Wealthy investors' real estate secrets 🔑

Today’s top stories…

• Discover the RE secret that the world's wealthiest are using

• Compensation packages of real estate's highest-paid CEOs 

• Learn the five real estate expenses you should never pay

• 💰 Deal of the Day!: 2 bd | 2 ba | Jefferson, NY (Under $300K)

Today’s mortgage rate (30 Yr. Fixed): 7.52%

The Wealthy's Secret to Building a Real Estate Empire

The world's wealthiest individuals, those with a net worth of $100 million or more, have a secret weapon when it comes to investing: real estate. According to a recent CNBC article, these ultra-high-net-worth individuals are heavily focused on real estate investments, particularly Class A properties built within the last 15 years.

Real estate investments offer a range of benefits that attract the wealthy, including stability during economic fluctuations, consistent cash flow through rental income, appreciation potential, and portfolio diversification. In fact, real estate typically represents a significant 27% of their investment portfolios.

But you don't need millions to invest like the wealthy. Average investors can gain exposure to real estate through various platforms and investment vehicles. REITs, such as Realty Income Corp. (O), allow investors to participate in a diverse portfolio of commercial properties while enjoying monthly dividends and a attractive annualized yield of 5.8%.

Platforms like Arrived, backed by Amazon founder Jeff Bezos, enable investors to buy shares of single-family and vacation rentals with a minimum investment of just $100. Cityfunds by Nada offers exposure to the $32.6 trillion home equity market with a $500 minimum investment and a target yield of 8% with a guaranteed 7% floor.

For accredited investors, the Rhino GP Fund II on CrowdStreet provides access to a diverse range of real estate assets in the Greater Boston market, with a minimum investment of $25,000.

By following the lead of the world's wealthiest individuals and investing in real estate, you can potentially benefit from the stability, cash flow, appreciation, and diversification that real estate investments offer.

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⏰ Quick Tips

You asked. I answered.

What is a good return on investment (ROI) for real estate?

A good ROI for real estate investments varies depending on the type of property, location, and investment strategy. Generally, an ROI of 10-15% is considered strong for rental properties, while fix-and-flip investors typically aim for returns of 20% or higher. However, it's essential to factor in the risks associated with each investment and to compare potential returns with alternative investment options. When evaluating ROI, consider metrics such as cash flow, appreciation potential, and overall market conditions.

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Uncovering the Highest Paid Execs in Real Estate

The CEOs of real estate's largest public companies experienced vastly different financial gains from the sale of company stock between 2021 and 2023, ranging from a staggering $145 million to absolutely nothing. Surprisingly, these gains appear to have little correlation with their companies' actual financial performance during the same period.

Opendoor, which suffered a combined net loss of $2.3 billion and an Adjusted EBITDA loss of $737 million, saw its former CEO sell $145 million in company stock before leaving the company in January 2024. In contrast, Zillow's CEO sold $86 million of company stock in March 2021 when the stock price was near an all-time high, despite the company having a combined net loss of $787 million but a positive Adjusted EBITDA of $1.1 billion.

Other notable examples include Redfin's CEO, who sold $19 million in company stock while the company was unprofitable, and eXp Realty's CEO, who sold $71 million in company stock while the company was profitable. Interestingly, the CEOs of Compass (unprofitable) and Anywhere (profitable) did not sell any company stock during this period.

These findings raise questions about the incentives and intentions behind these stock sales and how they relate to actual company performance. While there may be additional factors to consider, such as the conditions under which CEOs were granted stock and their reasons for selling, the inconsistencies and massive variance in financial upside realized by these CEOs provide an opportunity for further investigation.

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5 Real Estate Expenses to Avoid in Retirement

High Mortgage Payments:

With the national median mortgage payment reaching $2,184 in February 2024, it's crucial to aim to pay off your mortgage before retiring. High monthly mortgage payments can significantly strain a fixed retirement income. Consider downsizing or relocating to a more affordable home to reduce this expense.

Expensive Property Taxes:

Property taxes vary depending on where you live. Some states, like New Jersey and New York, have annual average property taxes of $10,409 and $5,112, respectively. When choosing a retirement destination, factor in the property tax rates and look for states that offer property tax exemptions or discounts for seniors.

Costly Home Maintenance and Repairs:

As homes age, maintenance and repair costs increase. Budget accordingly and consider downsizing to a newer, more manageable property to minimize these expenses. You can also devote energy to lawn care yourself or look into moving to a senior community where the HOA covers exterior maintenance.

Unnecessary Renovations:

While some home modifications for accessibility may be essential, avoid overspending on luxury upgrades that won't significantly improve your quality of life in retirement. Focus on necessary updates that will directly benefit your safety and comfort. Rising costs of raw materials and higher interest rates may make renovations an expensive cost to avoid.

Rising Utility Costs:

Americans spend an average of $429.33 monthly on utilities, depending on location and consumption. Invest in energy-efficient appliances, windows, and insulation to help keep utility bills manageable. Consider downsizing to a smaller home to reduce overall energy consumption.

By carefully managing your real estate costs and minimizing these expenses, you can ensure that your retirement savings last longer and provide you with the comfortable lifestyle you deserve. Remember, the key to a financially secure retirement is to live within your means.

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💰 Deal of the Day!

Price: $259,900

Address: 180 Dutch Hill Road, Jefferson, NY 12093

This Catskill Mountains cabin offers the perfect blend of comfort, convenience, and outdoor adventure, making it an ideal vacation rental for those seeking a peaceful retreat with easy access to hiking, swimming, snow trailing, and other exciting activities in the surrounding 10,000 acres of natural beauty.

Airdna data:

Estimated monthly payment: $1,937/month (if financed)

Estimated monthly revenue: $3,058/month

Cashflow excludes additional operating expenses. Always confirm local regulations, HOAs and permits before purchasing a property.

Thanks and see you tomorrow!

✍️ Brett