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Top 7 Reasons Why Investing in Passive Real Estate Can Lower Your Taxes

It’s 4th quarter and the year is winding down. Are you thinking about your 2022 tax bill yet?

If not, here’s why you should!

There are just over two months left in the year and it’s not too late to find ways to offset your taxes before the end of 2022.

Most people, when they start out investing, don’t even think about taxes and how their investment choices may affect how many money you may have to pay to Uncle Sam..

That’s because, when you invest in stocks and mutual funds, you have to pay capital gains tax on the profits earned.

But investing in real estate tends to make your tax bill lower, not higher.

Yes, you read that right. Investing in real estate can often help lower the amount of taxes you owe, even while you’re making great returns on your investment.

But how is that possible, you ask?

There’s actually a HUGE difference between the way the IRS views stock market gains and the way they view real estate gains. And that’s exactly what we’ll discuss in this article, specifically from the standpoint of a passive investor in a real estate syndication.

But First, a Disclaimer

We are not tax professionals, nor do we wish to be ones (it’s a tough job). As such, the insights and perspectives provided in this article come from our personal experience only. You should always consult your CPA or tax advisor in relation to your specific situation.

Okay, now that that’s out of the way, let’s dive in.

The 7 Things You Should Know about Taxes and Real Estate Investing

Okay, get ready to have your socks knocked off. As much as taxes can knock one’s socks off, anyway.

Here are seven main things I think every passive investor in a real estate syndication should know about taxes:

The tax code favors real estate investors.
As a passive investor, you get all the tax benefits an active investor gets.
Depreciation is a super powerful tool!
Cost segregation is depreciation on steroids.
Capital gains and depreciation recapture are things you should plan for.
1031 exchanges are amazing.
Some people invest in real estate solely for tax benefits.

#1 – The tax code favors real estate investors.

You may have heard that more people become millionaires through investing in real estate than through any other path. And believe it or not, the tax code plays a big role in that.

You see, the IRS recognizes how important real estate investing is, in providing quality housing for people to live in. As such, the tax code is written in such a way that it rewards real estate investors for investing in real estate, maintaining those units, and making upgrades over time (more on these benefits in a moment).

So as a real estate investor, you’re like the IRS’s teacher’s pet.

Hey, there are worse things.

#2 – As a passive investor, you get all the tax benefits an active investor gets.

This is a big deal! This means that, even though you’re not actively fixing any toilets or climbing on any roofs, you still get full tax benefits, whether you’re an active or passive investor.

This is because, as a passive investor in a real estate syndication, you invest in an entity (typically an LLC or LP) that owns the property, and that entity is disregarded in the eyes of the IRS (these entities are sometimes called “pass-through entities”).

That means that any tax benefits flow right through that entity, to you, the investors.

Note: This is different for investing in REITs. With a REIT, you are investing in a company, not directly in the underlying real estate, and hence you don’t get the same tax benefits.

Common tax benefits from investing in real estate include being able to write off expenses related to the property (including things like repairs, utilities, payroll, and interest), and being able to write off the value of the property over time (this is called depreciation).

Let’s focus in on this thing called depreciation.

#3 – Depreciation is a super powerful tool!

Depreciation is one of the most powerful wealth building tools in real estate. Period.

Depreciation lets you write off the value of an asset over time. This is based on wear and tear and the useful life of an asset.

What is depreciation?

To give you a simple example, let’s say you just bought a new laptop. On day one, that laptop works great. Over time, however, the keyboard gets sticky, the processor slows down, and the battery barely lasts more than a few minutes. Eventually, the whole thing will go kaput and be worth very little, if anything. This is the essence of depreciation.

Essentially, the IRS is acknowledging that, if the property is used day in and day out, and if you do nothing to improve the property, that over time, the property will succumb to natural wear and tear, and at a certain point in the future, the property will become uninhabitable (just like when that laptop eventually dies).

As you can imagine, every asset has a different lifespan. You wouldn’t expect a laptop to last more than a few years. On the flip side, you would expect a house to still be standing several years, or even decades, later.

For residential real estate, the IRS allows you to write off the value of the property over 27.5 years.

Note: Only the property itself is eligible for depreciation benefits, not the land. The IRS is smart enough to realize that the land will still be there in 27.5 years and will still be worth the same, or more.

Here’s an example

Let’s say you purchased a property for $1,000,000. Let’s say the land is worth $175,000, and the building is worth $825,000.

With the most basic form of depreciation, known as straight-line depreciation, you can write off an equal amount of that $825,000 every year for 27.5 years. That means that, each year, you can write off $30,000 due to depreciation ($30,000 x 27.5 years = $825,000).

The reason that this is such a big deal is this. Let’s say, that first year, you make $5,000 in cash-on-cash returns (i.e., cash flow) on that property. Instead of paying taxes on that $5,000, you get to keep it, tax-deferred (i.e., without having to pay taxes on it until the property is sold).

Wait, really?

Yes, really.*

*Disclaimer: This depends on your individual tax situation. Please consult your CPA.

That $30,000 in depreciation means that, on paper, you actually lost money, while in reality, you made $5,000.

Plus, properties acquired after September 27, 2017, are eligible for bonus depreciation, which can really amp up the tax benefits for that first year.

This is why depreciation is SO powerful.

#4 – Cost segregation is depreciation on steroids.

But wait, there’s more!

In the last example, we talked about something called straight-line depreciation, which allows you write off an equal amount of the value of the asset every year for 27.5 years.

But, for most of the real estate syndications we invest in, the hold time is around just five years. So if we were to deduct an equal amount every year for 27.5 years, we’d only get five years of those benefits. We’d be leaving the remaining 22.5 years of depreciation benefits on the table.

This is where cost segregation comes in.

Cost segregation acknowledges the fact that not every asset in the property is created equal. For example, that printer in the back office has a much shorter lifespan than the roof on top of the building.

In a cost segregation study, an engineer itemizes the individual components that make up a property, including things like outlets, wiring, windows, carpeting, and fixtures.

Certain items can be depreciated on a shorter timeline – 5, 7, or 15 years – instead of over 27.5 years. This can drastically increase the depreciation benefits in those early years.

Here’s an example

Let me give you an example. And this one is based on a true story.

A few years ago, real estate syndication group purchased an apartment building in December of that year. That means that the investors only held that asset for one month of that calendar year.

However, due largely to cost segregation, the depreciation schedule was accelerated for many items that were part of the property, including things like landscaping and carpeting.

The K-1 that was sent out to investors the following spring showed that, if you had invested $100,000 in that real estate syndication, you showed a paper loss of $50,000.

That’s 50% of the original investment.

Just for owning the property for a single month during that tax year.

And, if you qualify as a real estate professional, that paper loss can apply to the rest of your taxes, including any taxes you owe based on your salary, side hustle, or other investment gains.*

*Again, this depends on your individual situation, so please consult your CPA.

This is a game-changer, folks.

#5 – Capital gains and depreciation recapture are things you should plan for.

You didn’t think that real estate investing would be 100% tax-free, did you?

Unfortunately, the IRS likes to be included in everything.

In real estate investing, the way they get their cut is through capital gains taxes when a real estate asset is sold, and sometimes, through depreciation recapture, depending on the sale price.

