Commercial real estate investing conjures up images of amassing six-figure down payments, looking for investment partners, and dealing with business tenants. In reality, commercial real estate can actually provide passive income streams without requiring much capital to get started.
I recently sat down with RealtyMogul's Co-founder and CEO Jilliene Helman to talk about the crowdfunding platform that has revolutionized real estate investing. RealtyMogul is an investment platform for those who want access to commercial real estate investment opportunities. RealtyMogul offers some of the more traditional commercial real estate investments like office buildings, strip malls, and storage spaces, but they also just launched a second real estate investment trust, MogulREIT II, to invest in multi-family apartment communities across the United States.
You probably don't think of relatively small investments and passive income opportunities when talking about commercial real estate. But the new standards for commercial real estate investing are surprisingly simple and potentially profitable. Here's what Jilliene Helman shared about the industry-disrupting platform.
Getting Started in the Wealth Management Industry
Jilliene is no stranger to the investment world - it's how she grew her own personal wealth. She got her start in the banking industry. "After coming out of undergraduate business school at Georgetown, I went to work in banking and spent most of my time working in wealth management," says Jilliene. "I spent time really understanding how people built portfolios and invested their money across bonds, stocks, and real estate, and other private investments as well. I've been involved in underwriting over $5 billion in real estate, so I've looked at a lot of real estate."
Jilliene's personal wealth management strategy mimics that of successful millionaires - she has widely diversified her investments and income to continue scaling her wealth strategy. And those investments go beyond commercial real estate: Jilliene says she's made angel investments in early-stage startup companies as well as in private enterprises like oil and gas partnerships.
Lowering the Barrier to Entry
Although I'm not new to commercial real estate investing, I could have dramatically shortened the amount of time it took me to enter the industry, had crowdfunding been around back when I got started. I shared with Jilliene that I actually have several investments in commercial real estate. It took a lot of hard-earned savings, and a lot of time spent waiting, to gain a foothold in the industry. I had to work my way up to a sizeable down payment that was big enough to start investing with. Today, investors can get ahead much more quickly by investing like millionaires through crowdfunding.
Platforms like RealtyMogul let you crowdfund multi-million dollar commercial real estate investments with as little as $1,000 to $5,000. Depending on your cash flow, you can make an investment immediately and continue reinvesting the profits.
Jilliene has definitely seen how the commercial real estate investing landscape has dramatically changed in recent years. "We've got just shy of 300 million dollars invested in commercial real estate through our platform," she says. "And I think what you mentioned is critical, where it can take a really long time to save up for a down payment to go buy a million, or two or three or four million dollar building. The beauty of crowdfunding in real estate is that you can invest with as little as $1,000."
Making Your Money Work for You
One of the biggest takeaways from my talk with Jilliene was about how to generate passive income opportunities by investing like a millionaire and making your money work for you, instead of you working for your money. "I'll go into my bank account, and I'm getting distributions from RealtyMogul and other partnerships I've invested in, deposited directly into my bank account," Jilliene says. "I'm not doing any ongoing work on these passive and private investments." Like with any passive income, Jilliene agrees that there's a lot of work upfront to create those income streams, but once they're in place, your money is working for you.
Anyone who has ever been a landlord knows that dealing with tenants and all the hands-on work that comes with it is cumbersome. But commercial real estate can be a completely passive opportunity that doesn't require you to do anything. Jilliene agrees that you don't need to be active in all of your investments: "One of the benefits in crowdfunding is it's passive. Once you've made your investment decision, it's not sucking up a lot of time and energy and you can focus on how fast you can make money through your job."
I asked Jilliene for some examples of how investing like a millionaire in commercial real estate can turn into passive income opportunities. If you're familiar with commercial real estate investments, you already know that a REIT can provide a distribution every month. Jilliene shares that in RealtyMogul's case, they've now gone through 12 months at 8% distribution annualized. While some investors might take that distribution and spend it, others will take that 8% and keep reinvesting it to turn it into a compounding investment. In the second month of a payout, investors will be earning on that original 8% in addition to interest earned each subsequent month of distribution.
I also asked Jillene about the tax advantages of investing in real estate. Although she couldn't give any specific tax advice, she reminded me that investing like a millionaire requires a mentality for tax savings. For example, you could work with an accountant to uncover some of the write-offs and tax advantages that come with real estate. "Take advantage of tax laws like a millionaire," Jilliene advises.
Millionaire investors know what to look for when it comes to real estate, including how to keep their capital in their investments. Whether you're investing in a private placement or a 1031 exchange and rolling the capital forward, you can keep your money working for you through tax time.
Diversification and Consistency Are Critical
In order to invest and manage wealth like a millionaire, you need to diversify. Jilliene emphasizes that diversification is critical. "Millionaires are diversified across things other than real estate, oil, and stocks," she explains. "Personally, a certain part of my portfolio is taking a ton of risk investing in startups."
Jillene also advises that consistency is key. "It's important to craft a strategy for yourself and stick to it," she says. "Millionaire investors are very disciplined and aren't afraid to allow that to play out over a long period of time. Expect to be locked in for the long-term. Millionaire investors are making investments for the long-term in unique transactions."
Have you invested in commercial real estate? Did it turn into a passive income stream? Let me know about your experience by leaving a comment below: