybody else, everybody you don’t know, because there’s so many people out there today that don’t know the power behind real estate, that don’t know how real estate can benefit their future or their portfolio.
And, I have a number of investors that started out investing 50, 000 and now they have a million dollars in real estate and they own, they’re partners in a 1000 units. So there’s a lot of [00:16:00] opportunity with private investors out there. And then there’s the investment dollars that will come from family offices.
Traditionally, groups of families that come together, or have had a exit from another business, and they’ve gotten a large payday. Could be 50 or 100Million dollars makes up a family office. And family offices are all not the same. They invest in different asset classes. They invest in different opportunities, but there are family offices that will invest in multifamily.
And then there’s the 3rd piece of equity that you can go look for and the institutions. I’ve done some institutional deals in the past where we’ve had life insurance companies as our partners. And those life insurance companies come in just like an LP. Institutional money will sit in the deal.
They want a little bit more [00:17:00] preferred return, but take a little bit less on the back so can balance out. You might only have to pay them current what you’re paying everybody else, but then they get the rest on the back end when you sell just like everybody else would. So they take less equity more of the preferred return piece.
I really like this question. What are the common risks in markets? So people are asking, what are the common risks in markets? Well, any market can change. It can get better. It can get worse. And the things that drive that are or unfortunately, in some cases can be politics. And I’m not going to get into politics, but if policies change, like let’s look at California.
There’s markets in California that have instituted rent control. And is rent control good for us? Not really as an owner operator, rent control makes it tougher for us to do our [00:18:00] business. When you have rising costs of insurance and rising costs of taxes, and you can’t raise your rent, how do you offset that?
It really hampers cash flow on those properties, and it causes the NOI to drop and when NOI drops, value drops. Because remember that NOI or cap rate is an inversion. When rates go up, pricing goes down. When cap rates go down, pricing goes up. It’s the same thing with NOI.
If your NOI drops, your value is going to drop. When NOI increases, your value is going to increase. And then, as a kind of a follow up to that question is what are the essential components of a good location for multifamily properties? So I am a huge market driven investor. I believe that markets make the difference between a good and a bad deal.
You could put me in a bad market with a good deal and I wouldn’t be happy, but you could put me in a good market of a tougher deal [00:19:00] and I’ll be happy because I know that I can increase the value and change the value of that. So what are the things that we look for?
The first, of course, is population growth. I need to see migration coming into the market. I need to see that population growing, and not just this year, but previously. This goes back to the history a little bit. How many years consecutively has population been growing and what’s the forecast for moving forward?
Because when you have population growth, the 2nd piece is job growth. So, because population grows, jobs going to grow. There’s more demand on the marketplace for HVAC, for contractors, for distribution, for retail, for entertainment. And as you put that demand on the marketplace as population is growing, jobs are going to grow.
And then invertedly, what happens is household income grows as a result of that. And household income is a big piece [00:20:00] of what you want to look for in any market. I want to make sure as a landlord that I can raise my rent. The only way to be able to do that is to know that the household income in the market or in that sub market is going to substantiate that rent increase.
Give you an example. I want to be able to put a tenant in a place that makes over three times the amount of rent. So if my rent is $1, 000 a month, that tenant needs to earn over $36, 000 a year to substantiate that rent. So, if I’m in a market that is in the household incomes, $28, 000 there’s no way I can raise my rents to a thousand.
Cause I’m not going to be able to achieve it because the income isn’t there in the marketplace. So hopefully that makes sense to you. But if I’m in a market that the rents are $48, 000 a year, I should be able to push my rents beyond a thousand over time. So, [00:21:00] I look at that and then I look at what the data says, free data and paid data, moving forward quarter after quarter for the next eight quarters.
So when we’re underwriting, we look at this. Now, the other thing that’s really important is employment diversification. So, I’ve been in the real estate business a long time. We used to own assets in the Ohio Valley, and in the Ohio Valley at that time, there were really two major employers. There was transportation and distribution. And, auto manufacturing.
So these auto manufacturers made parts for the big manufacturers that put cars together. Now, what happened was in 2008, those businesses got distressed because car sales stopped, house sales stopped, people stopped spending capital and buying things. So distribution slowed down and it caused a decrease in jobs [00:22:00] and occupancies in that market.
I want to make sure today I’m in markets that have multiple employers. So let’s look at the Tulsa market. I like Tulsa. I think it’s going to be an emerging market coming out of the cycle that we’re in and it’s going to grow. But if I look at Tulsa right now, I have aerodynamics. I have medical, I have manufacturing, I have retail, I have distribution, I have technology, I have entertainment.
I have a number of employers that are growing in that market. Amazon just built a new distribution hub. There’s a new electric car manufacturer called Canoe that’s building their international headquarters there. And, they just signed a contract with the U. S. Postal Service this year to supply 3, 000 mail trucks to that region.
Then there’s a brand new theme park that’s being built outside of Tulsa. That theme park is going to be a destination for people to [00:23:00] come to just like when Walt Disney built Orlando. So, what do you have in the market that you’re in that gives you that robust population and job growth. That’s really what’s important.