In a real estate syndication that holds a property for 5 years, you wouldn’t have to worry about capital gains taxes and depreciation recapture until the asset is sold in year 5.

The specific amount of capital gains and depreciation recapture depends on the length of the hold time, as well as your individual tax bracket.

Here are the brackets and percentages based on the 2021 tax rates:

https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/

For more details and the most up-to-date laws and info, I recommend you discuss the specifics with your CPA.

#6 – 1031 exchanges are amazing.

I mentioned above that when a real estate asset is sold, capital gains taxes (and often, depreciation recapture) are owed. However, there is one way around this. And that’s through a 1031 exchange.

A 1031 exchange allows you to sell one investment property, and, within a set amount of time, swap that asset for another like-kind investment property.

Doing so means that, instead of having the profits paid out directly to you, you roll them into the next investment. As such, you don’t owe any capital gains when the first property is sold.

Only some real estate syndications offer a 1031 exchange as an option. Often, the majority of the investors in a syndication have to agree to a 1031 exchange to make it a possibility.

Unfortunately, you cannot do a 1031 exchange on just your shares in the real estate syndication.

The sponsors must decide to do a 1031 exchange on the whole shebang. It’s all or nothing.

Every sponsor is different and approaches 1031 exchanges differently. If a 1031 exchange is something you’d be interested in, be sure to ask the sponsor about it directly.

#7 – Some people invest in real estate solely for the tax benefits.

The tax benefits of investing in real estate are so powerful that some people (namely, wealthier folks) do so purely for the tax benefits. You see, by investing in real estate, they can take advantage of the significant write-offs, and then apply those to the other taxes they owe, thereby decreasing their overall tax bill.

This is how real estate tycoons can make millions of dollars but owe next to nothing in taxes.

It’s perfectly legal, and it’s a powerful wealth-building strategy. And, you don’t have to be wealthy to take advantage of the tax benefits of investing in real estate. The tax code makes the benefits of investing in real estate available to every real estate investor.

Recap

Like I mentioned when I started this article, you don’t have to worry about taxes when investing in real estate, especially as a passive investor in a real estate syndication. In most cases, you’ll be able to make money via cash-on-cash returns, yet you won’t owe taxes on those returns due to benefits like depreciation.

To recap, here are the seven things I think every real estate investor should know about taxes:

The tax code favors real estate investors.
As a passive investor, you get all the tax benefits an active investor gets.
Depreciation is hecka powerful.
Cost segregation is depreciation on steroids.
Capital gains and depreciation recapture are things you should plan for.
1031 exchanges are amazing.
Some people invest in real estate solely for the tax benefits.

As a passive investor, you don’t have to “do” anything to take advantage of the tax benefits that come with investing in real estate. That’s one of the benefits of being a passive investor. You don’t have to keep any receipts or itemize repairs. You just get that sweet K-1 every year, hand that over to your accountant, and that’s it.

THREE THINGS AN INVESTOR SHOULD FOCUS ON IN TURBULENT TIMES

There’s no doubt about it. We are in a time of economic uncertainty. The Feds keep raising interest rates in an effort to curb inflation and the stock market continues to be volatile.

During these turbulent times, the wealthy focus on three main areas:

Passive Income
Capital Preservation
Tax Savings

Passive Income

Unless you are one of the lucky few that love their job, most people spend their days working at a job that they can’t wait to leave. Escaping their W-2 is a major factor for many of our investors and by investing in real estate syndications, Noblivest can help you achieve that goal. Passive income can be created through cash flow and equity multiples which can eventually replace your W-2 income.

And when that happens, you can stop working for money and let your money work for you!

Capital Preservation

When stocks are in a bear market, it can be painful to even check your account. In the span of a single day, your stock portfolio can take a nosedive, decreasing your net worth dramatically.

At Noblivest, the number one thing we focus on when putting together or investing in a real estate syndication is making sure that, above all else, we don’t lose money. Even if we don’t hit our expected returns, we want to be sure, at the end of the day, we at LEAST get our original investment back.

So when you are investing during turbulent times, make sure to invest in stable, recession resistant investments to preserve your capital and then ideally, to grow it!

Tax Savings

“Two things are certain in life, death and taxes.” Benjamin Franklin

Most of us know this quote from Ben Franklin but I prefer this response from an uncited source: “Death and taxes may be certain, but we don’t have to die every year!”

For many people taxes are by far their biggest expense and it’s not just income tax. There are property taxes, sales taxes, conveyance taxes, capital gains taxes, inheritance taxes… and the list goes on.

For high income earners working a W-2 job, there’s not much you can do about payroll taxes. But what you can do is focus on investing your capital to create passive income, which can trigger a variety of tax savings. For example, when investing in a real estate syndication, depreciation may be used to offset your gain, thus reducing your taxable income. And when exiting a deal, you can utilize a 1031 exchange to roll your profits directly into a new investment, thus deferring your taxes to a later date.

Interested in learning how you can weather this economic downturn and still come out ahead? Let’s discuss how we can help! Book a call

The Best Way to Invest One Million Dollars

If you had one million dollars, what would you do?

Most people, when asked this question, would reply with a number of responses – they’d pay off their credit cards, buy a home or car, travel, maybe even stash some away for a rainy day.

But one of the first things you should do is, think about how you can make that $1,000,000 last.

Obviously, paying off consumer debt is a good thing and it’s understandable that you’d want to spend some of the money on travel and shopping. But by investing even a small part of that one million dollars into a cash-flowing asset, you can create passive income that will continue to grow and pay you for years.

Let’s explore 5 ways you could work to grow that million over the next 5 years and see which one is the most profitable.

#1 – Savings Account

A basic savings account is the default got-to when people think of large sums of money.

Savings accounts are generally considered safe and they usually do earn interest. However, at the time of publish, savings accounts are earning a mere 2.5% interest. If you put all one million into a savings account and let it earn interest for 5 years, you’d wind up with about $1,133,001.

Savings accounts are “safe,” but as you can see, the returns are measly.

#2 – Certificate of Deposit

Since you are interested in earning more than an ‘ol savings account can yield, CD’s might be interesting. Certificates of Deposit offer a fixed interest rate in exchange for your investment over a set period of time. At the time of publish, a 5-year CD rate is 2.86%, which would result in your million becoming $1,151,417.

While this is better, it’s still not great. One million bucks has much more earning potential, thus, our journey continues.

#3 – Stocks

Alright, we’re getting more serious here. Higher interest rates come with higher risk, and everyone knows that playing with the stock market can be risky.

Historically, investments in the stock market return about 10% per year (average), which means about $100,000 for your million. We can estimate that investing your million in the stock market could yield about $1,500,000 after 5 years.

Now we’re talkin’!

But aren’t there other options outside the stock market? What about real estate?

#4 – Rental Properties

One million dollars could go really far in the rental property world. Consider this, you could buy real estate properties by putting 25% down. So you could snag a $200,000 single-family residence for $50,000, which means you could invest in 20 properties of that value!

If each home brought in $300 in cash flow per month (rent minus expenses), 20 properties would yield you $6,000 per month or $72,000 per year. At this rate in five years, you could have $1,360,000.

Take into consideration some improvements, rent increases, tax breaks and a few other perks, your total returns would be comparable to those of the stock market.

