Updated: Jul 3, 2020
It's easy to invest in NJ multifamily real estate properties passively, and it's the best way to get a legal tax shelter, equity depreciation, and predictable quarterly returns. Peoples Capital Group structures commercial property real estate deals with an exit strategy between 3-5 years. People can choose a lump sum payout or move into another property.
The Passive Cash Flow Podcast is for beginner or experienced investors. Subscribe today to learn how you can diversify out of the stock market, own a part of an apartment building & start earning Passive Cash Flow!
Peoples Capital Group has been helping passive investors build wealth in NJ real estate for 10 years. Visit www.PeoplesCapitalGroup.com to find out if you qualify to start earning passive income and pay less taxes via investing in real estate. IRA's and 401K's are accepted. -- https://www.facebook.com/peoplescapitalgroupnj/
Aaron Fragnito: Hi, listeners. It's Aaron Fragnito, co-owner of People's Capital Group. Host of the Passive Cash Flow podcast. Welcome to our first podcast episode. We're going to talk today about how to make money while you sleep. That is everyone's goal, is to make your money work harder than you work. If your money isn't hustling, if your money isn't working harder than you work, then you're not doing it right. We're going to talk about how to make money while you sleep today.
We're going to go over the time value of money. We're going to talk about Warren Buffett a little bit. The value of passive cash flow, how to avoid downtime on your capital if your money is sitting in a CD or it's hardly keeping up with inflation. That's downtime on your money. We're going to talk about how to avoid that, and we're going to go over an actual investor story of how he earned a great return and continues to earn great returns. This on one building, one of our many investors.
Let's jump right into it. Let's talk about the time value of money. We buy apartment buildings here in New Jersey, we work with private and local investors. They put their money in the building, the money earns cash flow, the buildings are in cash flow buildings, offer tax depreciation, and they get a good return on their money. Their money is always at work. The investment stays, the capital stays in the investment for a number of years. The capital continues to work for them through the investment. They can keep their investment in the property indefinitely as we refinance it every few years and collect a big lump sum of cash. Enjoy the cash flow benefits quarter after quarter and the tax write offs, but their money is always working.
Our investors even if they want to exit a property, sell their shares in the LLC and get back their initial investment, that's fine. They can do that at every refinance mark. However, we want to find a place to put their money right away so we can keep their money working. Here at People's Capital we buy apartment buildings, we work with local investors, we have our own management company. We make sure people's money is always working. Our investors are consistently earning returns. When they exit out of a building we always have another building for them to go into.
Our other investors that have been investing with us for years have been able to continue keeping their money. Earning profits for them, earning tax write-offs, and we're going to talk in other episodes how your money can earn tax write-offs as well. Warren Buffett said, don't wait to buy real estate, buy real estate and wait. All right, if your money is sitting in the sidelines and you're looking for the best deal in the world or the best partners, you're trying to find that deal that's going to triple your investment overnight, well, it's really hard to find.
Sometimes you can just team up with a good company that knows what they're doing, put your money to work, start making double digit returns. If you're always waiting around for that perfect deal, that perfect investment, that's super safe, that no risk, triple your return overnight investment opportunity, and you're not finding it, that's because it's probably too good to be true, and anyone that says they can double your money way too fast is probably pulling your chain. You want to focus on investing in the right assets, the right company, but do it quickly. Do it effectively. Don't wait around too long.
I meet people at these networking events month after month, year after year, that haven't pulled the trigger and invested in real estate and their money is not working for them. It continues to sit in a CD account. If your money's earning less than 3%, it's not keeping up with inflation, go to peoplescapitalgroup.com. Get in touch with us. Figure out how you can start making 11, 12, 13% return on investment on your money through local real estate here in New Jersey. Even if you're not in New Jersey you can still invest in the building with us.
There's so much value in passive cash flow. We work so hard to wake up in the morning, go to work. I work 60 hours a week on my business here, I'm a small business owner. I know many other small business owners, some of them invest with us, and I feel the struggle. It is a hard job to work this hard, to run your business, and that money we make whether you're working a nine to five or running your own business. I saw my dad get on the train and go to New York City for 40 years. That's not easy either. He worked up the corporate ladder and worked very hard to get there.