And then we look at crime. What is the kind of crime in the area? Every area has crime. Even if you live on the Gold Coast in Chicago, you’re going to have crime. And some areas, it’s just heavier than others. But what type of crime? Do you have murders? Do you have rapes or do you just have petty theft and car break ins. You’re going to have that everywhere.
The next thing we look at is demographics. And then I want to have the conversation, which sometimes can be a delicate conversation, but am I able to change the demographics? If I have one demographic of people living in this apartment complex. But some of the other complexes around there are different demographic.
Can I change my demographics? So I want to know, do I have [00:24:00] the ability to do that? Then I want to look at schools, and I’d like to see schools be a grading of 5 or better in the area that I buy multifamily in. Because then that’s going to help you also bring a better tenant to that market.
The next thing I say is, when you’re looking at crime, call the police department, ask the police department about that address, about that property. How many calls do they have out there? What are they looking for in that area? And then you want to go with a city. And you want to talk to building and zoning, and not just building and zoning, but you also want to talk to the economic development department.
I remember years ago, we were going to build a new development in a suburb outside of Chicago, and it was going to be hotel retail. And we built a relationship with the economic development people, and that department, the city, and because of that, it made our permit process easier. It made our [00:25:00] zoning process easier, we got some tax abatements.
But find out what the city wants and can you add that to help the city push along a little bit. So how do we incentivize or be incentivized by what somebody else wants? How do we meet somebody else’s needs? The city, the economic development department with our assets? Remember, that when you make changes to a property, you not only affect that property, but you affect the market around it.
So, the small business on the corner benefits, because you bring a better tenant that spends more money that increases the profitability of that small business. We’re not just center focused on that particular property. But we become market focused and that really helps to grow your property value back to NOI, creating more [00:26:00] value, and the market value around it.
I’ve had a mission for years in the multifamily business, and that mission has always been to provide safe and secure housing for my tenants. And I think there’s a lot of single parents out there. There’s a lot of single moms out there and they want to know that if they’re at work, that when their kid comes home from school, that that kid’s going to be safe, that they’re not going to be chased down when the door closes behind them, that they’re going to be able to get apartment safely and not be hassle.
And, it’s just always been a mission to how do I provide a safer environment for my tenant and also make a social impact in the community around.
So here’s an interesting question that came in. What should investors prioritize cash flow or property appreciation? Well, that’s a great question. And I think it comes down to personal preference. What do you want? [00:27:00] What are you looking for? As a multifamily investor, a syndicator, what I look to do and just so you know, if you’re not sure what a syndicator is. A syndicator is a sponsor, a GP, somebody who finds a great real estate deal and goes and raises the private capital and marries the two together.
A syndicator just puts together groups of people in order to buy assets of real estate. So that’s the short synopsis of that. But, what do you want? Do you want cash flow? Do you want long term wealth? As a syndicator, I try to fill 3 buckets for my investors. The first one, can I put more cash in my investors pocket on an annual basis?
And then long term wealth, how do I increase the wealth of my investors over time and help them create generational wealth as a result of real estate investing? I want to protect their [00:28:00] principle. I want to create more cashflow. I want to give them generational wealth. And then the fourth piece is to have tax advantages.
If you’re a high net worth investor, how do I offset your income for your passive income, your active income through strategies that we have in the real estate so you pay less taxes. We’re all going to pay taxes, but why should we pay more. I’ll give you an example. I was on the phone yesterday with an investor.
He said, oh, I just invested in this mobile home park and put $50, 000 there. He goes, my accountant just called, me told me I’m going to have a tax bill of $100, 000 this year. I said, wow, that’s a shame. I said, would you like to offset that $100, 000? He goes, how? I said, well, if you took that $100, 000.
And you invested it in this particular asset that we have right now, because of cost segregation, because of the depreciation, you’re going to get about a [00:29:00] 50 percent tax break, which means that if you invest 100, you’re going to get a $50, 000 write off. Which is going to come off of your taxable income. So now you’ve just lessened your tax bill of $100, 000 down to $50, 000.
He goes, that’s a no brainer, right? Wouldn’t you agree that that’s a no brainer and those are benefits that investors can have. So not every deal is going to do that. Not every deal is going to do that after the 1st year, it all depends on the sponsor and the GP, how they put it together, what they’re doing with that depreciation, how they’re distributing it.
So there’s different things you can look at. We’re going to do, we’re looking at doing a commercial asset, which is going to give even more depreciation and more cashflow to investors. So there’s different strategies and different product classes that are going to help you create more [00:30:00] value.
So as an investor, what do you want to achieve? Do you want more cashflow to take an extra vacation? Are you trying to create generational wealth? Do you need those tax write offs? What are your concerns? Are your concerns, is my principal going to be okay? Well, if you’re a private investor right now looking for something, it’s close to the end of the year.
There’s some advantages here. Give me a call and we can walk through your personal situation and see how we might be able to help and maybe we can’t help and either way at least you get more knowledge and more Information that’s going to help you in your personal investing along the way. There was another question somebody just asked because I made a comment about cost segregation as part of the depreciation and somebody’s saying, what is cost segregation?