#5 – Real Estate Syndications

This last one you may not have heard about – investing passively in real estate syndications. Real estate syndications are group investments where, as a passive investor, you pool your money together with other investors and buy large commercial or residential property, like an apartment complex.

Investing passively relieves you of the landlord’s responsibilities of managing rental properties and allows you to earn cash flow without having to find individual properties that match your price point.

The minimum investment on a syndication deal is typically $50,000, but you can invest more than that. For example, you can invest $100,000 into 10 different deals with an 8% average annual return and earn $80,000 per year in cash flow distributions altogether.

Just considering the annual return numbers, we’re coming in comparable to the other investment choices mentioned, but wait, there’s more!

Each of the 10 assets in which you invested will sell after improvements to the property are completed and the market timing is right, usually around the 5-year mark. Often, investors can expect to receive an additional 50-60% in returns at the sale of the real estate syndication deal.

With the cash flow distributions and the profits from the sale in consideration, you could potentially double your money from $1 million to $2 million in just 5 years. Now that’s amazing!

Conclusion

Now that you have thoroughly explored what you could do with $1 Million and how you can make your money earn more money, I bet you can’t wait to get your hands on a windfall. You never know, it could happen!

And when it does, you already know 5 different ways that money can make money – from savings accounts, CDs, stocks, rental properties, and real estate syndications. To learn more about real estate investing and syndications, book a call with us. For access to our private community of like-minded investors focused on wealth-building, you’re invited to join Noblivest Investors Club today.

High-Level Concepts To Fuel Your Wealth-Building Strategy

Growing up, many of us didn’t have strong pillars of financial knowledge, especially if we came from a middle-class family like I did. My parents worked hard but they had no real money management skills beyond getting an education, finding a steady, salaried job, paying their bills on time, and then stashing any extra money into a small savings account or investing in a few stocks.

School wasn’t much help, either. In all my education, not once was there a class that taught about savings options beyond a typical savings account or investment strategies beyond a company 401K. If you’re like me, everything you’ve learned about personal finances and how to get ahead in this world came from your own hard work and dedication toward thinking outside the box.

That’s why in this article, we are more than happy to share the five high-level concepts that can positively impact your ability to generate wealth quickly and efficiently if implemented with timeliness and dedication.

Money Management In Four Steps

A fantastic view of the high-level cash flow journey is to break it down into “four pillars,” as M.C. Laubscher from Cashflow Ninja calls it. Cash creation, cash capture, cashflow creation, and cash control are the four pillars he’s taught to his faithful followers for years.

In the first stage, Cash Creation, your role is to create money. You venture out on your own, obtain a degree, land a salaried position at a stable company, develop connections with industry peers and seniority, start your own business, find a mentor, and hustle toward bonuses and raises. The cash creation stage is the foundation of all the other steps. The key is not to get stuck here for 40 years, like most of the US population!

Next, we have Cash Capture, and in this stage, you create a buffer between how much you bring home and how much you spend. You likely succeed at this by budgeting and saving as much take-home income as possible. The difference between your income and your spending is where you capture cash and use it to fund your investments, purchases of appreciating assets, and your private banking strategy (I’ll explain this in a little bit.).

Once you have emergency funds and other savings in place, have a grip on your budget, and are consistently capturing cash, you move on to the cashflow creation stage.

Take notice of the name: Cashflow Creation – There’s a big difference from the first stage of working for cash. In this third stage, you learn how to use the money you’ve saved and the relationships you’ve nurtured to invest, generate additional cash flow, earn interest, and create income independent from your day job.

Typically, people in this third stage actively seek investment opportunities, including insurance policies, stocks, REITs, bonds, residential real estate, and commercial real estate syndication opportunities.

Next isn’t really the final resting point, but more of an ongoing focus to protect and tweak your financial strategy for the best. Cash Control involves creating a will, pursuing estate planning, maintaining life and disability insurance policies, and ensuring your finances are set up for longevity. You didn’t learn this stuff in school, so it’s up to you to intentionally learn and refine your financial plan toward protecting your assets from creditors, taxes, and lawsuits and providing a legacy for your loved ones.

I’m sure you’ve heard the phrase “making your money work as hard as possible” thrown around, and in a nutshell, intentional action throughout each of these stages will do precisely that!

Private Banking Strategy

The next high-level concept I’d like to share also called “becoming your own bank” and “infinite banking strategy,” is where you use a carefully drafted whole life insurance policy to become your own lender, borrower, and beneficiary all at the same time.

Look at the big-bank business model. They accept people’s deposits in exchange for a “safe” place to store the cash promising minimal interest earnings. The bank loans that money out to others and earns a much steeper amount of interest off the loan. All along, if someone defaults, they are the beneficiaries via collateral, collections, etc. Why save your hard-earned cash for minimal interest and then borrow other money at a higher interest rate? It just doesn’t make sense!

I invite you to explore flipping this widely-accepted business model and create your own private banking system. If you followed the four stages above, you captured cash and have significant savings ready to invest in creating passive cashflow. With this cash, you buy a dividend whole life insurance policy from a mutual insurance company. When written correctly, your policy will allow you to fully fund it quickly and borrow a large portion of that money from inside the policy within the first year.

Now before your head spins, let me explain. When you fund the policy quickly, you become eligible for dividends and earnings inside the policy itself. When you borrow against your policy at a low rate, you’re still earning interest on the full value, AND you get to reinvest that borrowed money into a real estate syndication.

Boom! You’ve taken 1$ and invested it into two places at the same time, AND now you have an insurance policy too! There are many other details to this, which I’ll save you from right now, but just know this is one tax-advantaged option for creating a wealth-building machine.

Value Your Time Most Of All

Your time is your most precious resource, and when you start out, you don’t have much choice but to trade your time for money. You likely spend 40-60 hours a week contributing your expertise and energy in exchange for a paycheck.

That’s not a sustainable life/happiness model, though, right? At some point, you want to have captured enough cash and begun to invest in lucrative deals so that you could reduce the amount of time you have to put in and instead spend it doing things you enjoy.

This is where you reclaim your time. Maybe that means hiring an assistant to keep you organized and run little errands for you, or perhaps that means hiring household services like laundry, a maid, and a landscaper. In all areas of life, I encourage you to explore the activities you do, their worth, whether you like doing them, and how much of your time and energy they take. When you conclude that specific actions are not worth your time or energy, hire them out and, in exchange, use your time to learn about and pursue the next level of wealth-generation.

Another way you can fast-track your wealth-building machine is to intentionally surround yourself with people who inspire you. Find connections ten steps ahead of you, who are doing things you wish you could be doing, and then find ways to infuse their lives with value. Use your knowledge and expertise to support them and further develop a positive rapport with them.

You’ve probably heard the quote by Jim Rohn, “You are the average of the five people you spend the most time with.” Well, recent research shows that who you are is even affected by your friends’ friends and those friends’ friends! This emphasizes how imperative it is to seek masterminds, mentors, and relationships with those you admire.

As you surround yourself with valuable connections, nurture the relationships created, and allocate time and energy-sucking tasks, you create more space in which you can explore higher-level concepts and accelerate your wealth-building journey with fewer mistakes.

Continuously Break Parkinson’s Law

Finally, the greatest, most valuable high-level advice I can provide is that you have to break Parkinson’s Law repeatedly. Parkinson’s Law is the high-level idea that the more income you make, the more you spend.