Whatever you're doing you're working hard for your money. Money just doesn't appear, unless of course it's inherited, but that money was worked for as well. You want to get that money working for you. You want to get that money making returns. Inflation is around 2 to 3%, so if you aren't making 3% cash-on-cash return on your money, cash-on-cash return, by the way, it means if you invest $10 and make $1 in net profit, you made a 10% cash-on-cash return then. Made 10% of your cash investment back in net cash profit. Your cash-on-cash return is a very important calculation to focus on when you're looking for a good investment.
You want to be making like a 10 to 12% cash-on-cash investment, or ideally you want to do even better than that, but really it's hard to beat that if you want a safe, consistent return on investment. You tend to find out that about 10 to 12% cash-on-cash investments is a very competitive, very good return investment. It's hard to match that with index funds or other investment opportunities in other asset classes, but in real estate we can make good returns. We can buy discounted buildings, we can force value into them, we can increase the cash flow, and through time we can make really, really solid returns to our investors.
Their capital isn't sitting around doing nothing. It's quickly moved into a building and it starts returning cash flow and tax write-offs quarter after quarter, year after year. By understanding the value of passive cash flow, putting that money to work quickly, making sure it doesn't have downtime, getting good returns on that money, you're going to start to build that nest egg much faster. You're going to start to be able to recognize good opportunities and bad opportunities. The more you invest the more you research properties and talk to companies like ours that offer passive real estate investment opportunities.
Now, if you had to run around and look at all the buildings, we look at 400 buildings to buy one, and you had to do all the due diligence, learn the industry, learn how to manage real estate, how to reposition properties, it would be very very difficult. It took me 10 years to learn what I'm doing. I still learn new things every single day. My partner, Seth Martinez and I are always learning and improving our systems, and that's what a good business owner does, but if you had to do what we do then it just wouldn't be a good return on your time. Because it takes so long to learn this industry and set up all the resources we've set up, find the right investment opportunity. It's really really much better to team up with a company that's already doing this successfully with a 10-year track record like Peoples Capital Group.
Same thing when you go to invest in stocks. Generally, you're going to hire a professional for that. Although these days a lot of people make their own picks. A better example is also going to a doctor, you're not going to go order a hairdresser. A lot of these things we don't do on our own, so when it comes to investing in real estate, it's the same thing. They might say, "Oh, well, I'll hire a realtor. A realtor will find me a good deal." Yes and no. Realtors aren't particularly well-versed at finding good investment opportunities.
Especially residential realtors, nothing wrong with it. I sold residential real estate for years. Many of our investors are residential real estate agents. It's a great way to make money. It's a great service to our community. However, those agents aren't really bringing you investment opportunities. There are some good agents out there with good investment opportunities, there are commercial brokers, but we find our properties through direct mail marketing and off market deals. Through wholesalers and brokers that bring them directly to us before they put them on the MLS.
Newsflash, if something's sitting on the internet, it's probably not a good deal. When people bring me something on Loopnet, which is the general commercial database of properties for sale over the nation, and it's been sitting on Loopnet for six months, it's a red flag right away. Because if it was such a good deal in Chicago then someone would have bought it. If it was such a good deal sitting on the internet, then someone would have bought it.
We never find deals on the internet, we're always direct to the seller, the direct mail marketing or just our network in general or the broker who has a pocket listing who calls us first. The other thing brokers do is they don't send out their listings to the internet in commercial real estate right away. They tend to call up their great A buyers like us and they bring them the deal before anyone else knows about it. It's called a pocket listing.
Commercial real estate it's very tough to find a good deal. It doesn't make sense to run around and try to look for a great discounted apartment building. It takes us 400 properties to review before we find the diamond in the rough that we're going to pull the trigger on and close with our private investors, and start returning passive cash flow to those investors. It's a ton of work, and we're really good at what we do, and that's what we focus on.
Okay, but when I need to get my hair cut I go to a hairdresser. When I have something wrong I go to a doctor. I hire professionals for the right thing because they're better at those things than I am, and when it comes to real estate investing people should do the same thing. I know real estates all around us. There's two families, you could buy a duplex, you could buy a single family home and start cash flowing that. I understand, it's not hard to call up a realtor, find a deal and buy a home down the street perhaps and start trying to make some money on it, but now you're managing that real estate.
The return investment for a smaller property isn't very good, so a two family or three family isn't going to get you the return on investment such as owning a smaller piece of a 25-unit. It's better to own 10% of a 25-unit than 100% of a two-unit. You want to own parts of big buildings. Big buildings cash flow better, they're safer. When two tenants move out of a 25-unit you still have no problems covering your mortgage every month and all your expenses and you still probably will cash flow on it, but if it's out of a two family, you're writing a check that month to cover your mortgage payment. That's a really frustrating thing, and if you don't have that money, guess what, your property is going to spiral out of control. If you can't pay to keep the water on then your tenants aren't going to pay their rent.
