Blog Archieves - Cherif Medawar

Recession-Resistant Real Estate Investing Is a Lie

March 17, 2023March 15, 2023 by devteam

Real estate investors have long been searching for a secret to recession-resistant investing. The idea is simple: invest in properties more likely to withstand economic downturns and provide stable returns, regardless of market conditions. Unfortunately, the truth is that recession-resistant real estate investing is a lie. The Reality of Economic Recessions Economic recessions can impact all real estate markets, regardless of location or property type. Even the most affluent areas and high-end properties can suffer during an economic downturn. For example, the demand for luxury properties can decline significantly, leading to a drop in property values. Similarly, commercial properties, such as office spaces or retail buildings, can be challenging as businesses reduce expenses and downsize. No market or property type is immune to the effects of a recession. False Sense of Security Created by Government Intervention During economic downturns, governments often introduce low interest rates and stimulus packages to boost the economy. These measures can make it easier for investors to obtain financing, and this leads to a temporary increase in demand for real estate. However, this boost is often short-lived, and once the government intervention ends, the market can quickly return to its prerecession state. This can create a false sense of security for real estate investors. For example, during the 2008 recession, the U.S. government introduced the Troubled Asset Relief Program (TARP) to stabilize the financial sector. This program injected billions of dollars into the economy and temporarily boosted real estate demand. However, once the program ended, the market quickly returned to its prerecession state, and many investors suffered significant losses. The Fallacy of Historical Data The idea of recession-resistant real estate investing is often based on historical data, which may not be a reliable predictor of future success. Past performance does not guarantee future success, and market conditions can change quickly. Economic factors, such as interest rates, employment rates, and consumer confidence, can all impact the real estate market. As a result, no investment is entirely safe, and investors should always consider the potential risks before investing in any market or property. Furthermore, the current economic climate is unlike any other in history. The COVID-19 pandemic has caused unprecedented disruptions to the global economy, and the long-term impact of this crisis is still uncertain. Therefore, traditional market indicators and historical data may not be relevant in the current environment, and investors must be cautious about relying too heavily on these factors. The Importance of Risk Management While no investment is entirely recession-resistant, there are strategies investors can use to mitigate risk and increase their chances of success. Diversification: Investing in a range of properties and markets can spread risk and minimize the impact of any single parcel or market downturn. Additionally, investors should consider emerging markets or alternative investment options, such as real estate crowdfunding or investment trusts (REITs), to reduce their exposure to any single market or property type. Due Diligence: Another essential aspect of risk management is conducting thorough due diligence before investing. Investors should research the local market, analyze the property’s financials, and consider potential risks or challenges before purchasing. They should also work with experienced real estate professionals, such as brokers or property managers, who can provide valuable insight and advice. Steps to Invest in Commercial Real Estate Like a PRO Cherif Medawar copyrighted his FACTS investment system to take away the mystery and unpredictability of commercial real estate. The FACTS: Find the deal Analyze and calculate Control the deal Time for due diligence and financing Strategize While no investment strategy can guarantee success, Cherif’s FACTS system is a valuable resource for investing in real estate. By focusing on the fundamentals and staying disciplined, investors can make informed decisions and increase their chances of success in any market. Conclusion In conclusion, the idea of recession-resistant real estate investing is a lie. Economic downturns can impact all real estate markets; no property type is entirely safe. Instead of searching for a magic solution, investors should focus on strategies to help them navigate the ups and downs of the real estate market. By diversifying their portfolio, considering emerging markets, and looking for alternative investment options, investors can reduce risk and increase their chances of success. Real estate investing can still be profitable and viable, but investors must be cautious and realistic about the potential risks involved. There will be many opportunities in 2023 for people to break into commercial real estate. But there will also be challenges. Know how to FIND, ANALYZE, CONTROL, TIME, and STRUCTURE the deals. See BLUE OCEAN OPPORTUNITIES IN COMMERCIAL REAL ESTATE. Get your free copy.