Well, cost segregation is an engineering study that is done by a company. And you hire them, they come [00:31:00] in and they take the components of an asset. So windows, roofs, paints, carpeting, cabinets, and they depreciate it at different time lengths. So, in the past, you would take depreciation on a commercial asset over 37 and a half years. On a residential asset, it’s over 27 and a half years.
And you would straight line that depreciation. Depreciation is calculated because our values of property go up, the government deep values our property and there’s a spread in between that we get to depreciate. You take the asset value, less the land value, which is generally 20 percent, gives you a product value.
You depreciate that over 37 years, you get a straight line number. But cost segregation allows you to devalue that faster. And then there’s this thing called bonus depreciation, which [00:32:00] gives you the ability to even accelerate it more during a time period. So, if you have product properties, you can do cost segregation on them.
You can even go back several years. If you’ve done upgrades, if you’ve done enhancements and rehabs, that will give you the ability to write off more on your taxes, put more cash in your pocket and give you more savings on your taxable income on an annual basis. And isn’t that something we all want to do, preserve our capital, create more cash flow, and save on our taxes?
Okay, so the last question that we’re going to talk about is, how can I accurately assess a property’s financials before investing? So, I’m taking that more, that that’s addressed more to the passive investor. The investor who’s thinking about investing in syndication. And I think there are things you need to look at.
Look at the GP, look at the team, look at the experience, [00:33:00] even if they’ve had bad experience. Is that benefit you by being partners with that GP team? So, you’re going to look at that, but more importantly, you want to look at the financials. And I always tell people, I say, hey, there’s 3 ghosts. If you’ve ever seen the movie Christmas Carol or the play Christmas Carol.
Remember, there was the ghost of Christmas past. The ghost of Christmas future, or present and the ghost of Christmas future. And it’s the same thing in real estate. You’ve got financials, you’ve got operations from the past, you have the current, and you have what your performance is going to be, what the future is going to look like.
And you need to look at all those. Look at the trending rent rolls. Look at the trending occupancies. Look at the trending income. Look at the rents. Look at the expenses. Are there any anomalies when you look through those where maybe month after month at $600, $700 for a [00:34:00] bill, and then all of a sudden it spikes to $1400.
What caused that spike? Why did it grow? Dig into that. When somebody tells you, hey, I have $100, 000 worth of other income on this property. Well, where’s that other income coming from? It could be coming from application fees, move out fees. It could be coming from eviction fees. It could be coming from different places, laundry facilities, parking, the amenities that you might be selling on a property.
So, always dig into the numbers because I always say the math doesn’t lie. If you can get your arms around the math and you can understand what that current owner is doing and what you need to do to run that property properly, if you’re an active investor. Or know what the GP team’s going to do if you’re a passive investor, then you’ll be able to make clear decisions.
Make your decisions investing in these syndication based on the sponsor, based on the finances, based on the [00:35:00] proforma. And as the sponsor proven that out previously and other assets and based on what the projections are. And then all I always tell people, I say, you got to go on your gut.
What do you feel about it? Do you feel comfortable? Is it going to work? Do you feel comfortable and confident in the sponsorship and the team? How is this going to benefit me in the long run? So, I hope that was helpful. I hope today’s been helpful for you. Thanks for being here. I love doing these podcasts, especially I love these Q and A’s because there’s always a myriad of questions.
People want to know different things and just bring some education, bring some free stuff to the market that you can benefit from. So, hey, let me just kind of start to warm this up a little bit. Coming in January, I’ll be doing my annual goal setting event. It’s an online event every year.
We’re going to have a workbook. We’re going to spend a half a day just talking about goals. But what you want to accomplish and helping you get [00:36:00] set up for 2025, whether you’re going to be a active investor or a passive investor and helping you build your business, build your platform and your portfolio.
Thanks for being here everybody. If you are following us on Instagram or Facebook or any of the other social media platforms, thank you. Please tell somebody about us. And if you’re not following us, follow us, please. Follow us on Instagram, on Facebook, on YouTube, on TikTok. We are always bringing out relevant content, information for you that’s going to help you build your business. That’s going to help you grow mentally.
And I always tell people. Hey, none of us ever grow unless we grow personally, then we’ll grow professionally. So how do we help you do that? Mindset, goal setting, be part of our community and listen, join our inner circle, join our inner circle and get some benefits as being a member with us and how that’s going to help you grow and help you [00:37:00] benefit your business, whether passively or actively.
Have a great week everybody. We’ll see you next week. If I can answer any questions along the way. Don’t hesitate to reach out to me personally.
Kristen: Thank you, Mike, and thank you for joining us for another great episode of Insider Secrets. As always, Insider Secrets is brought to you by My Core Intentions. Wherever you hang out on social media, you will find Mike and My Core Intentions. Please like and follow us to get the most up to date real estate investing trends.
Visit mycoreintentions.com where you can get expert coaching on all things real estate investing and property management. If you’re looking to become an expert, Mike’s coaching will help you scale your real estate investment business. We’re looking forward to having you back again next week for more Insider Secrets.
