Unlocking the Power of Multifamily Real Estate: Insights from TR Capital Partners
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Welcome to Alternative Wealth, where we explore traditional and alternative investing, retirement, and personal finance concepts. I'm your host, Ryan Kolden. Join us as we talk about the strategies and tactics that can help you make better financial decisions.
DISCLOSURE: Ryan Kolden is an investment advisor representative of RPG Family Wealth Advisory. Kolden Wealth is a DBA of RPG Family Wealth Advisory. The opinions expressed by the host and or guests in this podcast do not necessarily reflect the opinions of Kolden Wealth or RPG Family Wealth Advisory. No information on this podcast should be construed as as investment, legal, tax, or financial advice.
Ryan Kolden: Today on the show, I have Ryan Twomey and Lucas Ravanis, co-founders and managing partners of TR Capital Partners, a real estate investment firm specializing in multifamily that is dedicated to providing investors with attractive risk-adjusted returns while delivering quality living experiences for their residents. Ryan and Lucas, glad to have you on the show. Great to be here. Thanks for having us. Yeah, not a problem. So I want to start off by discussing multifamily apartments from a high-level view. In terms of different types of sub-assets of real estate, so things like industrial, office, retail, storage, what attracted you guys specifically to multifamily?
Ryan Twomey: Yeah, so when we got our start, we actually started small with triplexes and duplexes with our own money, just doing it all in our backyard pretty much. And we immediately fell in love with the multifamily side. I think one of it has to do with the demand for housing, especially right now. And that's especially in the urban areas that continue to attract individuals seeking the social connections, the convenience, the active lifestyles. Obviously, that's where all the jobs are. Another thing recently with the COVID epidemic was A lot of people started working from home. A lot of people started renting because they had more flexible schedules, they could work from wherever they wanted. That's a big factor that drives demand, which is why we love the multi-family space. We think that it's definitely a more stable asset as opposed to an industrial building or an office building, where things like economic downturns and things with the job market can really affect that significantly. As far as the demand for housing, we feel that people are always going to need a place to live. And that's kind of one of the tenets of life, right? So multifamily has been our go-to for that one. They made that one main reason.
Lucas Ravanis: Yeah. And to add to that too, there's two things in life that are never going to stop happening and people aren't going to stop living. People aren't going to stop dying. I don't want to deal with the dead people. But what we realize is with multifamily, There's such a great opportunity for people to diversify their portfolio with an asset that you can control. Now when you're investing in stocks and bonds, you're hoping that a company is executing on their strategy. When you're talking commercial real estate, the name of the game is net operating income. So if you can increase that property's income while also decreasing the expenses, you are force appreciating that property, making it more valuable. So you have more control over a tangible asset, which is what really made it appealing for us to start investing in.
Ryan Kolden: I'm sure everyone's well aware of the housing, I don't know what you want to call it, but boom, that's gone over the last couple of years, specifically in states like Florida where people were moving into and whatnot, then moving out of. What does the landscape look like in terms of the future demand for apartments?
Ryan Twomey: So part of our business strategy with all of the places we buy, the markets we buy in, is we look for places where they're not having a ton of new builds, meaning they're not having a bunch of construction contracts and building new apartments from the ground up. This is key to indicate, you know, that there's not gonna be a ton of competition. Rank growth will continue to increase as opposed to decrease, which it is doing in some markets like Austin, Texas, various parts of Florida. Essentially, there's an oversupply. that can happen in any market. It all comes down to how many units are there, the absorption rates and things like that. But that's actually one of the things we focus on most is we focus on markets where there's not going to be a ton of new builds. So we can kind of take advantage of the demand that's already there because the supply won't increase enough where it will increase vacancy rates on those properties.
Ryan Kolden: Awesome. One of the things… So I'm not a seasoned real estate investor, but I have purchased a lot of properties as investments. I say a lot. I did four. I don't own them anymore, so it's not a lot. But one of the most rude awakenings I had was with a single residential property. going from 100% occupancy rate to when they move at a 0% occupancy rate overnight. So that is a shocker. What trends are you seeing in vacancy rates with regards to multifamily right now?