Top Markets for Commercial Real Estate Investment in 2023

July 12, 2023March 3, 2023 by devteam

High interest rates and a recession will make 2023 a challenging year for some asset classes in commercial real estate. Though inflation eased in late 2022, it was still running at more than 7%. The Fed will continue raising rates until it sees a marked reduction in inflation nearer to its 2% target. Weakening fundamentals and higher cost of capital will generally lower asset values. The silver lining is that some asset classes in the commercial real estate market are poised for a significant rebound in 2023. The U.S. economy continues to grow and will continue to drive demand for commercial real estate in the coming years. Multifamily, Industrial and Flex, Modular Home Communities and some sectors of Retail are rebounding today. [March 2023] Commercial real estate investment is a major source of wealth for many investors. There are numerous markets around the world that offer opportunities for investors to make good returns on their money. Commercial real estate is a prime investment market, with capital flowing in and out of the industry on a regular basis. The U.S. commercial real estate market has seen $1 trillion in capital invested over the last decade, with another $1 trillion expected to be invested over the next 10 years. As investors continue to take notice of the benefits associated with commercial real estate investments, they are looking for areas that offer the best returns on their investments. The commercial real estate market is a large and diverse industry. From office buildings to warehouses, hotels to shopping malls, residential apartments to mixed-use developments, the commercial real estate sector has something for everyone. Factors That Can Impact the Performance of an Investment Commercial real estate investment is an important part of many people’s portfolios. However, a number of factors can affect the performance of your investments, including: Market conditions: The economy is currently in a recession, so commercial properties will be easier to find than in previous years. However, when buying property at a discount price, you might pay more than you would have if you waited until the market rebounded. Interest rates: Interest rates are an important factor when it comes to buying or selling a property because they determine how much money an investor will earn on their investment. Higher interest rates mean higher returns and vice versa. Supply and demand: The balance of supply and demand in the commercial real estate market can greatly impact the performance of investments. Oversupply can lead to lower rents and decreased property values, while high demand can lead to increased rents and higher property values. Government regulations: Changes in government regulations, such as zoning laws, tax policies, and environmental regulations, can have a significant impact on the performance of commercial real estate investments. Market trends: The commercial real estate market is constantly evolving, and it’s important to stay informed about market trends and changes. Trends such as the shift towards remote work, changes in consumer spending habits, and advancements in technology can all impact the performance of commercial real estate investments. The Top 10 Hottest Cities for Commercial Real Estate Investment in 2023 The commercial real estate market is constantly evolving, and choosing the right location for investment can make all the difference. With the right combination of economic growth, job market strength, and real estate demand, certain cities are poised to be top markets for commercial real estate investment in 2023. New York City, NY: New York City has always been a prime location for commercial real estate investment. Its robust job market and strong demand for office, retail, and hotel properties make it a top market for 2023. Despite its high prices, investors are attracted to the city’s steady flow of income from commercial properties. San Francisco, CA: San Francisco’s thriving tech industry is driving demand for office space, making it a prime location for commercial real estate investment. The city’s limited supply of available real estate, combined with its high cost of living, has driven prices up, making it an attractive market for commercial property investors. Washington D.C.: The nation’s capital is experiencing steady job growth and has a strong demand for office space, making it an attractive commercial real estate investment market. With a steady flow of government and lobbying spending, investors can expect a steady return on their investment. Boston, MA: The Boston metro area has become one of the hottest real estate markets in the country. The region is home to many Fortune 500 companies and a number of startups, which together have pushed commercial property values higher. The city also has one of the country’s most robust education systems, which means there are plenty of skilled workers to fill open jobs. As a result, Boston is expected to see commercial property values rise by more than 5% in 2023. Los Angeles, CA: The Los Angeles metropolitan area is one of the largest in the United States, with over 13 million people. The city is also home to some of the nation’s top attractions, including Hollywood and Beverly Hills. The area’s business climate is dominated by entertainment, media and international trade. Los Angeles has been an up-and-coming city for real estate investors in recent years, and it’s expected to remain a hot market in 2023. 6.Dallas-Fort Worth, TX: The Dallas-Fort Worth metroplex, the nation’s fourth largest, has experienced a population boom in recent years. The number of residents has increased by more than 7 percent since 2010 and is projected to grow by another 10 percent over the next decade. The city is home to some of the country’s biggest employers, including Exxon Mobil Corp., AT&T Inc., American Airlines Group Inc. and Southwest Airlines Co., all of which employ thousands of people in the region. 7.Seattle, WA: Seattle is the fastest growing city in the U.S., according to data from the U.S. Census Bureau. The city … Read more

