Every big decision I made I tend to reflect back to see how I made it to better understand myself and make better decisions in the future. This time is to invest in a multifamily deal on the passive side
The Decision to be made: To buy 2 unit of shares in Laredo and Muse or not
Greed Motivation: Nothing wrong with true mail box money. double it in 5 years is not to bad per the expectation
Oh and the Tax advantage is going to be great as well. This is huge since i made quite a bit of income on my commission this year. this will all be offset via K-1
Fear Factor: No control over money, the economy will tank, the job market will tank
Logical Sense:10% for a truly passive investment in real estate is a great deal.
Why Do you want to make this decision: We have some extra funding that we currently pay 3.5% interest on. We need to invest in something to offset it. I do want to stay active as an investor so I feel like this investment is necessary. I do want the exposure of my portfolio to multifamily as well because as of right now I don’t have any
Describe the Surrounding: lot of successful investors around me. I know the sponsor as well and did a deal that went well with them in the pass
Anyone pushing you to make the decision? not really, just myself.
What will you do if everything works out: enjoy the cashflow
What will you do if shit hit the fan: suck it up – you have no control as a passive investor
Have you done your due diligence: yes, I understand the sponsor payout model, I did a deal with them in the past. I really like the location and the way the Sponor approach the deal as well. it is value-added.
How do you feel: not that excited – normal actually. I know I can generate better returns than this by flipping, Airbnb, but that’s active/semi active income. Also, I want to push this money to work to a place that I don’t see it so I am more motivated to generate new money. Having money in the bank kinda makes me lazy. I am not in the state where I want to retire yet, although I have the option to do that
What is some reason to say NO to this deal: Cap rate is quite low going in, not terribly bad though, things are uncertain with the election, even more, uncertain with Covid. The economy feels like a big bubble that will pop anytime. The sponsor cut is 30/70 it is usually 20/80 in the past
Describe some way to mitigate this risk: Split the fund into two apartments in two different locations instead of on, asking for a reference. ..him perhaps i should think more about this
Could this be a life-changing decision: No, worst case I lost a 100k best case I made 200k after 5 years. hm…now looking at this. not too sure if it is a good deal anymore since my gain is capped at 200k and I have to risk 100k?
looking back: Thinking..
In The pictures:
Trying new Korean Fired Chicken Spot in town.
The Cash Flow Note Pad 