Ryan Twomey: Yeah, that's one of the reasons we love the larger properties. So we're targeting things 30 to up to 200 units in size. We found that, so we did our triplex, for example, and similar to what you're saying, if a tenant moves out, in the case of the triplex, 33% of your income is gone. So if you're a small-time investor and you have single families or small properties, you're most likely relying on them to cover the mortgage payment. The whole point is for you to have a couple extra hundred bucks in cash flow that can supplement your income a bit, but you're not paying out of pocket for that mortgage. If someone moves out, you're immediately most likely paying part of the mortgage payment and therefore becomes a liability to you. It's no longer an asset that's cash flowing and putting money in your pocket. It's actually taking money out of your pocket. So with the properties that are 30, 100 units in size, we could have five, six people and sometimes 10 people move out. And we won't even really see that affect our cashflow too much because we have 90 other tenants paying rent on time. And that way we can cover all the operational expenses, still cashflow a little bit, then pay off investors and get those distributions out. And while we work on re-leasing those units in typically about a 30 day timeline. So that's the reason for the economies of scale there. And that's also one of the reasons we love larger multifamily on the commercial side, as opposed to something that's one to four units on the residential side.
Ryan Kolden: Lukas, you hit on this a little bit earlier, talking about stocks and bonds and adding real estate to a portfolio. The average investor or someone who's doing it theirself, maybe through Vanguard or Fidelity or whatnot, The bulk of their portfolio for the most part is going to be some kind of traditional stock and bond portfolio weighted to basically their tolerance and whatnot. As an investor, why would someone want to consider adding real estate to their portfolio if they were only in something like traditional stocks and bonds?
Lucas Ravanis: My biggest thing is in life, it's not necessarily about how much money you make, but it's how much you keep. And the biggest expense we all manage poorly is your taxable income. Now, with stock sponsor mutual funds and you invest in that and you're hitting 5% a year, that's a win, right? But you get penalized when you try to take that money back, right? You have to pay taxes on it. Now, real estate, when you invest in real estate, not only can you control the value of it, but it incentivizes you, the government incentivizes you to own real estate. We reward real estate owners and you get to claim all these different tax benefits like depreciation and pass-through income to hold on to more of your hard-earned money. So it's a great tactic for people to put into their portfolio because it allows you to not only grow your wealth, but hold on to the money and pay Uncle Sam less every single year.
Ryan Kolden: So one of the things that I talk to a lot of people about, and you said it there, I love that word incentive. So a lot of people have misconceptions, I think, around the tax code and why certain tax breaks and deductions exist in the tax code. And Congress specifically puts social engineering incentives into the tax code to incentivize people to do things that the government otherwise has zero interest in doing, one of them which is providing housing. And so I think that's an incredibly important point you made is that the incentive to invest in real estate to provide housing, therefore you get that tax break. In terms of investing in real estate, I think a lot of people don't understand that they can participate in larger deals. They think that they have to go out and buy a home themselves or like, hey, I see this $2 million apartment complex I have. I don't have the capital to do this. Can you briefly explain the GPLP structure and how someone can passively invest in deals they otherwise wouldn't have access to?
