Welcome to the Covenant Capital Blog! The purpose of this blog is to provide value and education to its readers on the topics of commercial multifamily real estate and how this asset class can support a wealthy, abundant, and financially-free life.
What is “financial freedom?”
The responses to this question will vary depending on who you ask because financial freedom looks different for everyone. Here are some examples:
- The Financial Guru may define financial freedom as the point when your passive income not only covers your basic expenses but surpasses it to a point where you can live your ideal lifestyle.
- The Retiree may consider themselves financially free when their nest egg is large enough to support them throughout their retirement years.
- The Entrepreneur seeks to become financially independent on their own terms, by aligning their career with their lifestyle and structuring their business around how much money they want or need to make each year.
For many (including myself), Financial Freedom means something more than monetary freedom. It means Intellectual Freedom, Freedom of Adventure, and most importantly Freedom of TIME. Maybe some of these resonate with you:
Intellectual Freedom – to be able to freely use one’s own thoughts, words, creativity, and life experiences to create the life they want for themselves and their family.
Freedom of Adventure – life is short and the world is wide! Imagine a life where your passive income pays for your exploration, or you create a job that allows you to work remotely from any place in the world! To be able to see the world on your terms while working (or not working!) is to have Freedom of Adventure.
Freedom of Time – This is the entrepreneurial freedom to do what you enjoy with your time, with no one else dictating how you spend it. I love this article which dives deeper on this type of freedom.
How can Multifamily Real Estate Investing support a financially free life?
Robert Kiyosaki, the author of Rich Dad Poor Dad, says “the key to financial freedom is a persons ability to convert earned income to passive income.”
The advantages of investing in multifamily real estate are many, but before I go into the main reasons, let me start with some background on real estate investing.
Historically, real estate investments have proven to be a strong defense against inflation. Real estate is a familiar and tangible asset, offering advantages over the learning curve of stock investments. You can physically inspect and visit your real estate investments. Furthermore, you have the flexibility to reinvest your returns by paying down the mortgage or acquiring more properties. It’s all about cash flow and the financial opportunities it presents.
What is Cash Flow? Great question! The savvy investors ensure that properties must minimally break-even, but preferably cash-flow. Cash flow is essentially whatever is left over after you take all your rental revenue and payoff all your expenses. Cash flow allows an investor to save up to invest in another property, supplement their full-time income, replace their full-time income, or can be used as additional spending money for an investor.
Revenue – Expenses = Cash Flow
You can think of cash flow investing the same way you think about dividends with stocks. At some interval, whether it is monthly, quarterly, semi-annually or annually, you will receive regular cash distributions from your investment.
But there is a key difference in stock dividends vs real estate cash flow!
Let’s look at stock dividends. Most dividend yields hover around 4% or even less on an annual basis. While that number is certainly better than the current savings account rate of 2%, it’s nothing to write home about. Sure, the stock price could increase over time, but until you sell it that money isn’t realized.
What kind of returns can one expect from investing in a Real Estate Syndication?
The average multifamily syndication generates returns of between 7-10% in rental income from rental properties, a return well above the stock market. This is called a “cash-on-cash” return. Since multifamily return is realized almost immediately, I would make the case that this is a superior investment compared to the stock market. As a bonus, many properties may continue to appreciate in addition to the regular returns.
Let’s wrap a pretty little bow on it. Multifamily Real Estate Investing can support a financially free life by:
- CASH FLOW
- Asset Appreciation
- Principal Pay-Down
- Superior returns compared to the stock market
- Almost immediate access to your return via investor distributions
Although cash flow investing is a great strategy for the right investor, there is always the possibility that the investment will not cash flow (for example, there could be unforeseen vacancy that reduces your rental income below total expenses, among other possibilities). Performing proper due diligence is key and fully understanding the possible outcomes will help you as an investor to determine if a particular investment is right for you.
Our Vision at Covenant Capital
At Covenant Capital, we want to help our investors to live a financially free life on their own terms. We build personal relationships with all of our investors and celebrate them in all of their wins, both financially and personally. We are here to serve.
In the pursuit of financial freedom, we discover that it encompasses more than just monetary liberty. It includes the realms of intellectual freedom, the thrill of adventure, and, most precious of all, the freedom of time. We all aspire to craft lives where our thoughts, creativity, and experiences shape our destinies, where passive income fuels our adventures, and where we dictate how we spend our time.
At Covenant Capital, we’re dedicated to providing the education and resources you need to embark on this transformative journey. Join us in building wealth and experiencing life to its fullest through multifamily real estate. Your path to financial freedom starts here. Take the first step today and set up a call with one of our advisors!