Most people find that with each raise or bonus achieved, they can afford something they’ve wanted, which is all exciting until years pass by, and they’re stuck with no savings to show for all their hard work.

But you, you’re different. With the four pillars, buying your time back, and private banking knowledge, you are destined to thrive in that Cash Capture stage and ensure your expenses are much less than your income. Beyond that, you have to continually refine your cash capture strategy, always ensuring you have more to invest.

With each raise, cashflow check, and bonus, strive to remain conscious of the temptation to spend more and break that cycle again.

While you focus on the high-level strategies outlined above, we at Noblivest are focused on nurturing relationships with investors (like you) and presenting the best real estate syndication opportunities available to our Noblivest Investors Club members.

For access to our private community of like-minded investors focused on wealth-building, you’re invited to Join Noblivest Investors Club today, taking a huge step toward checking the so-called boxes on several of the high-level concepts discussed herein.

How to Quit Your Job Through Investing in Real Estate

No matter how many jobs you’ve had or how far down the career path you are, facing any workplace transition brings up emotions, fears, and possibly, some sleepless nights. The bittersweet feelings of quitting a job include guilt, worry, anxiety, excitement, adrenaline, and gratefulness.

It only seems sensible that a cushion of cash in the bank might make any transition less worrisome. In this article, we’ll share 3 steps toward making the leap from the ol’ 9-5 through real estate investing so you can spend less time behind a desk and more time doing things you love.

Why Leave Your Job

Unlike generations prior, it’s rare for anyone these days to remain with a single company or industry throughout their career. There’s a massive work-from-home, remote position, freelancer, and small business shift happening at the same time.

There are many professionals (you included) who want to take the leap and are aware of the freedom they desire, but feel the guilt and fear associated with abandoning a career path, reducing their income, and still being able to afford a life they love. Some of these fears can be because of their need to support a family or because the cost of living in their area is high.

For some people, they actually like their jobs. Maybe resigning isn’t for you right now, but it doesn’t mean there won’t be a moment down the road when you might consider it or even think about taking a sabbatical to just travel or spend time with loved ones.

The simple solution to all of the above is passive income. Income you earn without actually having to step foot in an office or head to work even a few hours a day seems like a dream, but we’re here to share with you how you can make this your reality.

Step 1 – Find Your Freedom Number

The first step toward building a strong financial plan toward quitting your full time job with confidence is finding your freedom number. This number is the amount of money that would more-than-cover your regular monthly expenses based on your current lifestyle.

This is the amount of income you need to earn passively in order to quit working and still cover all your bills worry-free. You can easily find this value by looking at your expenses from the past six months.

Let’s pretend your expenses for the last six months look like this:

Month 1 – $ 9,500

Month 2 – $ 12,300

Month 3 – $ 8,700

Month 4 – $ 10,800

Month 5 – $ 9,100

Month 6 – $ 9,600

The average of these expenses is $10,000. Now, add a 10% buffer.

Your freedom number in this case is $11,000. This is how much you need to establish in consistent, passive income so you can leave your nine-to-five with confidence.

Step 2 – Build Passive Income

Now that you have your target, freedom number calculated, you can get to work building multiple streams of income that will equal that total.

Some ways to generate passive income include writing a book, creating online courses, or designing products to sell online. My favorite though, the one that requires much less time and effort, is real estate investing.

Actually, did you know there are more people who become millionaires through investing in real estate than through any other path?

It’s true! This is because you don’t need to know how to write, design websites, or create products and market them. With some capital and dedication to research, you can invest in cash-flowing real estate and build your streams of income, one deal at a time.

Passive investments in real estate syndications can earn between 8 – 10% annual cash-on-cash returns, plus additional income upon the sale of the asset after an average of 5 years.

So, as an example, you could invest $100,000 and earn about $9,000 in passive income per year while doing very little work.

Get a few of these going, and you build, brick-by-brick toward your income goal /freedom number ($11,000 per month in the example above). Even just an extra one or two thousand a month relieves some financial pressure and allows for more flexibility in your personal schedule.

No matter how you choose to build your financial cushion – through real estate or online products or both, the main goal is to create multiple streams of passive income to reach your freedom number.

Step 3 – Track Your Progress

As you build each stream of income, it’s actually quite fun to track your progress and see that passive income number increase over time. Whether you’re an excel nerd or not, you’ll want to establish a way so you can easily see how much passive income you’re earning each month and which investments are out-performing others.

If you were to choose real estate syndications, for example, you could see that for every $50,000 investment, you’ll earn about $350 per month in passive income. By this math, you might consider moving the $200,000 you have in the stock market over to syndications and begin generating $1,400 per month.

While $1,400 is quite far from $11,000, it’s a building block. Plus, it will probably more than cover your groceries for the month – one less thing to worry about.

Each additional passive income stream you add covers another current living expense and acts as one more tile to your freedom number mosaic. One day soon, you’ll reach the tipping point where you feel comfortable reducing your work hours or quitting your job altogether, without experiencing a true reduction in income.

Recap

Drastic changes and quick transitions can easily stir up fear or worry in any responsible adult, but even more so if you feel the weight of providing for a family or achieving steep lifestyle/income goals. The biggest thing to remember though, is that countless others have built passive income like we discussed here, and you can too.

The steps outlined herein will help you identify your personal, passive income goals, create a path toward creating that passive income, and track your progress. No matter your reasons for wanting to build passive income, following the three steps above will help you build the financial assurance you need to quit your job with confidence.

Real Estate Investing: Understanding Syndication Structures

When evaluating commercial real estate syndication, most investors start by identifying an asset class in which they would like to invest (multifamily, office, retail, etc), and then within that class, they may focus on a specific category (Class A, Class B, etc)

However, when you are reviewing a potential deal, it’s important to also consider the syndication structure so you can determine whether a specific property or investment is a good fit.

Real estate syndication structures dictate how the returns in the deal will be split up between you and all the other passive investors (limited partners) as well as the real estate syndicators (general partners).

Understanding real estate syndication structures, specifically: splits, preferred returns, and waterfall structures, is crucial to your success in finding real estate investments to help generate the most passive income and help you build your wealth over time.

In this article, we’ll walk through how to evaluate deal structures so you are prepared when reviewing your next opportunity.

Real Estate Syndication Structures

Every real estate syndication deal is structured differently. So depending on which investment group you’re working with, you could be looking at widely varying investment opportunities simply because of the syndication structure.

At Noblivest, we prefer to keep the structure of our real estate deals simple. For the sake of this article, we’re explaining the type of real estate syndication structures we typically see in real estate investment opportunities.

Keep reading to learn more about these three main components generally used to structure a real estate syndication deal.

The split between the limited partners and the general partners
Preferred returns
Waterfall structure

The Split Between The Limited Partners And The General Partners

The split in a real estate syndication deal is a simple percentage. As a passive investor, you’re likely wondering what rate of return you can expect to receive from your investment capital if you were to participate in our next syndication.

Again, while every deal is different, most often, you’ll see a 70/30 split, with 70% going to the limited partners and 30% going to the general partners as compensation for their hard work in managing the asset itself.

The split structure in a real estate syndication deal considers both cash flow and profits from the sale. During the hold period, the primary proceeds are cash flow dollars from tenants’ rent. 70% of the cash flow goes to the limited partners and 30% to the general partners. Upon the sale of the investment property, the profits are distributed in the same way.

