Top 5 Ways To Make A Ton Of Money Investing In Real Estate
The Amplified Impact Podcast
March 15th, 2023
There are two things that changed the trajectory of my life financially… Entrepreneurship, starting a business, and investing in real estate.
And what’s really interesting about real estate investing is that I had several interactions throughout my life where opportunities presented themselves, but it never clicked for me that this was a viable path for me.
Real estate investing can seem daunting and overwhelming.
But after involving myself in it, I saw how simple it can be, and how available it is for everyone to participate in.
So I want to give you the top 5 ways to make a ton of money investing in real estate.
And if you’re interested in starting your own journey in real estate investing, check out my other podcast, Multifamily Investing Made Simple!
https://www.youtube.com/c/MultifamilyInvestingMadeSimple
TWEETABLE QUOTE:
“I want to open the door to help you explore and understand why real estate investing is the preferred investment vehicle for 90% of wealthy people.” – Anthony Vicino
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Invictus Capital: www.invictusmultifamily.com
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Episode Transcript:
5 Ways To Make A Ton Of Money Investing In Real Estate
[00:00:00] Anthony: What’s up everybody? Welcome back to the podcast. Today we’re gonna talk about real estate investing. Truthfully, the, the two things that changed the trajectory of my life financially was entrepreneurship, starting a business, and then two, investing in real estate and for a long time real. What’s really interesting, actually, before I even share that story, what’s really interesting about real estate for me is that.
I had many interactions with it throughout my life, but for whatever reason, it just never clicked or dawned on me that this was a viable path for me. It felt insurmountable. It felt daunting, it felt overwhelming, or it just felt lame and boring and stupid. Something for other people to do, but not for me.
And so the first experience that I had with real estate was in college. My roommate and his dad were buying single family homes, and so I would live with him and we would do the construction together and, and really that was my first experience with real estate investing. But through that experience, I, I just learned, I hate construction.[00:01:00]
And I think this is a lot of people’s first experience with, uh, real estate investing because they see it on like HGTV with those shows where they’re, they’re going in and they’re fixing up a house. They make it better and then they sell it, right? And so a lot of people, that’s what they think of when they think of real estate investing.
And for me, that’s what it was for a long time, cuz we did a number of those and I was like, I don’t like this. I don’t like real estate. That’s what I thought. I didn’t like real estate. And then it wasn’t until a number of years later that, uh, a friend came to me and he was buying these quad. And he invited me to invest with him.
And this was pretty passive. Just give him some money to go buy him and do the thing. I said, cool, let’s, let’s do that. And this was before I even really knew anything about real estate or why it was a, a good opportunity or anything like that. I hadn’t done research. I hadn’t really educated myself. I was just, Um, I was like, yeah, real estate.
I’ve heard of that. People do that, right? But it wasn’t until after I started getting some, some success with my businesses started generating, you know, money that I was asking the people in my life, what should I do with this? Like, how do I set myself up for the future? And the answer to that, [00:02:00] these, these people would give me, almost always revolved around buy assets, physical assets, if you can, aka real.
And so that’s what I started doing. That’s how I got into my first triplex and why I started getting into it. And then from there we started scaling. And you know, the story now is we, we have a lot of real estate, which is really crazy to think about. Um, but I wanna share with you guys if you’re not, if you’re new to real estate investing or the concept of it, and you’re still where I was at the beginning of my journey, where I think it’s overwhelming, it’s daunting, can’t do it, and not even sure what all the benefits necessarily are.
Um, I wanna start talking a little bit more about real estate here with you guys. I do have. Podcast entirely that me and my partner Dan do, called Multi-Family Investing Made Simple. Highly recommend you check that out. We have 350 plus episodes. We’ve been doing it for a number of years now. We also wrote a book, passive Investing Made Simple, and so for those that don’t know, that is like.
Where I make the majority of my, my, my money, that’s where my time goes these days, is to building Invictus Capital in the real estate side of things, um, you might see me [00:03:00] put out a lot of content, a lot of YouTube videos, a lot of, you know, podcast episodes, but this is now where I make my money, like my money is made through real estate and through, um, owning a real estate investing private equity company.
So what I wanna share here is five ways that you get. when when you invest in real estate, and I think this is really important to understand this concept, when you understand the different ways that you can make money in real estate investing, you start to understand why it’s such a powerful vehicle.
And that’s all I wanna do today, is I want to open the door to help you explore and understand why real estate investing is the preferred investment vehicle for 90% of wealthy people. Why it’s where they put their money. So the five ways that you can make. in real estate, you have your cash flow, you have appreciation, you have your taxes, you have your debt pay down, and you have fees.
So let’s break these down. Number one, cash flow. Cash flow is the profit leftover after all your [00:04:00] expenses are paid for the month. So your operational expenses, you know, your utilities, your debt service, all that stuff, whatever’s left over beyond that is your, your cash. And good real estate generates monthly cash flow.