Raise Capital for Real Estate Under Regulation D

February 14, 2023 by devteam

Raising capital for real estate investments can be challenging if you do not have the right knowledge and structure, but one option investors may consider is utilizing Regulation D, approved by the Securities and Exchange Commission (SEC). This regulation provides an exemption from registration requirements for certain private offerings, allowing companies and individuals to raise capital without the need for a public offering. Regulation D is a very important tool in the fundraising world, especially for real estate investors with a proven track record and existing strategy. This regulation allows you to raise capital for real estate investments through crowdfunding and pooling investors’ capital into projects. What Is Regulation D (Reg D)? Regulation D, or Reg D, is a set of rules issued by the Securities and Exchange Commission (SEC) that provide exemptions from the registration requirements of securities offerings. These rules are designed to make it easier for companies and individuals to raise capital without going through the costly and time-consuming process of registering with the SEC. Regulation D provides three different exemptions, each with its own rules and requirements. The most commonly used exemptions are: Rule 506(b): This exemption allows for the sale of securities to an unlimited number of accredited investors and up to 35 non-accredited investors. Companies must not make any general solicitation or advertising and must provide certain disclosures to investors. Rule 506(c): This exemption allows for general solicitation and advertising only to accredited investors. This is useful for companies who want to raise capital through online platforms, social media, or other forms of general solicitation. Rule 504: This exemption allows companies to raise $5 million in 12 months. General solicitation is allowed, and companies must provide certain disclosures to investors. Related: Raising Capital For Real Estate In 6 Steps Requirements of SEC Regulation D Section 13(a) of the Securities Exchange Act of 1934 (“Exchange Act”) directs the SEC to adopt rules and regulations relating to the offer and sale of securities. In addition, Section 12(b) requires registration of securities sold under Regulation D. The following are requirements for compliance with Regulation D: – Registration: The issuer must register the securities with the SEC and provide certain information to the SEC in connection with its registration. – Forms: Form SD is a simplified document containing basic information about an offering, including information required by Rule 501(c)(1) of Regulation D and information about persons selling securities in the offering. – Sales Information: All sales must be conducted through a broker-dealer registered under Section 15(b) of the Exchange Act (or other person registered with state securities regulators). – Periodic Reports: Every issuer must submit periodic reports to the SEC on Form 8-K within 10 days after it learns of material events affecting its business or financial condition during any period covered by those reports, except for annual reports (Form 10-K), which must be filed within 120 days after the end of its fiscal year. Limitations of SEC Regulation D SEC Regulation D provides an exemption from the registration requirements of the Securities Act of 1933 for certain private offerings. Still, it also has several limitations that issuers must be aware of to comply with the regulation. One limitation is that Regulation D offerings are restricted to accredited investors, with the exception of Rule 505, which allows for up to 35 non-accredited investors. Accredited investors are individuals or entities that meet certain financial thresholds, such as having a net worth of over $1 million or an annual income of over $200,000. Another limitation is that Regulation D offerings are subject to certain resale restrictions, which means that the securities cannot be resold for a certain period without registration. This can make it difficult for investors to exit their investments and can limit the liquidity of the securities. Additionally, issuers must comply with state securities laws, which may impose additional requirements and limitations on private offerings. Lastly, an issuer conducting a Regulation D offering cannot solicit or advertise the offering to the general public. This means that an issuer cannot use traditional forms of advertising, such as television or newspaper ads, to offer its securities. Benefits of Regulation D Regulation D of the Securities and Exchange Commission allows companies to raise $5 million from accredited investors through Regulation D offerings. A limited number of investors. Only accredited investors are allowed to participate. These people have a net worth of at least $1 million or an annual income of over $200,000 for the last two years before investing in the investment opportunity. No broker-dealer fees. Investors do not pay any fees when they participate in a Regulation D offering, so they don’t have to pay commissions. No minimum investment amount is required. There’s no minimum investment amount required in a Regulation D offering because it is an unsecured loan, meaning there is no collateral involved with the transaction, like with secured loans such as mortgages or car loans. So if you want your money back after investing in real estate under Regulation D, you can sell your property without penalty but only within 180 days after closing on your loan or sale closing date, whichever comes first. Bottom Line We hope that this article will help real estate investors and brokers to raise capital through Regulation D and scale their current portfolio and real estate business. While the benefit of financing deals via Regulation D is limited to certain types of compliance rules, Cherif Medawar, Real Estate Fund Manager and Authority on raising capital for real estate through syndication and funds, thinks it’s important to highlight the fact that there are still many opportunities for investors and brokers to raise capital via this route. There will be many opportunities in 2023, for investors to break into commercial real estate and scale their current business– you just need to understand that the money is in the structure. And Regd is a powerful structure for anyone with an existing record on investing. Cherif can walk you through the set up, structuring, … Read more

Passive Income through Triple Net Lease (NNN) Investment: Understanding the Basics