Regardless of how the split ratios are structured, they should always add up to one hundred. While a 70/30 split is the most common, sometimes syndicators who are just starting out may offer an 80/20 split to incentivize more prominent institutional investors to invest a more significant capital amount.

Preferred Returns in Real Estate Syndications

So, you might be wondering, “Does the general partner group or the passive real estate investor pool get their money first?”

Preferred returns dictate who gets paid first when it comes to cash flow and distribution of proceeds from the sale. As a way to incentivize the investors on both sides of a real estate syndication deal, sometimes preferred returns are introduced into the equation.

The passive investors are given preferred returns, meaning they’ll get their cut first, which reduces fears and hesitations around contributing capital. Meanwhile, if passive investors are the only ones getting any returns until the property exceeds 7% in returns, for example, the general partners and incentivized to ensure the property becomes profitable in excess of 7% as quickly as possible so they can earn a little money too!

At Noblivest, we like to show our passive investors that they are our priority, and one way to do so is by offering preferred returns on the majority of our real estate syndications.

Waterfall Structure

A waterfall structure simply means that as an asset’s performance increases, the percentage of its return, the general partners and management team will be compensated more as payment for their expertise in making that asset perform at a higher level.

A typical market real estate syndication structure is a 7% preferred return with a 70/30 split. To explain it further, the first 0% to 7% of returns go directly to the limited partners, and the general partners receive zero. However, if the returns reach 7% to 14%, the 70/30 split kicks in, with 70% of the proceeds going to the limited partners and the remaining 30% to the general partners.

Most passive investors don’t realize that nearly all real estate syndications have a waterfall structure. Once a particular return is achieved, the format changes from a 70/30 split to a 50/50 straight split.

A waterfall structure incentivizes the general partners to expertly manage the asset, getting it above and beyond their initial projections. In this situation, returns of 14% and above and any cash flow or profits from the sale would be a 50/50 straight split between limited and general partners.

Be sure to read the fine print of your PPM and investment summary to verify whether the real estate syndication structures you’re considering include a distribution waterfall because usually, they do.

Understanding the Cash Flow in a Real Estate Syndication

Passive investors need a solid working knowledge of how best to evaluate the structure of a commercial real estate syndication so they can determine whether the projected returns are aligned with their financial goals. Understanding the typical real estate syndication deal structures can help you know what to expect as you embark on your vibrant journey as a real estate syndication investor.

When you have clarity around general syndication structure elements such as splits, preferred returns, and waterfalls, you’ll better be able to determine whether a particular deal is a good fit for you and your financial goals. Furthermore, the goal is to have confidence when selecting a deal. So, through understanding these fundamental concepts, investing in syndication opportunities becomes less intimidating, which better positions you to start building your wealth and your portfolio.

House Hacking 101: How To Start Living For Free

Mortgage and rent payments make up a good chunk of many people’s budgets. But what if you had a way to live for free? Many people have found a way to do that through “house hacking”. It’s a simple concept that anyone can do, and you might already be doing it without realizing it!

If you’d like to reduce your living expenses or if you’ve been trying to figure out how to have renters pay down your mortgage for you, you may be a great candidate for house hacking.

In this article, you’ll learn what house hacking is, find out how to decide if a property is a house-hack-worthy purchase, discover how to get started, and learn how to stockpile your earnings from one property to buy the next and continue to build your wealth.

House Hacking Defined

If you live in one portion of a property and rent out another room, unit, or space on the same property, you’re essentially house hacking. You can become a house-hacker with any small multifamily unit like a duplex, triplex, or quad, and, surprisingly, you can even do it with a single-family home!

Basically, your renters pay a monthly equivalent close to, equalling, or greater than your mortgage payment on the property, rendering your housing expenses near or at zero. This way, you’re earning equity and paying down the mortgage without actually having to pay it yourself!

This frees up your budget, reduces the likelihood you’ll remain in a job you hate and decreases your stress. When you can have good, paying tenants in your units and live with $0 housing expenses, you free up your finances to accomplish more, grow your wealth faster, and earn passive income to fund the lifestyle you want.

How Do You Know If A Property Is A Good Purchase For House Hacking?

If you want to get started house hacking, first, you need the “perfect” house-hacking property.

That doesn’t mean you’re in search of a fully renovated, adorable property or even one that has excellent curb appeal. Perfect, in this case, means that the rental rates you could theoretically charge a tenant will cover or come close to covering the mortgage payment on the entire property.

To get to that point, you must first consider how much rent each unit of the property is likely to provide and compare that with your expected mortgage payment. Look at the price of duplexes, for example, and see if the overall cost of the property would render a mortgage payment that could be covered by the rental income from one unit alone.

An Example:

If you find a duplex for $400,000, you’ll likely apply a down payment of $80,000 in cash (20%). That leaves you with a $320,000 mortgage. At about 5% interest on a 30-year mortgage, your payments will be about $2,000 each month.

With this knowledge, you’ll scope out the rental market and see what renters generally pay for units comparable in size to one you anticipate having for lease. This is as simple as looking at Craigslist or any other online hub where people share and shop for a place to live. Don’t overcomplicate the research process!

If the rental rates you see in the market are at or near $2,000 per month, then it’s likely you’ll be able to get a paying tenant in one side of your duplex for that amount. Then, you can live “for free” in the other side while your tenant’s rent payments build your equity in the home by covering the mortgage payment.

If the rent rates in the area are a little less, say $1,800 per month, then you’ll have to pitch in $200 a month to cover the mortgage on the property. But, hey, I’ve never found rent for $200 a month before, so I’d still say you worked yourself a great deal!

On the other hand, if you find out rental rates in the area are $2,200 per month, your renters will be paying more than your mortgage payment, leaving you a little cash flow right away!

Either way, you’ve reduced your living expenses to essentially zero and gained a significant advantage toward being able to save for your next real estate endeavor.

What Else Does It Take To Get Started House Hacking?

Getting started house hacking is easy! All you need is your down payment in cash (20% of the market price of the property is required) and some basic knowledge of the area and types of property you’re searching for.

You may want to stash a little extra cash in a reserve account for things like anticipated renovations, lawn services, and pest control. Some unanticipated costs of becoming a landlord may be repairs, tenant damage (intentional or not), and notary or attorney fees.

You can easily find templates for tenant applications, leasing forms, and even contractor agreements online. Take advantage of services like Angie’s list or similar to find reliable handymen for repairs.

Once you have your savings goals met, simply expand your property search to include small multifamily units like duplexes or triplexes in the area. You can easily do this on any home listing site like realtor.com or by asking your agent.

How To “Snowball” Your Real Estate Purchases And Keep Living For Free While Investing More

Once you see the magic in having your tenants pay your mortgage while you live for free, you’ll probably want to do it again and again, accumulating real estate properties, growing the number of units you have rented out, and building your equity and passive income as you go.

The primary way to accomplish this is, as your tenant is covering your mortgage with their rent payments, continuing to “pay rent” to yourself. Set aside at least $1,000 per month into a separate savings account as if you were still paying a mortgage payment or rent. In time, this account will accumulate enough savings to cover a down payment on your next rental property.

