A few years ago, my realtor put Rich Dad Poor Dad (often called the “little purple bible” in the real estate world) in my hands before I closed on my first home. Like many people, my life changed after reading that book as I launched down the path of real estate investing.
But I was missing something.
While I understood the power of putting my money to work in a hard asset that produced cashflow … I found I wasn’t able to scale and generate financial freedom moreover, the time freedom, I so desired.
Years later, I finally read The Cashflow Quadrant, the sequel to Rich Dad Poor Dad, and my investment career was forever changed! (It’s not often you can say the sequel is better than the original)
In The Cashflow Quadrant, author Rober Kiyosaki illustrates how ultimate wealth (money and time) is created when an investor learns how to move their active cashflow from the active income quadrants of E and S (employee and self-employed) to the passive income quadrants of B and I (business and investor).
My Biggest Investing Mistake
Reflecting on this concept, I started analyzing how I ran my 30 cash-flowing single-family homes.
Even though I had property management in place, I was still heavily involved in my business: approving tenants, drafting and approving budgets, making all key decisions, handling all of the bookkeeping, banking, and legal, and constantly monitoring performance. Additionally, I was in charge of scaling the business: maintaining my deal flow, underwriting deals, making offers, and managing due diligence.
It struck me, in the process of scaling my portfolio I hadn’t scaled myself to the right-side Business quadrant. I had no real leverage, I couldn’t step away. I had money coming in, but I didn’t have my time back. I had another set of “golden-handcuffs”.
I was one family emergency away from my investing portfolio stumbling or even dying.
I was self-employed… again on the wrong side of the freedom equation.
And now my husband wanted to join me on the FI journey (yes!), but that meant adding an additional 40-50 units (ugh!). I knew I needed to restructure my investing and find leverage…fast!
That’s when I discovered the ultimate leveraged investment (as Kiyosaki puts it, the “I” quadrant)… where I could leverage other people’s time, expertise, and money to massively grow my portfolio… Real Estate Syndications.
How to Create Massive Leverage
There are 5 key levers you can pull to create massive leverage in your real estate portfolio and move yourself into the passive side of investing (the B and I quadrants) without being a business guru, helping you not only grow your business wealth, but your time freedom. And it’s no secret that my favorite way of capturing all of these 5 levers in one swoop is investing in real estate syndications.
So let’s review how you can pull these 5 leverage points in a real estate syndication investment.
Knowledge / Expertise
One of the biggest hurdles that keeps most investors from scaling from single family to multifamily real estate is their perceived lack of knowledge and expertise on the multifamily investment strategy. When you buy one single-family it’s one thing, but to buy 30 units in one transaction… well let’s just say scale can “cut” both positively and negatively.
In a real estate syndication, you get to leverage the General Partners’ knowledge of the market, deal strategy, construction, and systems for asset management.
When making the leap from single-family to multifamily, you also have to switch up your investment team. The realtor who helped you find your 3/1 ranch is not the same broker who will help you find a 75-unit deal. Same goes for property management, insurance agents, construction, lending, etc.
In a real estate syndication deal, you get to leverage the General Partners’ network of realtors, property managers, lenders, insurance agents, construction crews, other partners… and other investors!
Track Record / Credit / Lending
Track record, credit, and lending are 3 huge obstacles to solve when making the transition from single-family to multifamily. In my case, I had 30 single-family units, but I wanted to jump to owning a 30-unit building. I didn’t have that track record for that type of asset and lenders were shutting me down.
In a real estate syndication deal, you don’t have to solve this 3-pronged lending issue since you get to leverage the General Partners’ investment track record, credit and ultimately ability to secure lending. Bonus points too that you have now outsourced that debt obligation to them as well!
Unless you have millions in your bank account, it’s hard to make that leap from securing a downpayment and reserves on a few single family properties to securing a downpayment and reserves on an institutional-grade asset.
In a real estate syndication deal, it’s different! You get to leverage not only the General Partners’ money, but other investors’ money to help secure the down payment and various reserves to acquire a much larger, scalable deal. Everyone wins!
Time is your most precious non-renewable resource. Once you spend it … it’s gone… never to get back. Time is the reason so many investors never get started in real estate investing to begin with. Time is also the reason why so many investors get stuck and never scale their real estate portfolios to the point where it can create true wealth and time freedom for themselves and their family. This was my biggest sticking point when l made the leap from single family to multifamily investing.
Time is the biggest leverage point of real estate syndications. You can leverage all the time the General Partners’ have put into studying the investment strategy, building their networks, track record and investor database, and their expertise to find and manage the deal. All of it! This is the ultimate “I” quadrant move. Where you, the investor, gets to invest in an operating business… and get your time back!
Wrapping it Up
It’s no secret that my favorite way of scaling from the active income quadrants of E and S to the passive quadrants of B and I is real estate syndications.
Simple. It’s because I can pull all 5 investing levers at one time in one investment, grow my wealth and get my time back to live life to the fullest.
Want to learn how you can create massive leverage in your real estate portfolio now?
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