Fast Five for January

with Groundbreaking Real Estate

January has come and gone! As we step into February, we are reflecting on the festivities of January, and looking forward to what the new months have to offer. Our "Fast Five" series continues to offer a detailed snapshot of the real estate industry, providing valuable insights to navigate the ongoing year and establish a sturdy foundation for the months to come.

Bonus time & raises are coming- Don’t let it rot!

It is that time of the year where (hopefully) all of your big efforts at work will be rewarded with a nice raise and a juicy bonus. Congratulations!

Now is the time to book that expensive vacation, buy the car that you have been dreaming about, or invest in a shiny Rolex. Right? No….wrong! Spend some time thinking about how to grow that and your wealth. Sure, you should reward yourself with something nice. However, think about treating yourself a little and leaving more to reward your future wealth. A good rule of thumb is to multiply your bonus and raise by 80-90% and set that aside for wealth growth. Use the rest as a reward to yourself with your special wants or needs

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Here is a blog that I wrote with more thoughts on how to use your additional cash.?

Check Out The Blog

Tax Man Taking Advantage of You?

My effective tax rate used to be 40%+ while my wife and I worked in our day jobs. Now that we are full-time running our own business, we are able to leverage tax benefits to reduce our taxes substantially. Investing in real estate plays a significant part in getting to a lower tax bracket. Since we have lower tax rates now, we decided to move a substantial amount of our investments from our 401Ks over to Roth IRAs.?

We will pay taxes at our ordinary tax rate on that rollover (~20%). However, at retirement age, we will be able to take tax free payouts from the Roth IRA including any gains that have accrued. The bottom line is that one of the biggest investment returns that you can make is to reduce your effective tax rate (or future rate) whenever possible. Start planning now for 2024 changes that you can take to reduce your future taxes. Sit down with a tax advisor and come up with a long-term strategy that will optimize your taxes to help preserve your future wealth. I’m a CPA…let me know if you would like to connect to discuss ideas.

Myth: Real Estate Values Always Go Up

If you own a personal home, and like me…frequently spy on it on Zillow, you will undoubtedly see changes up and down in its estimated market value. Some real estate investors like to tout that real estate generally always go up over time. While this is often true, similar to your home price, the gain or loss on a real estate transaction is driven by the timing of your investment, economic conditions, and fluctuations in the market.?

The good news is that when investing in commercial real estate, there are some aspects of the valuation that you can control such as by increasing the cash flows or improving the property. The added benefit is that you can continue to hold onto it, and sell at a later date when it likely appreciates in value, while often getting cash flow returns during that holding period. In contrast, if a stock goes down in price, it could stay down forever, and you may need to sell at a substantial loss. You are not able to steer the price of a stock, or personally improve its cash flows (unless you are Warren Buffett).?

Admittedly, we have had some real estate transactions that have not always performed as well as we expected. That is where diversification is key in any asset class and across your portfolio- some will have mind blowing returns and others will be duds. One thing is certain…a smartly balanced portfolio WILL always grow your wealth substantially over time. For optimal wealth growth, we suggest targeting 20-30% of your investments in real estate transactions. Are you balanced?

Year in Review 2023

2023 marks the first full year that I have left my job to focus on my businesses full-time. I love the flexibility that owning my own businesses provide, and being able to better see where my actions can result in real outcomes. A few key highlights for us in 2023:

• Groundbreaking Real Estate- With our partners, we invested in $70.4 million in new commercial real estate projects. +35 investors from GRE contributed nearly $4 million of investments to the projects. Expected returns are on average 17% annually, across these deals, once the projects are completed. See below for our new opportunity to join us!
• Shore Term Rentals- Our short-term rental property management company in NJ was able to increase owner fees by 63% on average, and retain 100% of the customers that we wanted to keep…granted they were paying well below market rates initially. We also migrated to a new property management system that will enhance our services further.
• Personal Highlights- I played about 50 rounds of golf last year and somewhat improved my miserable abilities, reached my 200th ride on the Peloton, celebrated my parents 50th wedding anniversary with close friends and family, and coached my sons basketball teams.

Onto 2024…I am excited about the adventures that a New Year brings. I am planning to start a real estate investment fund, double our properties managed at Shore Term Rentals, and to have a long overdue family vacation.?

Personal Corner- How ADHD Nearly Crushed My Dreams

When my son was diagnosed with Attention-Deficit/Hyperactivity Disorder (ADHD), I started learning more about his condition, and how to better help him overcome it. Through this process, I realized that I myself have had ADHD my entire life, but never diagnosed. It’s estimated that 20% of adults with ADHD are not aware that they have it. It always took me longer to learn things in school, I hated doing mundane tasks at work and home, got distracted easily, and was a chronic procrastinator. As I worked on my own businesses, there were days and weeks, where I accomplished next to nothing except aimlessly checking emails and taking meetings. My businesses were close to failure several times, because of my lack of focus and drive.?

However, recently I have found some ways to improve my focus tremendously…and I am always searching for more. A few of the key things that have helped me: 1) block off my most productive times in the day to focus, 2) finding the right supplements, 3) working out 3-5 times a week and getting a good night sleep, and 4) being intentional with my time: focusing on short-term activities rather than day dreaming about my long-term goals. Here are some of the symptoms if you think that you might also have ADHD.

Back to School! Investment Opportunity

We have a new apartment and townhome investment opportunity in Grosse Pointe, MI. It is a late 1800s historic school house that we are converting to 18 apartments and building 8 townhomes. We are partnering with GSH Group, who is a well established commercial real estate operator in the Detroit area. I was able to tour the property, and was excited to see the construction well underway! We are expecting 17%+ Average Annual Returns for investors over the next 5-7 years.?

Key Highlights:

• Optimal Location- Across the street from Beaumont Hospital, and an eight minute walk to a historic downtown area with high end stores/restaurants (Kroger, Trader Joes, Starbucks, lululemon, etc.).
• Tax credits- We are keeping the historic preservation of the school intact, while converting it to apartment units. In return, we will receive tax credits that will be passed to investors to reduce their taxable income.??
• Quick capital returns- Building 8 luxury townhomes that will be resold as condos. This should enable us to return up to 50% of investors original capital in the first two years.
• Low Competition- The property is in a residential neighborhood with many +$1M homes nearby. There are very few apartments in the area, so we expect to attract renters that have not been able to live in the area in the past.

Reply to this email if you would like to learn more!

That’s it for this edition of the “Fast Five” newsletter. We hope you learned from it and take the opportunity to check out the resources we shared to help in your investments. Stay connected with us at Groundbreaking Real Estate on our social channels and our new blog for more content like this. If you’re looking for your next investing opportunity, send us a note, and let’s talk!??

—The Groundbreaking Real Estate Team www.groundbreakingre.com