As you move out of your first duplex, for example, and get another tenant to rent your old space, you’ll suddenly have two people paying $1,600 per month, effectively doubling your rental income. Meanwhile, you’ll be moving into a new triplex, for example, living in one unit and finding paying tenants to live in the other two.

With House Hacking, Who Knows What Your Future Contains!?

I’m sure you can continue to project a growing number of units and the passive income that goes with them by repeating this formula every few years. The good news is, you’d be on your way to ever-increasing net worth, tax benefits, and a diverse portfolio of recession-resistant assets too!

If you’ve been wanting to quit your job and travel full time, creating passive income through real estate investments could be the key to making that happen. Of course, it all starts with your first small multifamily property purchase.

I have to share this caveat now – being a great landlord is hard work and requires your time and attention to daily decisions about what’s best for the property and your tenants. Even if you choose to use a property management company, you’re still responsible (and liable) for every repair, tenant complaint, rent raise, and eviction.

If passive income and real estate investments sound great, but you’d rather not move every few years or deal with tenants and other landlord responsibilities, you might be more inclined toward group investments called syndications. When you invest as a limited partner in a real estate syndication, you reap all the benefits of real estate like tax deductions, passive income, and property value appreciation without dealing with any landlord-type headaches.

Real estate syndications have become my favorite way to passively invest in stable, tangible assets, earn passive income, and limit my liability so I can live the life I’ve always dreamed of with and for my family.

Neither house hacking nor real estate syndication investing requires any experience, degrees, or certifications. You don’t have to be experienced in one to do the other. Start by identifying your lifestyle and investment goals first, then decide if you’re willing to try to manage a property as a landlord.

5 Easy Ways To Start Saving AND Investing At The Same Time

Whether you’re just beginning your journey toward financial freedom or you’ve been investing for years, it remains important to simultaneously both save and invest, always keeping an eye out for opportunity AND potential pitfalls.

Every decision carries risk and while it is great to be planning for your future and building your portfolio, you never know what will happen. Let’s keep our fingers crossed, but chances are you may need to dip into your savings account or emergency fund at some point!

There is an ongoing and challenging balance between your income and the amount of money you need to reach your investing, expense, and savings goals. While this is typically more difficult toward the beginning of your investing journey, there are a few important saving tips and tricks to help you get a handle on your finances and allow you access to different investment options.

Here are 5 tips for saving money when you are investing.

1. Pay Yourself First With A Savings Account

Have you ever said to yourself, “where did that paycheck go?!”

For most people, as soon as a paycheck is deposited into their account, it’s spent on expenses like rent, groceries, and utilities. So, the vast majority keep saying “I’ll save my next paycheck,” with no real plan in place as to how, because the truth is, no matter when or how much you get paid, there’s always an expense in the waiting.

To alleviate the push-pull relationship between earning more versus accumulating higher expenses, you’ve got to implement “pay yourself first” anytime you receive income. Prioritize your savings goal and take it out right away!

Take a small percentage of your paycheck (maybe just 5% to start) and place it directly into your emergency savings account. This has to be done immediately as your paycheck hits your account before any other bills or expenses get paid.

Moving a nominal value to a different account creates a beneficial barrier, protecting you from spending those savings. Rest assured that once you’ve paid yourself first, you can spend what’s in your checking account without feeling guilty.

If you are in a position where your job offers direct deposit. You can easily split your deposit by amount or percentage. This allows you to allocate, for example, 5% to your emergency fund and 95% to your checking account. This way, you don’t risk forgetting to transfer it or spending it accidentally, and it’s done automatically every single time.

2. Get Your Side Hustle Funding Your Investment Accounts

Everyone seems to have a side hustle now. Whether you are trying to boost your credit score, reach an income goal, or afford a big purchase, a part-time job or side hustle can really help accelerate your progress!

With so many opportunities, both in-person and virtually, that encourage connection, collaboration, and providing services as solutions, this is one of the easiest ways to get going in the right direction.

You’ve heard of the gig economy, right? Join the bustling online community of entrepreneurs making money and you’ll be saving and investing in no time!

The trick is to take whatever amount you earn from your side hustle and put it toward savings. Choose whether you want that extra income in your retirement savings account, high-yield savings account, emergency fund savings, or another investment account/financial opportunity.

If you feel like a part-time job is not for you. There are many opportunities to make money selling things you no longer want. Mercari, Poshmark, and Facebook Marketplace are all great options!

Look through your things and decide what is worth selling. Clothing, handbags, and accessories are popular on a lot of resale sites. You may want to sell bigger items like decor, kids’ toys, or furniture locally.

3. Create A Plan For The Unexpected: Emergency Savings Accounts

Life inevitably carries risks and unexpected twists and turns. The saying “plan for the unexpected” is perfect in this section. You may not plan for a specific amount of money, but you can always save a general amount or a percentage of money to create a little safety net. You never know when an unplanned expense like a car repair, job loss, or some type of financial hardship might pop up.

When you do experience a sudden financial crisis, you may be tempted to stop investing, under the impression you’ll have immediate access to would-be invested cash. But, if you already have an emergency fund prepared, you wouldn’t need to interrupt your investing goals or wealth-building progress.

An emergency fund exists to help you afford home repairs, emergencies, and other unexpected costs in a time of financial crisis. Then, when the repairs are done, the insurance pays out, or you’re on your way to your new job, you can rebuild the emergency fund, all while your investment strategy remained uninterrupted.

As you build your emergency fund, you can adjust the amount saved based on your expenses and obligations, your employment status or fears around such, and re-evaluate your savings account goals once or twice a year. Financial experts agree you should aim to save three-to-six months of expenses in your emergency fund.

Maintaining a hefty emergency fund is a great way to keep your retirement funds, investment accounts, and other savings accounts intact. Remember, whether we’re talking about building your emergency fund, stuffing other savings accounts, or funneling cash toward investments automatic recurring transfers are your friend!

4. Pay Off Your Loans With Aggression

I’m guessing you probably stare angrily at your phone or computer whenever you see the total balance on your loans and credit cards. You aren’t alone.

But you aren’t defined by those numbers. If you have credit card debt, a student loan or personal loan, or high-interest debt, those obligations are going to make it quite difficult to build an emergency fund or invest in your future.

As they suck up the majority of your paycheck, they limit the amount of money you have available for savings and investing. If you find it difficult to make progress toward your savings account and investing goals, it may be time to start prioritizing certain pieces of debt toward payoff.

There is a tremendous benefit to working with financial advisors who can review your credit report, compare it to your personal financial budget, and help create a debt payoff plan. They’ll know how to consider interest rates, minimum payment requirements, and work with you to prioritize which debts should be paid off first.

Simply put, even if your income doesn’t increase, by deleting your high-interest debt, you will free up more money for your investing and savings account goals.

5. Learn About Your Investments (Stock Market, Money Market Accounts, and Real Estate Deals too!)

Every CD, broker service, transaction, securities deal, and mutual fund has a cost. So, as you walk your financial journey toward building wealth by saving and investing simultaneously, you’ll want to pay special attention to the fees required by each opportunity.

If you are looking at the mutual funds inside your retirement or brokerage accounts, for example, it is a great idea to look at how much they cost compared to the projected returns. The more you know about fee and transaction information, the better, more profitable financial decisions you can make for yourself.