This is one of the things that’s really great about it. Um, it’s not gonna be life changing sums of money, let’s say we. A hundred thousand dollars into a building, it wouldn’t be unreasonable to generate about a 10% cash on cash return per year. So what that means is, per year on that a hundred thousand dollars, you’d probably be making about $10,000 of cash flow.
And that’s pretty good by comparison to what you could get in the stock market anywhere else. Now, if you were just to look at, at that one lens of like 10% cash on cash, that cash. Yeah, sure. You could probably get better, um, returns in the stock market in the short term, but that’s only one of the ways that you make your money.
And so that’s just one, that’s one part of the picture that makes up your whole return when it comes to investing in real estate. So let’s just put a pin in that. Boom over here. Cash flow. That’s one. Side number two is, um, the appreciation. , [00:05:00] and this is where real money is, is made. When it comes to real estate appreciation, there’s two forms of it.
There’s organic appreciation and there’s market appreciation. Organic appre, I’m sorry, organic appreciation is market appreciation. And then there’s also value add or forced appreciation. Okay? So organic appreciation is what happens when the market just gets better on its own. Doesn’t, doesn’t revolve around anything that you do.
It’s just you bought a building in a nice neighborhood, it gets more popular. People wanna live there, and your, your building gets more valuable as a. Contrast that with forced depreciation, which means we go into our building, we improve it, we make it better just like they do on hgtv. But then instead of selling it, you know, you still just keep the building.
Well, I guess if you do sell the building, that’s one way of extracting the equity, uh, or the appreciation that’s formed in there as you’ve made the building more valuable. Or you can do what we do at Invictus is we just refinance it. That means we take out a new loan for the new higher valuation, pay off the old loan, keep the difference.
And so that’s a way of extracting value and a non-taxable [00:06:00] event, and we still get the only asset. So that’s a little bit in the weeds. We’ll talk about that particular, um, vehicle in a future episode. But that’s the second way. All right, so first we have cash flow, and second, we have appreciation. . Over the last couple of years, there’s been a ton of organic market appreciation.
That means buildings are just getting more valuable cuz they’re harder to build than they are just to to own, right? So as a result, your returns on real estate tend to be looking really good these days. If you’re buying in good areas and they’re appreciating like a solid five to 10% every single year, right now, you add that on top of your cash, on cash return.
Now it’s not, it’s not unlikely to see. Easily 15 to 20% returns, and that starts to get into the realm where not even stocks can hit that consistently on a risk adjusted basis. Right? So those are first two things, cash flow appreciation. Number three is debt pay down. So as we own this building, we have a mortgage on it.
We have residents in the building that are. Paying down our loan, like they’re paying their rent. And a portion of that [00:07:00] goes towards the debt payment, right? And a lot of that debt payment is interest, but a portion of it’s principle. So over time, the longer that you own this, let’s say you have a 30 year amortized amortizing loan, that means in 30 years your loan is gonna be completely paid off.
So if you bought a building for $2 million, if you just hold it for 30 years and do nothing else, your residents will pay the whole thing down and you will now own an asset with $2 million of of equity inside. Assuming it doesn’t even appreciate, which if it does, maybe now it’s worth three or 4 million, right?
So now you’re starting to see, like these returns start getting crazy cuz one, we’re getting the cash flow, the residual overflow of profits. Two, we’re getting the appreciation and three, we’re getting the debt pay down, right? So these three things combined start to to push our returns well north of 20%, 30% in some cases.
This is like really hard territory to match in any other investment vehicle. And the craziest thing about it is that, It’s doing it in a really low risk environment because one, when it comes to multi-family investments, there’s a lot of [00:08:00] stability. Just based off the fact that if we own a building with a hundred people living in it, one resident moving out doesn’t affect the bottom line, all that drastically.
And then two, housing is a basic human need. Like people need a place to live. And so, Even when things are expensive in life, like we still end up paying for a home. And if you can’t afford to buy a home, you have to rent. And so there’s just all these, these factors that lend itself towards, um, multi-family always being a pretty stable risk adjusted return.
So those are the first three. We got cash flow, got appreciation, got debt, pay down the. . The fourth way that we make money in real estate is through the tax benefits. And this, this is really just for the American investors out there. I don’t know foreign investment tax laws or anything like that. This is just for, if you’re investing in the United States, um, the tax treatments here are incredibly favorable.
There’s only one or two other investment vehicles that are taxed more favorably than real estate. There’s a lot of ways that this plays out, but when you hear stories of like, former President Donald Trump not paying any taxes on like a billion dollars or whatever, he does that well, I don’t [00:09:00] know if he does that all legally, but like a, a large part of that is done through what’s called depreciation, which is just a way of saying, The IRS recognizes that our buildings are wearing out over time, they’re becoming less valuable because they’re getting older, which is funny because these buildings are, that’s a, that’s theoretical.