February 7, 2023 by devteam

The retail commercial real estate market is booming in some sectors, and the opportunities available for investors continue to grow. However, it needs to be more than just owning a single retail property. Investors need to have the right tenant and the right lease to truly have wealth. Retail property is a commercially zoned property used for business purposes, the actual selling of the product, rather than its manufacture, retail stores, malls, shopping centers and shops all falling under the “retail” umbrella. The best way to increase your chances of success is by investing in triple-net (NNN) retail properties. But first, it’s important to understand why NNN is such an attractive investment opportunity and how it could help you achieve your long-term goals. What Is a Triple Net Lease (NNN)? A triple net lease (NNN) is a commercial lease in which the tenant is responsible for paying all of the property’s expenses and rent. These expenses include property taxes, insurance, and common area maintenance (CAM). The tenant is also responsible for maintaining and repairing the property during the lease term. Triple net leases are commonly used for retail properties where the tenant is a national or regional chain store. This is the best tenant. In addition, the tenant is typically a creditworthy entity, which provides a level of security and stability for the landlord. The terms of triple net leases vary, but they typically have long-term lease terms with established rent increases. This provides landlords with a predictable cash flow and minimal responsibilities for the property. Benefits of Triple Net Leases(NNN) There are several benefits to using triple net leases (NNN leases) for commercial real estate: Predictable Cash Flow: NNN leases typically have long-term lease terms and established rent increases, which provide landlords with a predictable cash flow. Minimal Landlord Responsibilities: With NNN leases, the tenant is responsible for all property expenses, including taxes, insurance, and common area maintenance, which allows landlords to minimize their responsibilities. Creditworthy Tenants: NNN properties are often leased to creditworthy tenants, such as national and regional retail chains, providing security and stability for landlords. Flexibility: NNN leases can be structured in a variety of ways, allowing landlords to customize the lease to suit their specific needs. Tax Benefits: NNN leases can provide landlords with tax benefits, as the tenant is responsible for paying all of the property’s expenses, which can be written off as business expenses. Low Maintenance Costs: As the tenant is responsible for maintaining and repairing the property, landlords do not have to bear the cost of maintenance and repairs, reducing the overall maintenance costs. Reduced Risk: As the tenant is responsible for all the expenses related to the property, landlords are insulated from the risks of fluctuations in property taxes, insurance, and common area maintenance costs. Diversification: NNN retail properties can provide diversification for investors’ portfolios, as they tend to perform differently than other types of real estate investments. Potential for Appreciation: NNN retail properties have the potential for value over time, as the tenant is typically responsible for any necessary improvements and maintenance, which helps keep the property in good condition. Triple Net Lease Example Here is an example of a triple net lease for a retail property: Tenant: ABC Retail Chain Property: Shopping center Lease term: 10 years Rent: $50,000 per year, with 3% annual increases Under this triple net lease, the tenant (ABC Retail Chain) is responsible for paying the following expenses in addition to the base rent: Property taxes: $12,000 per year Insurance: $6,000 per year Common area maintenance (CAM): $8,000 per year In this example, the tenant would be responsible for paying a total of $66,000 per year, which includes the base rent of $50,000, property taxes of $12,000, insurance of $6,000, and common area maintenance of $8,000. This type of lease provides the landlord with a predictable cash flow as the rent increases are established. In addition, the landlord’s responsibilities are minimal, as the tenant is responsible for all property expenses. This type of lease is commonly used for retail properties, and the tenant is typically a creditworthy entity, providing a level of security and stability for the landlord. Triple Net Leases vs. Single Net Leases and Double Net Leases Triple net leases (NNN leases), single net leases, and double net leases are all types of commercial leases, but they differ in the responsibilities of the landlord and tenant regarding property expenses. As the name suggests, a triple net lease requires the tenant to pay for all three of the property’s expenses: property taxes, insurance, and common area maintenance (CAM). This type of lease is commonly used for retail properties, and the tenant is typically a creditworthy entity, which provides a level of security and stability for the landlord. A single net lease requires the tenant to pay property taxes, but the landlord is responsible for the insurance and CAM expenses. This type of lease is often used for industrial properties. A double net lease requires the tenant to pay property taxes and insurance, but the landlord is responsible for the CAM expenses. This type of lease is often used for office properties. How to Start Investing in Triple Net NNN Properties Research – Do your research on the NNN investment market and familiarize yourself with the types of properties available and their associated costs. Develop a Plan – Determine your investment goals and create a plan to achieve them. This includes figuring out your budget, investment timeline, and desired rate of return. Work with a Professional – Consider working with a financial advisor or commercial real estate agent to help you find and purchase the right NNN property for your investment portfolio. Due Diligence – Before making an investment, be sure to do your due diligence. This includes thoroughly examining the property and its financials, as well as researching the tenant’s creditworthiness. Diversify – Diversifying your portfolio is key to reducing risk. Consider investing in multiple NNN properties to spread out your investment risk. … Read more