Employers typically offer retirement accounts as part of your benefits package. However, keep an eye on the fees and minimum balance requirements because they can be very expensive. If you discover steep fees inside your employer-offered plan, but still want the match (because hey, I wouldn’t pass up “free money” either), just contribute to earn the match and establish a separate brokerage account of your own outside of your employers’ offers.

As long as you’re following an overall financial plan toward building and generating wealth, whether you invest inside an employer offered plan or on your own is irrelevant. Do your due diligence, examine fees, tweak your budget, and do what is in alignment with your financial goals.

Ready to Master Your Savings vs Investment Ratio?

No matter where you are along the path toward financial freedom, the key takeaways here are to take the time to set up and review your financial goals. Having a periodic “money date” to allow rebalancing, evaluate your risk tolerance, make adjustments to your budget, explore new financial products, or tip your wealth management strategy toward stronger diversification is key.

Here at Noblivest, we’re experienced in working with investors at all experience levels, and truly believe that when you watch out for and respect your money, it takes care of you back.

As you check in with your expenses, emergency fund savings levels, and investment returns, we invite you to join the Noblivest Investor Club, because we love talking about this stuff! A fully informed investor (like you!) is more likely to make the right investment decisions and easily hit your financial milestones (maybe even faster than expected).

Giving The Gift Of Financial Literacy To The Next Generation

Raising the next generation is one of the most rewarding things we could ever experience. Along with seeing our children go through all of life’s many milestones, thinking about the future for our children can bring a little anxiety too. For many of us, our families and children are our biggest “why” in life.

While some of us might think about legacy or passing on wealth to the future generations, what is even more important and certainly a massive way of showing our love is to teach them how to be responsible with their finances as well. Taking this a step further beyond just financial responsibility, it’s about investing money into assets that generate passive income. This is the key to becoming financially independent in the future and for many generations ahead.

It is critical to talk openly with our kids about spending, saving, and investing; all of which help to instill positive financial values while they’re young. We want them to be equipped with the tools to not only care for themselves and their daily living expenses, but to also build wealth and responsibly use wealth to positively impact the world.

In this article, you will discover a few simple concepts you can teach your kids and tangible lessons you can implement as part of your plan toward creating generational wealth.

When Kids Can Grasp Financial Concepts

Of course, you’re not going to begin your first conversation teaching compounding interest to your 4-year-old! Children can understand a little more with each year, and you slowly build on their math skills and present simplified financial concepts based on their age, the situation, and the lesson you’re shooting for.

Young kids between the ages of 5 and 9 just need to learn basic arithmetic and have practice earning money, saving some, and spending some. This teaches them the basics of how the world works – you earn $10, you save $2, and you can buy a new toy for $8. Simple, right?

When kids can connect that each thing we do or have is paid for somehow, they’ll start to be more considerate of your household budget. Leaving the lights on, for example, might make the electric bill higher, and you have the opportunity to present and share the statement from the electric company and discuss this financial obligation that exists month in and month out.

Between the ages of 9 and 15, children can understand adult-like financial concepts like credit cards, compound interest, investing, and compute complex equations. At this point, it’s highly recommended that you share much more about your income, your bills, mistakes you’ve made, and, yes, your investing choices with them.

Teaching concepts to our children while they’re young, while they have time to practice and experiment with money under your wing instead of when it matters (like with rent or their credit), provides them an even greater chance at financial success.

Teach Your Kids To Save AND Invest

The most important thing, no matter the tools you use, is that your child gets access and experience with money. That means earning it, making choices whether to spend or save it, losing it, investing with it, borrowing it, paying it back, and everything that we adults do with our money but on a child-size scale.

Provide opportunities for them to earn some cash, and walk them through what to do with those earnings. As you encourage them to save some, spend some, donate some, and invest some, talk to them about why these choices are important and share about similar decisions you’re making with your own money.

Don’t be afraid to share more significant concepts like the impact they could make on a large scale with donations, mistakes you’ve made and what you learned from them, or how they can double their money investing as you do now in real estate syndications. The real lightbulb moment will be when they begin to understand that investments provide passive income – so much so that, if done well, they can choose whether or not to work.

You get this beautiful opportunity to guide them in earning their first several thousand dollars, building up their savings, and gaining exposure to the fantastic world of investing. Just imagine how much more opportunity for freedom and impact they have just by exposure to these concepts. Amazing!

The #1 Mistake Parents Make With Kids About Money

In general, talking to your kids about money is a million times better than avoiding the subject. It doesn’t matter how much or how little of an expert you think you are on the subject. They need to know about your financial mistakes to learn from them just as much as they need to know about the great decisions you made so they can emulate them.

Either way, discussing finances and allowing your child some exposure and experience with money and financial conversations provides them more knowledge and confidence with money than if it were never discussed at all.

Unfortunately, there is one glaring mistake we’ve probably all made.

Most of us can admit that we’ve said, “We can’t afford that,” at least once to our kids in response to their request for something.

While that may be the easiest, most automatic quip, it’s a missed opportunity for a teachable moment. Sometimes you’re just tired of saying “No,” but it’s important that we lean into that conversation about why we’re not buying it and why/how we’re making different choices with our money.

The truth is, we probably can afford that. So, instead of accidentally frightening your kid into a scarcity complex (yep, that’s what really happens), intentionally replace that phrase with a new, more precise, more truthful expression like, “That’s not why we’re at the store today,” or “That’s not in the budget right now,” or “The money I’m spending today is only for groceries.”

It’s okay to tell your kiddo the truth about why your answer to their request is no, and it’s even more okay to have an in-depth discussion about budgeting, spending money on meaningful purchases, and investing for the future instead of instant gratification. Honestly, we adults struggle with these concepts too, so it’s a great idea to introduce them at a young age.

If you replace the ‘we can’t afford that’ thoughtless response with an open conversation about financial choices, you and your kids will be much better off.

What Should You Do Instead

The best thing you can do toward teaching financial literacy to your children is to model your own financial choices openly for them. Talk them through the options you have, why you’re making one decision over another, what bills you’re paying and why, and even the trade-off we all face in spending money versus saving it versus investing it.

They need a taste of reality while still living at home to learn about decisions they will have to make when they are out on their own. Allow them to exercise their own spending habits and make the $20 or even $100 mistakes now because those are much better to learn from than the $1000 + mistakes they could make with rent money when they’re older.

Share about your income and bills so they can see what it costs to live their current lifestyle. At the same time, share openly about what it was like for you when you first started out. Although it might be hard to talk about your mattress-on-the-floor and ramen noodle days, they need to know that your life wasn’t always cashflow positive.

This openness can help them realize that it’s okay to start small and that, realistically, they won’t be living their current lifestyle when they move out. While that might be scary to some, you must help them see the value of that independence. With your help, they’ll begin their independent financial life with accurate expectations and knowledge of what utilities, transportation, food, and other necessities cost, and they’ll be less likely to feel like a failure in comparison to the lifestyle you’re able to provide.

Positively Impacting The Next Generation With Financial Literacy

Create open lines of communication between you and your kids about money and financial subjects so that they can always come to you with questions, dilemmas, wins, and losses, and so that you’ll continuously have the chance to guide and teach even as they grow into early adulthood.

We’re always learning, right? So, again, it’s a great idea to model that for and discuss your journey with your kids. You don’t need picture-perfect finances to be an authority on the subject with your children. They’ve already looked to you for every answer they ever needed their whole lives, and they aren’t stopping now.