Theoretically, they’re getting less valuable because they’re getting older. In reality, they’re getting more valuable because, you know, people still need a place to live. The building is still there. It’s harder to build. It is more expensive to build it than it is just for it to operate and. What that means is the, the IRS allows us to take, um, certain losses on our building and depreciate that, or offset some, uh, offset our profits.
All that’s to say is that when it comes to building wealth, it’s not about what you make, it’s about what you keep. . And the biggest expense that any of us are gonna pay in our lifetime are taxes. So anything that you can do to reduce your tax liability means more money into your pocket, which means more money out there working for you.
And the longer that you can do that, the better off you’re gonna be. Now, this is not tax evasion, this is Oh, [00:10:00] tax avoidance, right? Like this is tax mitigation. We’re doing this all. so that we can keep more of what we earned, and that’s what the IRS wants you to do. Like irs, the tax code is like 10,000 lines of very esoteric ways to reduce your tax bill.
Very, very few lines in there are actually dedicated towards what you need to pay, right? Everything else is all about loopholes or strategies that you can employ to reduce your taxable li. And last but not least, one of the ways that you can make money in real estate are fees. So if you’re like us at Invictus Capital, what we do is we create what’s called a syndicate.
So a syndicate is a way of grouping a pool of investors together to collaborate our resources. And those resources are time, experience, and capital. , right? And so at Invictus we have the time, we have the experience. We know how to find the assets, we know how to acquire them, how to operate them profitably.
And so we partner with limited partners who provide capital. And so the three groups together, we [00:11:00] come together, we buy assets that maybe one individual could not afford to own, operate on their own, and we collectively do this, this deal. Um, at Invictus we also put our own personal money into the deal, so it’s not like we’re just taking other people’s money and deploying it, like we’re also putting our own money to work.
But in this world, there are typically fees associated for what we do on the front end because with real estate, it’s a get rich, slowly but surely. Game typically takes many years to see the fruits of your labor really manifest in a meaningful monetizable uh, way. And so fees are charged typically at the front end and throughout the deal as a way of keeping the lights on.
Cuz we incur a lot of overhead costs of, you know, our staff, of our building, our softwares, our tax. Um, advisors, our legal advisors, all that stuff requires money. And so typically if we go and acquire, say, a 50 unit building that’s worth maybe $5 million. , we’re gonna charge a one to 3% acquisition fee, which is, you know, a good chunk of change.
But really that’s, [00:12:00] that’s the, the keep the lights on money for the next five to seven years of the deal. So it can look like a lot of money in some ways, but then in reality, um, you know, if you’re, if you’re to take that dollar amount and divide it across to how long we’re gonna be holding the deal, it doesn’t really work out to be life changing sums.
For us as GPS or operators on these deals, we tend to make all of our money or the big substantial money when there’s an exit event or like a cash out refinance or we sell the building. So, but those are five ways that you can make money in real estate. You got cash flow, you got your appreciation debt, pay down your tax benefits and fees.
So I just wanted to share this with you guys because if you’re new to real estate, like I was like, you know, when I first started on this journey about a decade ago, like you have no clue. Like you just hear real estate and it’s like kinda this big mystery box thing and it can feel very scary. And so hopefully this is sharing just a little bit of insight about like what makes it such an attractive vehicle for.
You know, so many investors. Now, in future episodes, we’re gonna talk about specifically how you can get started in real estate, whether you’re a [00:13:00] beginner, um, that’s, you know, making a little bit of money. Or if you’re young and you’re like, oh, I wanna set myself up for success over the next 20, 30 years. Or if you’re further along in life, you’re doing well, you’re making good money, but you, you want to do better.
You want to invest better, but you don’t necessarily want to go and own the real estate yourself and do the work and like deal with tenants and stuff like that. So, we’ll talk about that in future episodes. I just wanted to share this with you guys because I think there’s a lot of misinformation out there, or mis um, miscalibrated expectations around what you can do in real estate and how it works.
So I’m gonna try and do my best to start to demystify some of that in this podcast. So if you found this valuable, if you have questions, let me know. Find me on, uh, Twitter, at Anthony Casino or on Instagram, the Anthony Vino. Shoot me a dm. Let me know what your questions are and we’ll try and hit ’em on future episodes.
But until then, stay hyperfocus is my friend.
This Week On YouTube
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2. Learn to passively invest in commercial real estate with better returns, less risk, and zeo hassle.
→ Invictus Capital: my real estate private equity firm.
→ Multifamily Investing Made Simple: Top Apple Podcast.
→ Passive Investing Made Simple: Amazon Best Selling Book with 100 5 star reviews.
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