Value Add Real Estate Investing: Ultimate Guide

February 2, 2023 by devteam

Value-add real estate investing involves buying undervalued properties and improving them to increase their value. Cherif Medawar calls that “taking a property to its highest and best use.” This can include renovating or updating the property, increasing its income potential, repositioning it, enhancing its location, or adding amenities. By making these improvements, investors can increase the property’s value and sell it for a higher price, or charge higher rent, than they paid. What are Some Examples of Value-Add Improvements? Examples of value-add improvements can include renovating a property to make it more attractive to tenants, adding additional rental units, changing or repositioning the use of the property from office space to residential or retail space, improving the surrounding area or increasing accessibility, or adding amenities such as a gym, café, or co-working space. Why Do Investors Use Value Add? Value-added real estate investing has become popular with investors because it allows them to have control and make money on their investments without waiting for years or even decades before seeing a profit. For example, if you purchase a property that needs work, you can sell it much sooner than if it were in pristine condition when purchased. Related: Commercial Real Estate Investing: How to Get Started How Does Value-Add Real Estate Investing Work? Value add investing is a strategy that focuses on buying properties below market value, improving them, and selling them for more money or tenant improvements to increase the rents. If you’re investing in value-added real estate, it’s important to understand how it works. Identify a property that has value-add potential. The key to successful value-add investing is finding a property with a potential improvement. The type of property you buy will determine how much potential there is for increasing its value. Conduct due diligence on the property to assess its condition and potential for improvement. This includes conducting a property inspection, reviewing financial statements and market data, and researching zoning and other regulations that may affect the property. Develop a plan for improving the property. List all possible improvements that can increase the value of the property. Use a spreadsheet or other tool to track them as you go along. This will help you prioritize what needs to be done first and track your progress as you reach your goal. Obtain financing for the property, if necessary. This may include obtaining a mortgage or other funding to cover the cost of improvements. Like structuring a syndication or real estate fund. Implement the plan for improving the property. Once you have decided on the property and secured financing, start your renovations by choosing the right contractor. Consider hiring someone with experience renovating homes in the area and ask for references from other homeowners who have used their services. Once you have chosen your contractor, discuss your renovation plans with them and ensure they are realistic and within budget, so there are no surprises along the way. Sell the property or hold onto it and collect higher rents. Once the property has been improved, the investor can choose to sell it for a higher price or hold onto it and collect higher rents from the improved property. What Are Some Benefits of Value Add Investing? Some benefits of value-add investing include the following: The potential for higher returns. Investors can earn higher investment returns by improving a property and increasing its value. The ability to create value. Value-add investing allows investors to take a property that may be underperforming or need upgrades and turn it into a more valuable and attractive asset. The potential for income growth. Investors can increase their rental income or value by making improvements to a property, leading to higher returns over time. Flexibility in terms of property type and location. Value-add investing can be applied to many property types and locations, from residential to commercial and urban to suburban. The potential for tax advantages. In some cases, the costs of improving a property can be tax-deductible, providing additional benefits to investors. Final Thought One of the most overlooked things with real estate is the value added. It allows you to buy cheap and sell for more. It’s one of the most excellent methods for creating wealth through real estate. This guide will teach you all about value add investing, the benefits of doing so, and how you can do it yourself. If you would like to get in more detail on how to take each type of commercial real estate (13 types) to their highest and best use, check out Cherif Medawar CRE Round Table online training. He has an entire section devoted in each module for 20+ ideas per property type. You can also get information on syndications, partnerships and JVs with the Secrets to Syndication course. Check it out! cherifmedawar.com.

7 Ways Commercial Real Estate Investors Can Prepare for 2023

January 24, 2023January 24, 2023 by devteam

Commercial Real estate investing can be a lucrative and long-term strategy for growing and preserving wealth. The real estate market is cyclical. It goes up and down, but it always comes back up. While the current year has been challenging for many investors, savvy buyers still have plenty of opportunities to make money in real estate. Here are five tips for investing in commercial real estate in 2023: Diversify Your Portfolio: Diversifying your portfolio means spreading your investments across different types of properties and locations to reduce risk. This can include investing in different types of commercial real estate, such as office buildings, retail centers, and apartments, or investing in properties in different regions or markets. By diversifying, you can minimize your exposure to any one particular market or asset class, which can help protect your investments from market fluctuations and unexpected events. Additionally, by diversifying, you can also spread out your income streams and improve the overall performance of your portfolio. Stay Up to Date with Market Trends: Staying up to date with market trends is important for commercial real estate investors because it allows them to make informed decisions about their investments. This includes keeping an eye on economic indicators, such as interest rates and inflation, as well as industry-specific trends, such as changes in tenant demand or new construction projects. Keeping abreast of these trends allows investors to identify opportunities and potential risks in the market, and make adjustments to their portfolio as needed. This could include investing in areas that are expected to experience growth, or divesting from areas that are at risk of decline. Additionally, it also allows investors to prepare for any potential changes in the market and adjust their strategies accordingly. Look for Opportunities in Emerging Markets: Emerging markets, such as second-tier cities and suburbs, may offer opportunities for investors willing to take on a bit more risk. These markets can be less competitive and offer higher potential returns. Related: COMMERCIAL REAL ESTATE INVESTING: HOW TO GET STARTED Consider Alternative Investment Options: It’s important to have an investment strategy that includes more than just traditional commercial real estate assets. Investing in alternative assets such as syndications or real estate funds can provide a more diversified portfolio while still providing attractive returns over time on your personal projects. Partner With Other Investors: When you partner with other investors, it makes sense financially as well as lowering risk. You can pool your resources together to purchase larger properties or bring more capital into your deals. This also helps spread out risk so that each investor is only putting up a portion of their own money while still benefiting from all of their combined efforts. Consider forming a syndicate or real estate fund. (Regulation D) Invest in Your Education: Continuously learning and improving your skills as a real estate investor can help you stay ahead of the game. Attend training with experts whom you have verified are actually investing in the current market and read books and articles on the latest trends and strategies in real estate investing. Be Prepared for Challenges: The commercial real estate market can be volatile, and 2023 may bring challenges, such as economic uncertainty, changing consumer preferences, or increased competition. Be prepared to adapt and adjust your investment strategies as needed. And only work with investors, experts, teachers, mentors who have skin in the game and fully understand the current market. Final Thought In the end, your strategy is going to depend on your goals and ability to manage the money. In general, it’s important to have a target market in mind before you start investing. But don’t be afraid to branch out if need be; this is still a business based on real estate, after all. So there are plenty of opportunities for you to explore—you need to know where to look. There will be many opportunities in 2023 for people to break into commercial real estate. But there will also be challenges. Know how to FIND, ANANYLE, CONTROL, TIME & STRUCTURE the deals. Get the training you need. The money is in the structure.

