To prepare, consider options such as syndication.
Real estate agents, change is coming to our industry. The jury in Sitzer/Barnett v. NAR ruled in favor of the home sellers for $1.8 billion, finding, among other things, that NAR was jacking up fees, obstructing negotiations, inducing listings, and stifling competition. denounced. The judge has not yet issued a final judgment, and the amount could triple to more than $5 billion. More lawsuits are scheduled for next year, and new lawsuits are sure to follow.
The reality is this. Whether you agree with the lawsuit or not, change is inevitable. It will take years for the impact to be felt, but consumers outside the industry are wary. USA Today, The New York Times, Wall Street Journal, Apple News, and other nationally syndicated news outlets informed the public about this lawsuit.
To navigate this big change, be prepared to answer questions about how you make money, why you make money with what you do, and articulate your value on the buyer side of the equation. must be kept.
Your state may already have a buyer-broker compensation agreement in place. Still, if you're feeling overwhelmed and confused, you're not alone. Even experienced real estate agents aren't sure what this means for their future in the industry.
Americans currently pay nearly $100 billion in real estate commissions each year. Ryan Tomasello, a real estate industry analyst, predicts two things next as a result of the lawsuit. (1) His 30% of commissions could go away (about $333 million in commissions), and (2) every agent could see about half of their commissions drained from the industry.
People have spent hours opining on YouTube trying to decipher the tea leaves. To be honest, no one knows how this will turn out.
What can you do to prepare? Here are some key actions you can take.
Future-ready financial management
From all this you have to draw one conclusion. That means you need an unrelated source of income. One that is not subject to the whims of a jury, the NAR, or the Feds. You can get plenty of work done without having to deal with contractors, 2 a.m. calls from tenants, or leaky faucets.
Invest in real estate without the responsibility of active management. Invest, sit back, and cash your check. (OK, there are other meanings, but broadly speaking, this is pretty accurate.)
It's called “syndication.”
Without thinking too much about it, syndication is a way for experienced operators to bring in limited partners (LPs) as investors to purchase commercial real estate. Passive investors can enjoy the benefits of ownership, cash flow, equity, and even taxes without taking on active responsibility.
The typical process is:
- Our experienced management team reviews properties and identifies opportunities.
- Commercial real estate is held under contract and valued based on legal documents, physical condition, and financial condition. Qualified opportunities are presented to potential investors (like you).
- Investors watch presentations about real estate and business plans and ask clarifying questions. Each investor can decide whether or not to participate.
- Investors wishing to invest use their preferred funding source. Common options include liquid cash, solo 401ks, and self-directed IRAs.
- Investors receive regular distributions (quarterly is standard), annual tax breaks to offset passive income, and receive regular updates on the facility's progress.
that's it.
6 benefits of passive investing
As you know, owning real estate comes with a lot of responsibilities. However, there are also benefits to owning real estate. The good news is that investing passively in commercial real estate can provide you with a lot of benefits without any headaches.
Here are six benefits.
- Tax-advantaged investment. Investing in commercial real estate allows you to take a portion of your losses to offset your income from the transaction. In many cases, you can legally prove that you will receive little or no income from your investments.
- Appreciation of value. Homes are bought, renovated, and sold. The rehabber cashes out the big bucks and moves on. Commercial real estate may go through a similar process. As a passive investor, you too can reap the benefits. However, unlike housing, the process takes much longer (3-7 years).
- Expand your scale with less cash. Acquiring a rental portfolio requires a large amount of capital. When you invest in a commercial syndicate, you can own a piece of multi-million dollar real estate for just $50,000. Invest $50,000 in a rental property worth $250,000 or invest $50,000 in a commercial building worth $5 million. it's up to you.
- Make the committee roller coaster less painful. They eat what they kill. Or something like that. But first, we all know that there are factors that we can't overcome or control, like the Fed, interest rates, and lack of supply. When you invest in commercial real estate, you're establishing an additional wealth stream to support yourself during slow seasons or tap into additional vacation, summer camp, or college savings for your family. .
What would happen if you invested $100,000 in a warehouse that would earn you a 134% return over 10 years? On average, you would receive about $10,000 in passive income per year, $36,000 in sales revenue, and a return on your initial investment (without tax benefits). (if not considered). Don't dress too dirty. - Take control of your time. You want to find a better balance between your work life and your personal life, where you work hard and support yourself. Passive income is not an end in itself. It is a means to get what you want. Income freedom, time freedom, financial peace, and the mental peace of knowing that you don't have all your eggs in one basket.
- That's understandable. Warren Buffett is famous for saying, “Invest in things you understand.” You already understand real estate. There are many similarities between residential and commercial real estate. Stock market? That's another story.
Investing in real estate is not for everyone. All investments (real estate or otherwise) involve risk.
Where to start? Find a community of like-minded agents who share the same concerns and passion for taking control of your financial future as you do (e.g. www.AgentOptional.com). You're not alone in wanting a way to improve your work-life balance and earn more without sacrificing more time.