Ryan Twomey: Yeah, so that's actually what we thought when we started. That's why we went the traditional landlord route. And there's a difference between an investor and a landlord, which we quickly learned about a year into it. But through real estate syndications, you can essentially take advantage of other people's expertise. People are doing it full time and people that will be the landlord, the property managers or asset managers, we call them. for you so you get all the benefits of real estate without having to deal with all that, you know, those headaches and adding time to your already busy schedule. So me and Lucas right now act as GPs on these larger deals. So what that means, we're the general partners. Typically that's going to consist of someone who is the acquisition specialist, the investor relations and the asset manager, and then also a sponsor. So those four roles make up the GP team. We do everything from find the property, get the debt, we negotiate with the seller, we create the business plan to add value and operational efficiency, and then we manage the property manager, and then later obviously exit the property on behalf of the LPs, which are the limited partners. And those are people who don't want to essentially add time to their schedules or don't have the expertise or these, you know, a ton of capital to invest, but when I get all the benefits without dealing with all that stuff, because that's the reason most people don't invest in real estate is because they either don't have the expertise, they don't have the time, or they don't have the desire to be managing a property because We all heard some horror story of being a landlord, and that's instantly a connotation people have with real estate and rental. But there's much better ways to do it. There's ways to do it completely passive, like you would in the stock market, but with the asset itself, it has greater control and transparency than stocks, and you can interact directly with the team. Like you're not talking to a CEO if you buy the stock, right? But you can literally just call or text me or Lucas, We're going to hop on a call right away, answer any questions you have, go through the whole detailed plan, let you know all the benefits, what's going on, everything you should be concerned or excited about. We're just one phone call away, which also helps the transparency side of things. Yeah.
Lucas Ravanis: And to add to that too, if you invest your capital in a stock, you're a shareholder. If you invest your capital into a real estate syndication, you're an owner. And that's a huge misconception that people have. They think that they're just a part-time owner or a shareholder. And it doesn't matter if you're investing $100,000 into a $2 million raise, or if you're investing $25,000. If you invest into that deal, you are an owner. Congratulations. If that deal is 1,000 units, congratulations, you own 1,000 units. And that's the really cool aspect that people have a hard time wrapping their head around.
Ryan Kolden: It is. It's super cool that you can be a relatively small investor and own a piece of a 500-unit apartment building. We mentioned incentives and tax breaks with regards to real estate. Can you guys briefly explain, just from a high level view, the tax benefits that people receive from real estates? For someone who isn't familiar with the concept, maybe things like accelerated depreciation, bonus depreciation, and cost segregation.
Ryan Twomey: Yeah. So not to, I mean, not to go too deep into the weeds, obviously we're not tax professionals. So I will preface this by saying, well, you do invest in a real estate syndication, make sure you talk to them to see how it directly impacts you as an investor. But there are, so like Lucas mentioned, you are a co-owner in these properties. You're a partner alongside us. You have percent equity ownership in these properties. So you get all the same tax benefits you would as if you own, you know, a four family or, you know, a five family, whatever it might be on your own. So with depreciation, you can, you know, write that off. because of the losses on the property right down to your W-2 income, and that's done through pass-through taxation, which means the LLC losses, or the LLC tax write-offs, we'll just call them for simple terms, can actually be passed through right down to your W-2 income. So if you have 3% ownership in the property, you'll get to claim 3% of the total losses. And at scale, with these million dollar properties, that can be a significant chunk of money. So like Lukas said before too, but how much you keep, not so much how much you make. It's really how much you keep and how much you can put into work for you. So a lot of the reasons people do invest, especially high net worth individuals in these syndication deals, is one, because they don't have the time, but two, is because they need to get their business income or their W-2 income, whatever it might be, down so they're not paying a hefty tax bill at the end of the year. As far as accelerated depreciation and the cost segregation stuff, that's more of a high level. I mean, a little more in-depth as far as the tax code and what we're able to do, you essentially is what we're able to do is take the seven, we'll say seven years of depreciation, and cut them down to like one or two. So we're taking all of the depreciation we'd have over that time period, condensing it, and that way the passive income you're getting and all these benefits get accelerated, and you're actually getting most of that passive income completely tax free, because we're able to write off structural losses, depreciation, and stuff like that, earlier on in the deal, which we do through what's called a cost segregation study with a tax advisor.
Lucas Ravanis: Yeah, and to add to that too, just to look at it like a dumbed down view of what that actually means is, so you invest in an apartment building. That value of that property is appreciating over time, right? That's why you're investing in it. But the government understands that the walls of that building aren't getting any younger, the appliances are getting older, the foundation is getting older. So the government actually sees it as a depreciating asset, although the value is still appreciating. So one of the tax benefits through the cost segregation study that we put on every single year for our investors is we're able to claim the depreciation on that appreciating asset and you get to in turn pass through those losses onto your W-2. And that's really just like a dumbed down view of looking at it just so people can understand the beauty of owning a tangible asset and how you can earn more money by investing that way.