Real Estate Syndication From a Passive Investor’s Point Of View

January 16, 2023 by devteam

A real estate syndication is a partnership between a group of investors pooling their resources into a single investment. A real estate syndication, the structure, is set up by an investor or “syndicator or sponsor” who is raising capital for a specific project. In turn, passive investors may invest in the syndication for debt or equity shares. The real estate syndication process involves an investor using a legal entity known as a limited liability company (LLC) or corporation to hold ownership of the investment property. The structure allows a syndicator to legally raise capital from individuals. Real estate syndication is typically used by institutional investors, such as hedge funds and pension funds, who want to acquire real estate assets without becoming directly involved in managing those assets. Real Estate Syndication Framework A real estate syndication is a form of investment in which a group of individuals or entities come together to pool their money and resources to acquire, manage, and sell a property or property. The syndication framework is the set of rules, guidelines, and processes that govern how the group will operate and make decisions. A typical real estate syndication framework will include the following components: The syndicate’s structure: This will typically be a limited liability company (LLC) or a limited partnership (LP), with each syndicate member holding a specific ownership stake. The roles and responsibilities of each member: This will typically include a lead sponsor responsible for sourcing and managing the property and other members who may have specific roles, such as managing the finances or overseeing the construction and renovation. The terms of the syndicate agreement: This will typically include details such as the length of the syndicate, the distribution of profits and losses, and the decision-making and dispute-resolution processes. The syndicate’s investment strategy: This will typically include details such as the type of property the syndicate is looking to acquire, the target market and geographic area, and the expected return on investment. The syndicate’s exit strategy: This will typically include details such as the timeline for selling the property and the process for distributing the proceeds to the members of the syndicate. REIT vs. Syndication: The Ultimate Guide The Benefits Of Real Estate Syndications Real estate syndications offer several benefits to passive investors. Some of the key advantages of real estate syndications include the following: Diversification: By pooling their money with other investors, syndicate members can spread their risk across a larger and more diverse portfolio of properties. This can reduce the impact of any individual property’s performance on the overall investment. Expertise: Syndicates typically have a lead sponsor or manager with extensive knowledge and experience in the real estate market. This can help to ensure that the syndicate’s investments are well-informed and successful. Access to larger properties: By pooling their money, syndicate members can access larger and more expensive properties that might not be possible for an individual investor to acquire on their own. Professional management: Syndicates typically hire professional property managers to handle the day-to-day operations and maintenance of the property. This can help to ensure that the property is well-maintained and generates consistent income for the syndicate. Potential for higher returns: Because syndicates can invest in larger properties and take advantage of economies of scale, they may generate higher returns on investment than individual investors. Eligibility Criteria For Investing In Real Estate Syndications The eligibility criteria for investing in real estate syndications can vary depending on the specific syndicate and the laws and SEC regulations in the area where the property is located and how the syndication is filed/registered. However, there are some common criteria that are typically used to determine who can invest in a syndicate. Accredited investor status: In the United States, most syndicates require that investors be accredited, meaning they meet certain financial thresholds, such as having a net worth of at least $1 million or having an annual income of at least $200,000. This is intended to ensure that investors have the financial means and sophistication to understand the risks and potential rewards of the syndicate’s investments. Minimum investment amount: Many syndicates have a minimum investment amount, typically in the range of $25,000 to $100,000. This is intended to ensure that investors are committed to the syndicate and have sufficient funds to participate. Experience and knowledge: Some syndicates may require that investors have experience and knowledge in real estate investing or related fields, such as finance or construction. This is intended to ensure investors have the expertise and skills to understand the syndicate’s investment strategy and make informed decisions. This is mapped out in the syndication’s Private Placement Memorandum or Offering Package that an investor is given to review prior to investing in the syndication. . Suitability: In some cases, syndicates may conduct a suitability analysis to determine whether an investor is a good fit for the syndicate. This might involve assessing the investor’s financial situation, risk tolerance, and investment objectives to ensure that the syndicate’s investments are aligned with the investor’s goals. Final Thought We were able to help you learn a little bit more about how real estate syndications are structured and how you may invest in a syndication. We also provide services and support for the investor side, or sponsor side, to set up and legally raise capital from passive investors. By understanding all of the legal concepts and paperwork, as well as knowing what tools and resources are available to help you on your journey, you will be better prepared to make smart investment decisions. Educate yourself and come out on top in 2023. There will be many projects hitting the market and you may want to INVEST in one or manage one. We can assist you in understanding the direction that best suits your portfolio. Join us on our mastermind calls that are better than any Podcast because you get to ask questions live and get expert answers with formulas based on practical applications that work in today’s market

