Tuesday, November 20, 2012

How to Profit from Value-Added Real Estate

5:16 PM

My business partner Bob Malecki and I just hosted a series of workshops this weekend on investing in "value-added real estate." Here's what we mean by that:

Predictable Revenue

A property’s revenue is derived from rents paid for the use of leased properties. A strong property management team will focus on attracting only the most suitable occupants to the properties and bind them to carefully structured lease agreements, contracted for long periods of time with staggered renewal dates. These practices in turn generate consistent cash flows for Investor Partners.

Capital Appreciation

By making improvements, the value of the properties held in our portfolio are increased through the repositioning process. By increasing rents or occupancy rates, higher levels of stable monthly distributions are generated. When properties are refinanced or sold, the proceeds can be used to acquire additional properties to further increase value and wealth preservation.

Steady Cash Flow

One of the greatest advantages of real estate investments is they generate steady, strong, partly tax-sheltered cash flow and provide distributions. With the other advantages real estate has to offer, few other forms of investments can be bought with the same kind of steady cash flow return combined with the appreciation of the investment over time.

Total Return

On rental properties, the combination of stable revenue (from rents), capital gains (resulting from increased property values), principal paydown (from renters paying down loans) and tax savings (thanks to the investment’s special flow-through structure) may provide substantial returns. on the loans.

Hedge Against Inflation

Not withstanding cyclical variations due to supply and demand imbalances, in the long run, rents, values, and the replacement cost of real estate improvements rise in line with inflation. Multifamily assets also tend to have shorter term leases that can adjust to current market conditions much faster than other investments.  This makes real estate investing a particularly effective hedge against inflation, and should be a key component in any well-diversified investment portfolio.

Real Estate Ownership

Investors desiring a regular income, with an optimal balance between risk and reward, generally will prefer real estate consisting of land, buildings and fixed equipment. Moreover, the supply of land is limited and of fairly stable (though generally increasing) value. Real estate, therefore, is widely considered the best ultimate security and a solid basis for building lasting wealth.


Due to its wide range of asset classes and geographic diversity, real estate is an ideal platform to spread risk. The major advantage of pooled investments is that it allows an individual investor to join with others in acquiring a number of different properties in different markets. The combined strength of the properties in the pool provides a permanent stream of steady income that is virtually unaffected by variances in individual property vacancy rates or individual market fluctuations.

Operating Capital

It is well known that an investment’s staying power is the single most important factor to building wealth. Yet the need for operating cash is often overlooked when inexperienced investors buy real estate. Group investments assure that sufficient capital is available to give the investment the ability to withstand economic downturns or temporary shortfalls of individual properties.

Registered Retirement Savings Plan Eligibility

Private equity investments are 100% eligible to allow you to put the stabilizing, revenue-generating, and appreciating benefits of real estate ownership to work through a SELF-DIRECTED IRA. A self-directed IRA is no different from any other IRA. “Self-directed” means that you choose the investments thereby providing you with the benefit of more choices and more flexibility for your retirement savings.


Any sound private equity fund or real estate syndication makes all due diligence, monthly and yearly financial statements and other documents available to investors during the course of the investment.  This may include investor conference calls, investor website access, management updates, site visit reports, monthly financial updates and an annual report for tax purposes to keep investors informed of what is happening with their investment dollars.

For more information on investing in value-added real estate, please contact or call me at 425-270-7292.


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