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Hidden Investing; What the 1% Know with Holly Williams - CREPN #236

Commercial Real Estate Pro Network

Release Date: 02/20/2020

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If you can identify a single problem, and then find others with the same problem, you can start to determine if there is a market for your solution.  When there are enough people with the problem who are willing to pay, it can make sense to spend for a custom solution that you could then sell to others.

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I would say if you own retail real estate and you have an exposure, um, high exposure to department stores and apparel retailers, I would say if your portfolio contains a large portion, the percentage of your occupancy, um, is coming from department stores or apparel retailers. I would say you need to rethink when those options come up.

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So the saddest, I'll give you the saddest phone call we get in this office. My sale closed yesterday. I want to do a 10 31 exchange. So the BIGGEST RISK is not talking to an exchange company and they get fixated on the 45 day deadline, which as I said is the worst deadline. But the biggest risk and the worst case scenario is they don't talk to a 10 31 exchange.

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Hidden investing? What do the top 1% know that you do not? 

The 99% Plan

Holly Williams is a successful advertising professional who worked hard, and climbed the corporate ladder.  All during the climb, she did what she was taught to do; get a JOB, work hard, live below her means and save for her retirement.  

As her parents aged, she experienced first hand the sad ending waiting for most Americans who follow the investment plan her parents taught her.  What she learned while watching her parents age, was that the plan is designed so that you die broke. Nobody ever talked about how the plan includes that you die broke.  Why is that?

No one ever talks about how you get your money out of the 401k.  Most people know that when you sell, you have to pay taxes. But, nobody talks about what happens when your account goes down and you still need to sell your shares to get the cash you need to live.  How it is extremely unlikely you will ever make that money back. And as you get older, the government forces you to take the money out so that they can collect their tax. 

Her parents aging combined with her increasing tax bill made her hyper aware of the government’s goal for the masses; die broke.  Her plan was broken.

Hidden Investing

Then she met fellow Texas Tech alumni & NYC advertising executive, Joe Fairless, who shared with her an opportunity to invest in commercial real estate.  She liked Joe, and wanted to help him, but did not expect anything to come of it. Wow, was she wrong!

In the months that followed, she received income.  At the end of the year, she received a K-1 with depreciation which reduced her taxes.  She learned first hand how the tax code favored real estate. Then she found out what an accredited investor was, and that she was one.  She also learned about the private investment management advice resources available to the top 1% of Americans and family offices that are not available to the masses.  

1% of Americans

Eyes wide open!  Holly was making good money.  She thought she had an idea of how much the wealthy Americans made for an annual income.  Maybe a couple of million dollars per year and they probably paid 50% in taxes.  

Then she learned the truth about how much the Wall Street fund managers make; $20million and more!.  The advisors who were advising her made no more money than she did, and only knew to tell her to stay invested in the market.  Investing in real estate is risky!

Since she was an accredited investor, if she had a prior relationship, she was qualified to invest in sophisticated alternative investments like real estate syndications.  This is typical of the level of investment the 1% invest in. They get close to the source of the opportunity compared to the diluted returns available to the masses.   

Real Estate Investing

Real Estate investing is specifically encouraged by the tax code.   For accredited investors, when you invest directly, bypass all the middlemen, you are able to  lower your taxable income due to depreciation, and you have the ability to shield your gains from tax.  This is unlike investing in a REIT where you are a shareholder in a fund that most likely made a loan and receives interest payments.  When you invest as a limited partner in a syndication, you are an owner and entitled to owner benefits. 

In addition to the tax benefits, you can benefit from a value add strategy.  This can be accomplished through improved management or actually improving the property.  The key is to find an experienced investor who can assess the situation and identify the opportunity others cannot see.  

Income Versus Wealth

Most Americans are focused on creating more income.  A bigger paycheck equals more taxes and a bigger lifestyle for most.  Earn more so they can spend more.  

Real estate provides the opportunity to invest and create wealth.  You purchase a cash flowing asset with leverage. It grows in value, and allows you to shield both your income and gains from taxes.  

Even though the IRS tax code favors real estate, most Americans are unable to break from the heard.  They welcome the opportunity to invest in a stock or start up, but real estate still seems risky. Buying from a name brand mutual fund seems less risky than investing directly with an experienced key principal who knows how to improve the property, create cash flow and reduce their taxable income. 

Keep More

Holly has learned a great deal about Hidden Investing and how the 1% is able to invest in more secure opportunities.  To share her new found knowledge with others, she has created a learning and investment platform, KeepMore.com where her motto is: Get more, Earn more and Keep more.  

BIGGEST RISK 

Each week I ask my guest, “What is the Biggest Risk Real Estate Investors face?”  

BIGGEST RISK:  Oh, I know that's an easy answer. Because I had some real estate, but the majority of my net worth was in the stock market. The stock market is all about hope. It really is. If Trump tweets, it goes up. Tweets again, it goes down. You know, we can have a company with the best earnings ever and their stock goes down.

It makes no sense. Unless you're really good at picking these stocks. I just think that that that hope is not a strategy. 

With every investment that I make, I can tell you exactly what we're doing to mitigate that risk. How fast the area is growing. What's around the investment.  I can tell you all of that. 

So I just feel more comfortable. Because I absolutely don't know in the stock market. And the people we give our money to don’t either. No idea. Not a clue. They just say, “stay in and don't panic”. Right?

For more go to:

Website: www.Keepmore.com

Book: www.hiddeninvesting.com