ROI of Real Estate in 2022 and beyond

December 29, 2022October 20, 2022 by devteam

The return on investment (ROI) of real estate is one of the most important considerations when buying a property. If I am buying it to rehab it and sell it, then here is how I do the calculations: Purchase price Rehab cost Duration and holding cost Value at the end as if that was in today’s market and how that would be compared to current, comparable sales Any trends in the market I should be aware of regarding price expected changes? If I will come out ahead, say within 12 to 18 months, and my ROI is at least 20% annualized, then I would want to proceed Then I discuss with various lender loan amounts and construction draw terms If I am buying it to rehab it and keep it, then here is how I do the calculations: Purchase price Rehab cost Duration and holding cost Value at the end as if that was in today’s market and how that would be compared to current, comparable rents and cap rates Any trends in the market I should be aware of regarding rent and cap rates expected changes If I will come out ahead, say within 2 to 4 months, and my ROI is at least 10% annualized, then I would want to proceed Then, I discuss with various lenders the loan terms and figure out my cash-on-cash return which should then be around 12% per annum There are some factors that affect the ROI in real estate: Location: The location of your property will affect its value and its potential for profit. Properties located in highly desirable locations tend to have higher values than properties located in less popular areas. Properties near airports, shopping centers, or schools are also likely to be more profitable than those in rural areas. Size: The size of your property will also affect its value and potential for profit. Larger properties tend to have higher values than smaller ones because they have more rooms to rent out or sell individually for higher prices per square foot. Property type: Houses typically have lower returns than commercial properties because they require more maintenance and they have a smaller return on investment (ROI) than commercial buildings. Condition: If your property needs repairs or renovations before it can be rented out, your return on investment may be affected. Rent control laws: Rent control laws can affect both how much rent you can charge and how quickly properties are rented out. General market trends: So many investors are concerned about the macroeconomy and forget to zero in and focus on a specific area and a specific type of property to understand the values. If you follow my formulas and above and you can come out ahead; you will understand values and will invest no matter the market because when interest rates are low, property prices are high, and when interest rates are high, property prices are lower so it is a numbers game and if you know the numbers and how to work with lenders and contractors, you will become super rich. Join us on our mastermind calls that are better than any Podcast because you get to ask questions live and get expert answers with formulas based on practical applications that work in today’s market Sincerely, Cherif Medawar www.CherifMedawar.com

How Inflation is going to affect commercial real estate in a positive way

December 28, 2022August 24, 2022 by devteam

Inflation is often a cause for concern, but it can be a positive force for commercial real estate. Inflation can increase the value of properties and improve cash flow. What is Inflation? Inflation refers to an increase in the general level of prices for goods and services in an economy over a period of time, which causes each unit of currency to lose purchasing power over that time period. Inflation is generally low for commercial real estate investors because it means that their properties are gaining value over time. The higher the inflation rate, the more valuable your investment will be. For example, if you purchase an office building for $100 million and then sell it five years later for $110 million, you will have made 10% on your investment annually — even though there were no major changes to the building itself! There are many ways that inflation will affect commercial real estate in a positive way, but one of the biggest ways that it will affect us is by allowing us to make more money off of our investments. Inflation allows us to make more money on our investments because it increases their value over time, which means we will be able to sell them at a higher price than what we paid for them originally! Commercial real estate investing: how to get started How inflation affects commercial real estate It’s important to understand how inflation affects commercial real estate. There are two main ways that inflation can have an impact: Inflation drives up interest rates on loans. Interest rates on commercial real estate loans are usually tied to the Federal Reserve’s policy on short-term interest rates. When inflation rises, so do short-term interest rates, which means that lenders will charge higher interest rates on loans to cover the additional risk they’re taking by lending money at higher rates of return. Inflation makes real estate worth less in dollars. As prices rise over time, the same amount of money buys fewer goods and services — including commercial real estate. This means that owners’ net income falls even though their gross revenue may increase because they’re paying more in operating expenses such as property taxes and utilities. Inflation increases rents: Rents increase as a result of inflation because landlords pass on their increased operating costs to tenants. So, if the cost of operating your business goes up by 10%, then you will need to increase your rent by at least 10% to maintain the same profit margin. In some cases, landlords may even be able to increase their rents beyond these levels due to market conditions and lease clauses. Inflation increases the value of cap rates: Cap rate is a measure of return on investment (ROI). It tells you how many years it takes for an investor’s money to double when invested in a property or other assets such as stocks and bonds. For example, if an investor purchases an office building for $1 million with an annual net operating income (NOI) of $100,000 per year and sells it after five years for $2 million, his ROI would be 50%. That means that he earned $1 million from his original investment of $1 million in just five years instead of waiting 20 years before doubling his money at a 10% annual interest rate compounded annually; Bottom Line As the inflation rate increases, Commercial property and great deals of real estate will be on the rise as well. The demand will reach its peak as more people invest in apartments and commercial land. Real estate investors are looking for properties that are more affordable. Do you want to Crack the Code on RE Funds? Reach out to our office and learn about the power of Regd 506 b/c and Cherif Medawar’s structures. 844-720-1031 info@cmrei.com Cherifmedawar.com

