Learn how to build wealth and secure your financial future through strategic investments in real estate properties.
Discover the benefits of adopting a long-term approach, including increased cash flow, tax benefits, and more.
Whether you’re a seasoned pro or just starting out, this video has everything you need to know about maximizing your returns in real estate.
Transcript:
Chris Bounds 03:18
A mentor of mine a long time ago, told me, always make long term decisions. With one exception. If you got a cash flow crunch, make short term decisions, solve that problem and then get back to long term. As long as you can keep that balance, then you’re going to do well. But like you said, it is boring. The rock star, the rocket ship stories are more interesting. But that’s the rarity that’s not the most common. Usually it’s very boring. There’s a lot of people that you’d walk by down the street and you’d never know they’re multimillionaires just for doing something very, very simple for a long, long enough time.
Gino Barbaro 04:03
In multifamily it allows you to do that. We bought our first deal, Mike, myself and Jake, back in 2013. When it’s very similar to what’s going on in this part of the market cycle, right. Our market cycles reverting back to them. Rents were $350 for one bedrooms back then, we still own that 225 unit asset. We still own it till today. those rents are over $1,100 right now. So talk about creating wealth. In the span of a decade, we’ve been able to triple rents, valuations have gone up threefold, tax benefits. I mean, that’s where it talks about really creating true wealth. When you speak to a lot of intelligent investors and people who’ve been around whether it’s a SAM Zell or it’s the same freshmen, their mistakes are real simple. They should have bought more, and they should have held on for a lot longer.
Chris Bounds 04:48
Your strategy is a little different than a lot of investors out there and multifamily investors. Most indicators, they’re in and out in 3,5, 7 years, maybe 10. You’re more of a buy and hold for super long term to maybe forever ish.
Gino Barbaro 05:04
Yes. Let me let everyone in on a little secret. You don’t make money in real estate when you buy. That’s a fallacy. You make money when you exit. Let me say that, again. You don’t make money when you buy. That’s great, you make a little cash flow. But where do you make most of the money, it’s when you refi the asset or you sell the asset.
Chris Bounds 05:23
It’s the equity capture.
Gino Barbaro 05:24
That’s the problem. I think a lot of syndicators, when they have investors, they’re forced to sell, that’s where they make unless they’re putting money on the front end, they make money on the back end. Jake and I, we like to syndicate, we’ve syndicated a couple of deals. I like to buy these assets for longer term, if I’m looking at an asset and I’m gonna say to myself, I don’t really want to own this asset in the next 10 years, then I’ll pass on that asset because I’m thinking to myself, I want to buy an asset in a good market, or there’s a path of progress, where there’s population growth and job growth. and I want to buy an asset that if it’s old and I need to really fix it up and put a ton of CapEx into it, I can do that.
At these prices of last couple of years, you were forced to buy newer assets, because the capital expenditure requirements were so great on the older assets. For us, it’s just shifted in from buying these assets for shorter term, and holding for longer term. I think what syndicators should really consider doing is, there’s nothing wrong with buying assets and selling, right, because there’s sometimes you get into a market or things change, or all of a sudden you have this 10 unit, you’re like, I don’t want to be with the small deals anymore. Let me repurpose that money and put it into another deal.
That’s just really the business of real estate. We call it the conveyor belt theory, put these assets on a conveyor belt, this imaginary belt that’s in front of you, let these assets start matriculating, then you’ll look back three years ago, I’m glad I got into it, I’ve got these assets. Now, what do I do? Now you have the opportunity to sell that deal and put that asset into another asset or refinance and pull that equity out, like you said, and continue to invest it. The strategy is, when you’re going into real estate, just understand what your exit strategy is. Most beginning investors, myself included. It’s not just buy and hold forever, you want to buy and hold the right assets forever. I think we need to get clear on that as investors.
Chris Bounds 07:01
Aligning the exit strategy with your long term goals and the long term goals of the investors that you’re partnering with, because the sell, even if you’re a long term investor, ultimately, the problem or the success of that event occurs with what you do with the money. You live like a rock star. Cool, you’ll have fun, but ultimately, you squandered the wealth. But if you reinvest it, which is why I’m from a single family standpoint, I came with the slow flip strategy, instead of flipping over six months, flip over a three to five year period. That way, when you’ve accumulated the equity, when you’ve accumulated some appreciation, get some cash flow along the way, sell it, and then go out and buy not just one more, replace it by two or three more. You got more cash, just keep doing that. It’s very boring. But over a 10 year period, you’re a millionaire and you can keep your job doing this.
Gino Barbaro 07:53
Yes, great point. I love that.