If you buy your own building and you're trying to manage your own building, or you've done that before and you've felt the headaches of it, then you recognize the value in a company like ours where we vet so many buildings to find a really really good investment opportunity here in North Jersey. We buy near train stations that get you into New York City in less than an hour. We buy in good areas that had a lot of growth in the last few years. We also work up that North Jersey market. It has a high demographics, a lot of people in one place, a lot of inventory, and it's really fueled by the New York City Market. We don't invest in New York City, but we work off the New York City market. We work in cities like Newark, Paterson, Jersey City, Morristown, Plainfield. These cities all commute into Manhattan and keep a very strong value, very high rental prices, very high property values, so that's all good for us.
However, we don't buy Manhattan. Manhattan is a whole different beast. It's really not a good place to cash-flow, but we can cash-flow well in our New Jersey real estate. By working with a company that does all this work to find, analyze, manage, reposition, figure out ways to make better rents in the property, get our expenses down, figure out ways to make more income on the real estate through a number of different avenues and do all this work and execute properly through a five, 10, 15-year strategy, then you really need to come up with a good company and that's what Peoples Capital Group does. We bring vetted investment opportunities to qualified investors.
They don't have to do anything, they don't have to manage the real estate, they don't have to look at 400 bad deals to find one, they don't even have to come up with the rest of the money to buy it. They can put in a $50,000 investment into a $5 million building and now they own a piece of a $5 million building. It's much safer to own a piece of a $5 million building than 100% of a small building. Small buildings don't cash-flow. They're notorious for having high-vacancy rates because if you lose a tenant, you're going to lose half your income or a third of your income, and they just don't cash-flow.
Seth and I have bought dozens of two families and three families, there's nothing wrong with that. It's a great way to get started, but we really had to-- As you own real estate for years, you figure out you're better off buying a 25, or 50-unit property, or a 100-unit property because you can really cash-flow on that. It's a safer investment, it's a bigger asset. Yes, you're spending more money on it, and the costs are higher, however, the income is higher, the value of real estate is much higher, and it's so much better to have 25 tenants paying you per month than two tenants paying you per month. Think of it as a business, a business should have 25 customers instead of two while the business with 25 is a much stronger business because your customers aren't guaranteed.
You want to avoid downtime on your capital. You want to always have your money working for you. You understand the time value of money? Money is losing money every day, every minute due to inflation. Your dollar is not worth $1 tomorrow. When you go to sleep and you wake up tomorrow morning, your dollar is worth less. I know it's weird, but that's how money works. As inflation grows, our money loses value. Now, it's not like it's so quick. I mean, overnight, it's a very, very, very small percentage, but if you continue to have your money rest and earn a two or 3% on CD, or a safe bond, or stock, then it's really not keeping up with inflation and you're not making money while you sleep.
To make money while you sleep, you need to be earning like 10% cash on cash return, you want to also be not working for that money so it's 100% passive income, and you want to be not worried about that money so you actually can sleep. By investing in a local apartment building here in New Jersey that's well-managed by PCG Property Management, our in-house management company. By putting your money to work quickly and effectively, starting to earn a nice double-digit cash on cash return. By investing in real estate, you can simply make your money work harder and start making money while you sleep.
If you're not doing that, then you really should go to PeoplesCapitalGroup.com, put in your information, we can get in touch with you, we can figure out what the best avenue is for you to get started with Peoples Capital Group, see if you qualify. We do work with accredited and sophisticated investors. Most people do qualify to invest with us if they have a minimum investment amount, and you'll figure all that out if you go to PeoplesCapitalGroup.com and sign up for more information. We can get in touch with you quickly and effectively and talk to you more about how we buy buildings, how we analyze them, how we leverage the capital with investors, how we structure the LLC, and how we return awesome cash-flow to our investors, tax write-offs at the end of the year, and then split a big lump sum of cash upon each refinance. I know I'm throwing a lot at you right now. It's a lot of information. We're going to come out with more podcasts. Keep listening, hit that subscribe button. I'm Aaron Fragnito, Peoples Capital Group. Our website is PeoplesCapitalGroup.com. Listen to more podcasts for more information every week. Thanks a lot. Have a good one.