In fact, it’s better if things are a little messy because they need to see firsthand that you’re always learning, winning, failing, researching, and trying again. Remember, reveal your wins and your losses so that the lesson you’re teaching is realistic and they can develop accurate expectations for their own financial life.

The big thing is that you teach them the power of investing and help them get the correct accounts set up to practice and begin getting financial experience. Just imagine how different your trajectory would have been if you’d known about compound interest, passive income, and real estate syndication investments when you were their age!

Most of us didn’t get much of a financial literacy lesson from our parents, if at all. Fortunately, most of us are also absolutely determined to teach our children about money and break the cycle of financial illiteracy, struggle, and living paycheck-to-paycheck. With the simple tips and encouragement in this article, now we all have an opportunity to positively impact the next generation by teaching financial literacy to our kids!

How To Cultivate A Financially Successful Mindset

Sometimes, our investing journey may feel like a roller coaster. There are times with extreme highs, lows, and multiple medium-intensity moments occurring all in the same day.

Luckily, when you invest in commercial real estate, that roller coaster experience is a bit less volatile when compared to the stock market, but the highs and lows still exist.

Every investment requires you to take on risk in exchange for the potential upside.

The truth is, only 10%-20% of your success hinges on your knowledge, tactics, and the mechanical details you implement.

And that 80%- 90% of your success depends on your mindset.

You read it correctly!

Mindset has become quite the hot topic lately, but how do you cultivate a grit-oriented growth mindset that fosters investing success?

Make Your Dreams and Wishes Physically Visible

I heard a story recently about a real estate investor and how he made millions, lost it all, and then rebuilt it. His strong conviction in the power of a physical vision board really got my wheels turning. I can only imagine what it must have been like to have $50 million to lose in the first place!

I, too, have made vision boards and pasted pictures of objects and locations that I thought were far-fetched at best. Some of you practical, analytical folks may be questioning my sanity right now, but I’m telling you: vision boards work.

Ready for a science fact? The reticular activating system in your brain recognizes the goals you make physically apparent (by cutting and pasting pictures onto a poster board) and subconsciously draws you toward those individuals, locations, and things in real life.

When you have an on-paper visual depiction of your greatest objectives and aspirations, you’re less likely to forget why you’re striving and more inclined to take tiny steps in the direction of achieving those goals.

Maybe those hopes and dreams will come true after years of hard effort, or perhaps you take baby steps toward your major objectives and achieve them in five or ten years. Nonetheless, gazing at your goals every day has scientific, yet seemingly magical power.

Use Your (Potential) Pain As A Tool

Intentional journaling may help you achieve a major objective-setting endeavor. I’m not talking about waking up and jotting down your feelings, disappointments, and daydreams over a cup of coffee every morning. Instead, this is a very focused 30-minute goal setting exercise.

Here we go!

Get a 10-minute timer, two sheets of paper, and a pencil. Within the next ten minutes, you’ll brain dump all of your greatest wishes and aspirations on one piece of paper. Write as quickly as possible without analyzing what you’re writing. Fill the paper with the most amazing places you want to visit, the most expensive items you wish to own, and the most prestigious events you want to attend. Hold nothing back, even if it feels completely out of your league, crazy or even impossible at this time.

When your 10-minute timer is up, underline your number one over-arching goal and circle your top three one-year objectives. On another sheet of paper, write each of those four items with plenty of space between them.

Set your 10-minute timer for another go, and this time, write a short paragraph under each objective about why you must accomplish it. Perhaps you want to show your kids what’s possible, break a family trend, or that one of those objectives has been a life-long ambition of yours. Use emotionally charged phrases to convey feelings and emotion as you write.

When the timer dings, set it for the final 10 minutes. This time, write beneath each goal what horrible agony you’ll suffer if you don’t achieve it. Will you let someone (or yourself) down? Will you be trapped in a cycle of failure? Will you allow yourself to be proven inferior by the world? Detail the immensely painful assumptions and feelings you’ll experience around failure.

People don’t make daily choices out of comfort, they do things to solve a pain point. Customers purchase items, participate in events, and undertake journeys in order to alleviate their problems. This technique works because, by using pain as motivation, you’ll react eagerly to alleviate perceived suffering. So don’t just read this through; Stop right now and complete the exercise; these next 30 minutes may alter your trajectory.

Make Your Dreams a Reality by Verbalizing Them

Claiming your goals aloud is one approach to developing a positive mental attitude toward money. Whether your friends or family think you’re nuts doesn’t matter. If you speak your objectives verbally, in full confidence that they will come true, you’re more likely to achieve them.

This is where a daily writing practice might be useful, or you may use affirmations every morning to boost your confidence in yourself as someone who can achieve the goals you’ve set. Many celebrities, including Oprah Winfrey, have utilized similar measures, whereas others, such as Demi Lovato or Jim Carey, have taken more action-oriented approaches by writing themselves a large check or posting on social media that they’ll sing the National Anthem at the Superbowl.

Another method to make progress using verbal power is to replace negative phrases in your everyday speech with ones that convey confidence, hope, and possibility. As an illustration, replace “I just can’t seem to get over this issue” with “I’m grateful for the chance to learn something new and develop.”

I’m not telling you to be a happiness robot, but rather, that you be aware of your thoughts and the language you use internally and externally. Start speaking as if your goals are attainable and have already been fulfilled.

Implement A Gratitude Practice

Gratitude is at the core of every achievement. Practice expressing gratitude for where you are in life, what you’ve learned from your experiences, and for the accomplishments that lie ahead.

A gratitude practice may be done through meditation, where you take 5-10 minutes each day to close your eyes and think about all the wonderful things you have. Journaling your appreciation is another excellent method to express your thanks.

Have you ever heard of a gratitude vision board? You can create this powerful tool by pasting pictures of your children, accomplishments you’re proud of, and experiences you enjoyed onto a posterboard. This is just like a vision board, except it’s full of things you already have and are thankful for. Each day, allow yourself to be emotionally engrossed in thanks when you see this board – for the individuals, places, and things who have added value to your life.

A gratitude exercise can be done at any time throughout the day, during a morning or evening routine, or even while exercising! Make a strategy to be grateful for all that has happened and all that will come your way, and put it into practice in your daily life.

Allow the Universe to Return The Favor

Now, you’re probably wondering what this has to do with money, financial freedom, or real estate. When your mindset is in a good place, you’re clear on your objectives, and have implemented gratitude exercises, energy (typically in the form of money) flows to assist you in achieving your goals.

So, no matter how silly you feel, start employing mindset work to build the life you desire. Create a personal regimen that leaves you feeling like your lofty ambitions are now real and feasible. You’ll be more likely to conduct research, spot possibilities, seize opportunities, and build relationships if your objectives are in view.

Perhaps you’ve decided to invest a million dollars in real estate one day, and you come across a strategy that encourages you to put $50,000 at a time into various stable commercial assets. WINK WINK

Then you come up with a brilliant idea to save (or earn $50,000 more) each year, specifically and strategically toward your big goal.

Practice gratefulness, go through the 30-minute goal-setting session, state your objectives verbally with the universe, and make a vision board; if you don’t, you’ll never know what might have occurred if you did.