3 Things You Need To Know Before Investing In Real Estate

 Okay, so the next question is for everybody listening, obviously real estate is a hot topic. So you know, anywhere from Robert Kiyosaki, Rich Dad, Poor Dad, you know, this idea of like own assets and real estate is that asset. And so what I found is there's a large group of people that want to be real estate investors, which I love. And it's great because it can appreciate, you can create cash flow, you can use leverage, you can use special tax advantages. So real estate is a great asset. What can you teach us if we want to be real estate investors? What can you teach us number one to should we be real estate investors? Because I think there's some people that shouldn't, or they should be investing with people like you and not just doing it themselves. And number two, if you are going to be a real estate investor, what are like, what is the framework to think about how to evaluate an asset and like how can my audience take advantage of your knowledge and do it on a micro scale if they're, if they don't want to go through the fund route. Yep. So when investing, I got to put on my, my old real estate hat, dust it off. But yeah, so with real estate specifically, the way I think about it is there's two main points before making a real estate investment. And I think you nailed it with the first one. Should I even be doing this? And unpacking that a little bit, the key piece with real estate is there are real estate experts everywhere in the country trying to make money in real estate. And you don't want to be the biggest sucker. In times when times are really good, everyone can make money in real estate. The challenge is real estate is and has proven to always be cyclical. So you don't want to be the next biggest sucker. And by that, I mean, make sure number one, you are doing your homework, make sure you are underwriting an asset. And more importantly, make sure you're able to underwrite an asset. Are you actually qualified? Like, don't kid yourself. If you are not qualified to be underwriting the asset, you probably are the biggest, next biggest sucker. So make number one, make sure you're able to underwrite the asset. Number two, underwrite it. So then that brings to the next point, oh, how do you underwrite a real estate asset? The lens that I have used and I have seen successfully executed across most of our portfolio, most of our LP network, who own and operate real estate, is underwriting for a longer time horizon cash flow. And what that specifically means is you buy an asset and you value it based on the current cash flow and the expected future cash flow. And that will directly take into account capital expenses. So if you buy an office building, do you have to replace the roof? Do you have to provide a tenant improvement package to bring in a new user? You're like all of these expenses that would eat into your cash flow when underwriting a real estate asset underwrite for cash flow. And if you do that successfully, you can then to your point bring in leverage, have some debt. Ideally, your debt is also long term. Your debt can be fixed. So we're at almost all time low interest rates. So it'd be incredibly valuable to have debt on the asset. And then as the price of rents go up and the price of your debt stays the same, all of that upward pressure goes to your bottom line, means you make more cash flow. And that's why it has historically been an incredible asset to own for inflationary periods. Because when the price of, let's say, housing goes up, your rent collected will go up and the price of your debt will stay the same, which means you get to take home more cash at the end of the day. So you're relatively protected from inflationary periods. And then also to your point, there's a lot of tax benefits to owning real estate. So if I had to nail it into a very small box, I would say, analyze for cash flow. And then over the long term, your wealth creation, your wealth expansion, the actual expansion of the value of that asset will be significant. And that's what it is.