Ryan Kolden: Absolutely. That was a really good explanation. So I think that should be enough to stoke someone's curiosity to probably look into that a little bit deeper. Because like Ryan said, this can be very tax intensive. And it's definitely not something you ever want to try to execute yourself without seeking the help of a professional CPA or tax attorney and whatnot. Now, I want to shift gears a little bit. Over the last few years, rates have significantly gone up and commercial real estate has been in the headlines for being hit particularly hard. What effect have you guys seen with regards to increase in rates in the multifamily sector?
Ryan Twomey: Yeah. So we've seen, obviously, rates tripled in about a year and a half. And that hurt a lot of people in the commercial real estate space. So what we saw as a main issue was when the rates were, you know, two and a half, 3%, people were taking out a lot of bridge debt, but they weren't buying rate caps on that bridge debt. And bridge debt is variable. So it kind of goes with the market rate. When the rates tripled, everyone that didn't buy rate caps were done underwater and were no longer cash flowing. So that's one thing you should look for before you're investing in a deal, is look at the debt they have. So what we typically will do, is we'll have to get fixed rate agency debt, so we know exactly what we're paying every month. We can write that into our underwriting, so we can know exactly what to expect, mitigating that interest rate risk. And let's say the rates go up. Well, we already locked it in at a lower rate, so we're actually cash flowing better than we would have if we had that variable rate. Or if they go down, what we can do is refinance out, take a little bit of cash out of the property from the equity we have, and then send that out to investors so they can get all of or some of their capital back lowering the actual risk of the deal too. So in my opinion, the rates, you kind of just have to stick to your fundamentals. I'm not saying like we definitely didn't slow our acquisition process during the rate hikes and everything. But we definitely were more meticulous about what we were buying and at what price because at the beginning, the sellers were still expecting those 2020 prices when everything skyrocketed, right? But when you're offering on these deals, you can't take that into account. You have to go by the actual financials that they present you and what price point will make you hit your metrics that you set out to achieve for investors. So, it comes down to really sticking to your fundamentals and not forcing the deal, even if you are purchasing at a higher rate. Because if you can buy at the right price, that's really what the main goal of real estate is, and that's kind of how you win the deal.
Lucas Ravanis: Yeah, and to go on to that too, an experienced operating team should be able to take the interest rate and have conservative underwriting and still be able to find profitability with that. The good thing for our business is the high interest rates, because that just means people are still priced at a single family home, which is just going to improve our occupancy percentages, right? So we're also taking advantage of the fact that we're going to have more influx of people who are trying to rent. And that's going to be a trend that we see foreseeing for 10 more years, if not more. So yeah, high interest rates are good, but I mean, sorry, bad, but in a sense, we like them, right? It will work with them.
Ryan Kolden: Right. And one of the things Ryan said earlier on stoked my curiosity. How does multifamily hold up in recessionary periods relative to other, I guess, subtypes of asset classes? So I guess one thing in particular that's super attractive about real estate, generally speaking, unless it's a public REIT or something like that, it's an illiquid asset class. Meaning if you look at the drawdown of the housing price index during the great financial crisis from about 2007-ish, 2006, 2007 to when it hit its bottom. It took about… And again, it's been a minute since I've looked at this. So this is just a guess. It took something like three years to lose 34% of its value, 30-ish percent of its value. I think it was 28. But on the flip side, the S&P 500 did 34% in the matter of a couple of months. And then that full draw down in the S&P was close to 50%. So that's in terms of my perspective, in terms of including real estate in portfolio, it really has the ability to control volatility inside of a portfolio. But back to my question, how do you guys… How does multifamily hold up in recessionary periods relative to other different types of sub-asset classes of real estate?