REIT vs. Syndication: The Ultimate Guide

December 28, 2022August 2, 2022 by devteam

Differences between REIT and Real Estate Syndications

REITs and syndications are both types of real estate investments. REITs and syndications have a lot in common. What Is a REIT? REIT stands for “real estate investment trust.” REITs are companies that pool investor funds to purchase real estate assets like office buildings, apartments, and hotels. These properties are owned by the REIT and rented out to tenants. Investors receive a payout based on the property’s performance and an ownership stake in the company. The Securities and Exchange Commission (SEC) governs REITs and requires them to pay out 90% or more of their taxable income as dividends to shareholders. There are many different types of REITs based on their size, strategy, or focus. The most common type is an equity REIT, which usually focuses on owning commercial real estate properties such as apartment buildings or office buildings. Another type is a mortgage REIT, which focuses on financing residential mortgages instead of owning homes directly. What Is a Syndication? Syndication is an agreement between multiple investors and one or more property owners. In this agreement, each investor puts a certain amount of money into the deal in exchange for a share of ownership in the project, a specific project with a specific capital raise and end date. The Syndicator then raises and pools funding for the project and oversees its development and construction. Once the project is completed and sold, profits from the sale go back to investors based on their percentage of ownership and set terms of the syndication. The Syndicator may also be defined or called: Sponsor, Executive Manager; and may hold the roles of Property Manager (unless they hire on an outside Property Manager), Project Manager and overall CEO of the project. These roles and responsibilities will be defined in the Offering. How does real estate syndication work? Investors pool together money and use it to purchase properties that meet certain criteria determined by the syndicator or manager of the deal. In some cases, the manager then finds tenants for these properties who will pay rent on time every month, allowing investors to collect their share of the profits from renting out these units. An investor can make an interest return and get paid on the exit, as defined in the syndication. The Sponsor usually will hire a Property Manager who will then take care of everything else that comes up with managing a property – including repairs, maintenance and even leasing out vacant units if there are any left after all the tenants sign their leases. Main differences between REIT and Real Estate Syndications: Direct Ownership REITs offer direct ownership of the property through shares, while syndications involve indirect ownership through an investor group. With syndication, investors pool their cash together and purchase a share of property from a developer or seller. Shareholders don’t own any part of the property directly; they only own shares in the trust (or corporation). Value Volatility REITs are designed to provide stable returns with little or no volatility. This makes them ideal investments for retirement accounts or other long-term goals. Syndications, however, can be more volatile than traditional stocks due to their diverse nature and relatively short track record as an asset class. Tax Benefits REITs typically pay dividends at a higher rate than most stocks because they’re required by law to distribute 90% of their taxable income each year. This makes them an attractive choice for investors looking for yield without compromising liquidity. Syndications may also be eligible for tax benefits if structured as limited partnerships or corporations, but these benefits vary by state and type of partnership Diversification Real estate syndications are limited in the number of properties they can buy. Since they don’t have their own funds, they must rely on investors to fund each individual property purchase. This limits their ability to diversify by location or type of property. However, REITs have much broader diversification because they have their own capital and can purchase many different types of properties all over the country – as long as it’s in compliance with their charter. Liquidity Liquidity is important in real estate investing because it gives you the ability to cash out your investment quickly if needed. REITs are liquid because they’re publicly traded securities, but individual real estate syndication may not be. A REIT can be sold at any time, while syndication will take longer to sell because it involves several different parties. Investors who want the ability to sell their investments quickly should consider buying REITs rather than syndications. REITs vs. Syndications: Which is the Better Investment? Some investors prefer real estate syndications because they can choose specific properties and locations, while others prefer REITs because they offer more diversification and liquidity. Real estate syndications tend to have higher fees than REITs but give investors more control over the properties that they invest in. In addition, many people who participate in real estate syndications are able to profit from doing so without having to pay capital gains taxes on their earnings as long as they hold onto their shares for more than 12 months after purchasing them. Final Thought When it comes to the two types of passive income investments, many investors are hesitant to put their money in either one. Both Syndication and Real Estate Investment Trust (REIT) have their own pros and cons. It is up to individual investors to decide which investment is likely to give them the best return on investment. We will leave you with one more concept…. Could there be a structure that incorporates the benefits of a REIT and a syndication, and creates an even more powerful structure for Sponsors, those raising capital for real estate deals, and investors looking for a return??? YES. Yes, and that structure is a real estate fund. We will Crack the Code on that structure in our next post. Do you want to Crack the Code on RE Funds? Reach out to our office and learn about the power of Regd 506 … Read more

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