Ryan Twomey: Well, that's actually one of the reasons we love the asset too, and you kind of hit it on the head. It helps your volatility in your portfolio become more stable. So during recessions, multifamily investments specifically are actually one of the best hedges you can have against, you know, a stock portfolio or something in the public equity space. So if you think of it during, you know, say a recessionary period, people are most likely downsizing. So what we do with our company is we focus on B and C class apartments. So we're not going for these big luxury buildings where people are getting charged $5,000, $6,000 a month for rent. We're focusing on workforce housing and B and C class apartments. And during downturns, even the more rich people, higher network people will say, continue to downsize. Whether they get laid off, something happens with their job, just things become less affordable. They typically go for more affordable options. Depending on the asset type you're invested in real estate, because there's a broad spectrum of different types of real estate you can invest in, you have a strong hedge against inflation there, which essentially stables out your portfolio. And while you're, instead of panic selling your stocks, you can maybe hold on to those a little bit more because you have another asset that's supplementing your income or kind of keeping your portfolio stable.
Ryan Kolden: And you kind of mentioned it a little bit, Ryan, with what you guys do investing in UIs like B and C class properties. I want to shift the next part of today into talking about specifically what you guys do at TR Capital Partners. Can you briefly explain your guys' philosophy and strategy when it comes to investing in real estate?
Ryan Twomey: Yeah. So we specifically target underperforming properties, typically BC class, like I said, in emerging markets. So that way we can add value through renovations, rent bumps, better management, and get these higher returns like 18, 20% IRRs and have full control over the NOI because we know with this business plan, we can go in and execute on these things. And the key for us is really to identify deals that have this room for value-add, the value-add model in markets that have growth on the horizon, but it hasn't yet been priced in to take advantage of both forced depreciation, which is simply just increasing the profitability, and natural appreciation, which comes from the market and the comps in the area as well. So whether that be a city, a sub market, whatever it might be, you're kind of getting the best of both worlds there, which drives your returns, even if there's an extra couple of percentage points can be big when you're talking about these million dollar properties.
Ryan Kolden: Are there any particular states or areas that are looking interesting to you right now?
Lucas Ravanis: Yeah, right now we're heavily focused in Carolinas, Minneapolis, Ohio, and of course our own backyard in Massachusetts. But preferably speaking, we like landlord-friendly states, so usually red states. That just helps a business plan execute a little bit better when you have the eviction process. However, it's always in the secondary or tertiary markets that we will invest in. So what that means is we're not investing in the urban core. We like an hour, hour and a half outside of that. where we see year over year job growth and population, right? All these economic factors that are showing that there's going to be growth there. And then from there, we target these underperforming properties from these distressed sellers. And we go in there, put some TLC into it to raise the income and hold these properties anywhere from three to five years to five to seven years before we execute the exit strategy.
Ryan Twomey: I think going off a little bit too, so the markets for example, I think I just mentioned landlord friendly states, and that's typically what we'll target, but obviously Massachusetts is not one of those states. And that's also one of our main targets right now because we can go visit the property whenever we want, kind of really be on top of things as far as asset management side goes. But one of the things a lot of Blue States do offer, and I'm not talking about New York and California, I'm mostly just Massachusetts, is they offer these subsidized housing programs. So if you can execute that or implement that into your business plan and make sure that you're executing on getting those type of tenants in there, assuming that's what you want to do with the asset, You actually can benefit immensely because you're not going to have a ton of turnover. You're getting paid by the state directly to your bank account. So even though the eviction process is a lot harder in those blue states, Massachusetts talking about this specifically, there are upsides to it if you use the things that the state offers in the right way. Because you won't have to go through those evictions if you think about that the state's the one paying you. So assuming you can do your actual background checks and go through all those checks and make sure that the rest of the tenants are in good order, you won't really have to go through that process as much as people think you would. Even though when you do go through it, it definitely is a headache, which me and Lucas have also experienced, unfortunately, firsthand.
Ryan Kolden: So that kind of leads me into a question I wanted to ask you guys. I should have asked it earlier, but we're talking about it now. Now that you're doing what you're doing and have some experience under your belt, looking back on when you started in real estate investing, what were some of the biggest mistakes that you think you made that you wouldn't… If you were starting from scratch, you wouldn't do that again? I think it was looking at all of the options.
Ryan Twomey: We got really excited at first, so we were just like, you know, the only way to do it is just be a landlord. We thought we were going to scale getting triplexes, duplexes, quadplexes, but that's because that's all we knew. We learned about syndications through mastermind programs and learning from other people we've just networked with. And that's where a lot of our opportunity came from. So instead of just kind of jumping the gun, maybe, unless you want to be active in the space, like we learned some invaluable lessons that we've been able to apply to the larger properties. But if you're just looking to simply get the cash flow, the passive income, the equity growth, and all the benefits from it, there's better ways to do it than just jumping into a single family or a triplex. So I think maybe at first it would pretty much just be educating ourselves a little more. Granted, it did work out for the better because we put ourselves through that rigorous process, through action that was a little naive. Thankfully, it worked out. But for some people, I know it can end up kind of ruining their taste for real estate.
Lucas Ravanis: I'm very grateful for the journey that we went on to get where we are today because managing these properties and buying these properties with our own money first and house hacking them, that gave us a lot of firsthand experience. When we bought our first property and we house hacked it, that house was sponsored off of YouTube tutorials. We had to go in there and find friends who were contractors to help us do it, but the lessons we learned from it, it just made us better moving forward. It really differentiated us from joining masterminds and finding people who just had no experience jumping into them and then differentiating between people like Ryan and I who are already in the weeds of it. It's two different mindsets, you know, and you don't get that experience unless you're actually active in the space. Now, I learned from being active in this space that being a landlord sucks and that's something I don't want to necessarily do anymore. But I mean, a lot of people, a rebuttal we get is like, hey, if you guys can do that, why wouldn't I just do that? Because our deals are split 70-30. The investors get 70%, we get 30. Why wouldn't I do that when I get 100? To that, we're like, hey, If you want to do that, by all means, please do it. We did it. We loved it. But there was a point in our lives where we realized we didn't love it. And when you get to that crossroads, your options are to suck it up and keep going or to sell the property, right? So we realized that that wasn't for us. But if you want to do that, by all means, do it. And we wouldn't have understood that unless we just kind of jumped in headfirst. Super naive, but there was a lot of benefiting factors that came from that to help us kind of catapult our business forward.
Ryan Kolden: totally get that. So the mistake that I commonly see just like interacting with just friends and family and whatnot, and other peers and whatnot is people think you can just own a piece of real estate and you're just going to get rich just by owning that real estate. And this is a mistake that I made personally, but I thought I did that too. So I bought real estate, super excited, thinking I was just going to make money. I was actively bought and I treated it as a passive investment. And those two things don't align. When you're an active investor in real estate, you own a business. And if you neglect that business, you're going to learn very quickly that this wasn't a good decision. So I wholeheartedly agree with you, Lucas. I want to finish things off by changing tune here. What is something that you guys are working on, whether it's personal or business, that you're particularly excited about or interested in at the moment?
Ryan Twomey: Yeah, I mean, I guess the big vision we have right now is we're heavily focused in the Springfield, Massachusetts market. So we partner with an acquisitions guy who's been doing this, you know, 20 years and has strong relationships in that market where he's going direct to seller and we're planning to purchase about a thousand more units over the next couple of years. And that's all going to be completely off market at a discount strictly because he's developed that relationship. So we're always networking with people. We've happened to really hit it off with this team. And so over the next 12 to 18 months or so, we're planning to purchase a thousand units in that specific market with the ultimate vision of getting in, like I said, before the growth is priced into that area. So that's kind of our main focus right now. We're really excited about. But now we're just kind of focusing on getting that vision out there, maybe making sure all the properties are being executed properly because we've already closed on a few of them. And then going deal by deal to take down his whole entire portfolio, one property at a time.
Ryan Kolden: Lucas, you have anything personal or business? I mean, I guess Ryan just gave your business answer now and put you on the spot for something personal that you're interested in right now.
Lucas Ravanis: So the cool thing is, so Ryan and I both kind of got off into this real estate game due to Rich dad, poor dad, escaping the rat race. And Ryan and I both have some really unfulfilling W-2 jobs that we are still in the weeds with today. And we got that first property doing exactly what you just talked about. We're going to buy this property and we're going to get passive income. And buying and passive don't usually go hand in hand. We realized that was active income and there was nothing passive about it. So shifting our business into the syndication model where we get to partner with other operators and industry specialists to actually give people passive income, that's been extremely fulfilling to us where we get to benefit both investors' lives by helping them accumulate their wealth, but also the tenants in the community that we're investing in. But the really cool part is Ryan and I, we've been Knocking on wood, successful in this venture so far. What we're really excited about is we're seeing the light at the end of the tunnel where we're going to be able to be full time to our capital partners much sooner than we expected because we were able to shift their mindset and set goals to, you know, once you start getting these victories along the way, you realize when you map it all out, we're only X amount of deals away from being able to have these deals supplement our income. And then we have these nine to fives, but imagine how much work we can get done during nine to five and only focusing on this type of business. So that's what I'm personally extremely excited about. And that light is at the end of the tunnel and Ryan and I are grinding away to get there sooner than later.
Ryan Kolden: Fantastic. So guys, I'm going to go ahead and put your social media as well as your website in the show notes as well as the description. That way, if people want to connect with you, they'll have that and they can reach out to you. Before we finish things off, do you guys have any last parting words that you want to leave with people about anything we talked about or anything that we missed?
Ryan Twomey: Yeah, I'd say just, I guess, sum things up a little bit. If you're thinking about getting into real estate, whether it be to supplement your income, or maybe you just know it's a great asset class to build wealth, whatever it might be, first step is to make sure you're actually evaluating your goals and making sure that what you're looking to do is in line with those goals. Like Lucas mentioned before, we got into real estate because we wanted the passive income, and we were so naive that we thought we'd buy three properties and then be able to live off the passive income. The income is not passive. So we kind of took a step back and re-evaluated that. Obviously that goal, we still have that goal, but we re-evaluated the plan that we had in place and kind of reflected on if it was actually going to work the way we thought it would. So I'd say prior to investing in real estate, make sure you're one, networking with the right people because you can learn a lot and get a lot of opportunities out of people. And they're willing to help you, trust me, which is something that we didn't think would be as easy at first, but put yourself out there first of all. And the second, well, educate yourself on the best route of investing to fit your specific goals. And a lot of people don't want to be managing properties, but they don't know that there's other options out there. That's how we started. So now we provide the, essentially provide the solution that we were looking for at the very beginning.
Lucas Ravanis: And I would say people don't know what they don't know. And it's incredibly important to just educate yourself consistently on different aspects, especially if you're looking for accumulating your wealth. Now with real estate syndications, it's not a new term. They've been around for a long time, but I'm sure many people listening here haven't heard of this before. So it's important to understand that this investing vehicle, this isn't a 2021 GameStop play where you're going to invest your money and then in 24 hours, you're going to be a millionaire. If that's what you're looking for, that's not the outcome you're going to get. So it's important to have the investors' intentions, their goals, be in line with what we're trying to accomplish as a syndication team. If you're trying to get rich quick, probably not an investment vehicle you want to do. invest in a vehicle that you can control, you can get year over year income and equity and tax benefits and grow your wealth to fast track retirement and get more of your time back, well this is an awesome vehicle for you. If you're looking to diversify your portfolio, if you don't want just to get the traditional 7% of the stock market and call it a win, but look for returns as high as 18-20% And still, like I said, get these incentives to keep more of your money. Well, that's what we're trying to accomplish. Our goal is to educate people and let them know whether this is the time for them or not the time for them. This is out there. We're here to help you out. Real estate is such a vague term. Syndication is just a tiny slice of the pie of what you can do. But this is what we found was the most beneficial way to find passive income. And it benefited us so well, we realized we wanted to make a business out of it to help others. So at least if it's not the right time for people to invest, at least they know about it. And that's what we're trying to accomplish is to teach people about what we're doing.
Ryan Kolden: I know I just said we were done. However, Lucas, you hit on a concept that is so important that I don't think people, the average person understands that I, just in my experience, that the wealthy and the ultra wealthy do extremely well. which is… You mentioned the attractiveness of the returns of real estate can be significantly higher than the stock market. And a lot of people, I think, get confused as to why that is. And if you look at just the average appreciation of a home over the United States, like housing, it's about 5% a year. It might even be lower than that. So you say, hey, how do I get returns that are what you just mentioned. And it all comes down to owning an appreciating asset with a fixed debt instrument. And so real briefly, can you guys explain the math of leverage just from a high-level concept, that concept of owning an appreciating asset versus something like the stock market, which generally speaking is typically
Ryan Twomey: Yeah, I mean, it's essentially comes down to you get a lot more for your money. And so let's just keep it, you know, we'll go back to me and Lucas's first deal. We got our first triplex $425,000 for $14,000 total down payment. So we're able to purchase an asset, let's say it appreciates at 10% a year, just for round numbers, that's going up 10% a year on the 425,000, not the 14,000 that we put into the property. put, you know, say 14,000 into the stock market, you're not getting a value of appreciation off, you know, a leveraged investment amount, you're earning 10% on 14,000. And that's not that's a very slow way to build your wealth and equity in these in those, you know, instruments. So with leverage, you're buying something that's one, it's a tangible asset, assuming it's real estate, and two, you're getting a lot more bang for your buck, because you're really putting your money to work and using other people's money. In this case, the bank's money to actually grow your wealth. And based, I mean, since the dollar has been taken off the gold standard in the seventies, I mean, that is money. So if you can accumulate good debt, you're going to see a significant increase in your wealth. If you accumulate bad debt, that's when people get crippled and have to, you know, stay in the rat race, paying for their car, their house, whatever it might be, keeping up with the Joneses. So, That's another thing, going back to the educational side, make sure you know the difference between good and bad debt, because if you can leverage the good debt, you're going to see a huge spike in your wealth compared to if you were just using only your own money in whatever venture you're taking off.
Lucas Ravanis: We say a lot of times to our investors that they don't really need to be around this. Ryan and I, we love debt, right? That statement right there is kind of just like, love debt, but there's good debt and bad debt. If we can get good debt, mortgage on a property, and we can pay just for $450,000, just $14,000, we're able to supplement other income, other capital invested in other areas that pays down the debt for you. But your wealth is still accumulating. People don't really necessarily have the mindset of how wealth works. And it's another thing that you just need to continually educate yourself on. But the best tactic to grow your wealth is to leverage good debt. And we love good debt and we pass on those benefits of good debt to our investors.
Ryan Kolden: Fantastic. I highly encourage everybody to understand that concept. And it can be applied, real estate, it can be applied on equities and even some other different types of financial instruments. But that is key. And it is one thing that I've seen personally with working with clients is that people who understand that concept They generally do very well for themselves. And like everything in life, or like leverage, there's always risks using leverage. So be responsible. Now, that's a wrap for today, guys. I appreciate having you on. It's been a great conversation. Again, just as a reminder, everyone, you can find more about what Ryan and Lucas do in the show notes and description. Their links will be there. Take care, guys. And thanks for being on. Thanks for having us. The opinions and views expressed here are for informational purposes only, and is not tax, legal, financial, investment, or accounting advice. This material is educational in nature and should not be deemed as solicitation of any specific product or service. All investments involve risk and a potential for a loss of principle. Should you need such advice, please consult with a licensed financial, tax, or legal professional. Neither host nor guest can be held responsible for any direct or incidental loss incurred by applying any of the information offered.
