Mission-Based Strategic Investing – With Rick Melero

Financial freedom isn’t reserved for the wealthy. It can be achieved by anyone through saving money and making smart investments. Co-Founder and Principal of HIS Capital Group, Rick Melero is passionate about empowering aspiring investors through education to achieve economic independence.

“In my research, I found out that the wealthiest people in the world have one thing in common and real estate was a part of all of their net worth in some form or fashion,” said Rick. That realization began his pursuit of trying to get into real estate about 20 years ago.?

“I interned for six months. And the rest is history,” said Rick. “I actually worked for free for six full months, learned the business, started wholesaling properties, started really learning what it was like to analyze and negotiate deals that had enough room not only for me, but also for the investors.”

After the 2008 crash, his group became private lenders. “This space is an amazing place for people to build long term wealth,” he said.?

Over the past two decades, Rick has seen the real estate market go through many cycles.?

“In real estate, just like in any business, the reality is it's all about a cycle. There are always going to be cycles, no matter how we like it,” he said. “There's always a specific strategy that you can implement to capitalize whether the market is great, or whether the market is down. And so understanding the cycle was one of the key lessons I learned.”

“Then the next level was really learning how to diversify your investment approach, and not being a one-dimensional investor is what I call it,” he said. “So we developed a strategy called the 40-40-20 plan.”?

About 40% of their capital allocation is in what he calls short term gains. “These are opportunities that within 12 to 18 months, or a relatively short period of time, give us the ability to generate some pretty decent profits,” said Rick?

“The other 40% – that's really where the profits end up going – is to invest in passive cash flow assets, whether that's rental properties, private lending is one of our favorite strategies, or a host of other ways. And then once I have those two key buckets working, then the next component is what we call 20% higher risk, high reward. And that's when you can now afford to take on additional risks for projects that might be substantially more profitable. But if, God forbid, they don't work out, you don't lose everything. So, that's been the two key components that I found to be very effective in every stage of the cycle.”

“One of the things that we've done through lending is we've opened two buckets that are really interesting that we're working on at the moment,” said Rick. “The first one, I think everybody knows. We've been doing some Airbnb in strategic places by Orlando, that has really been an incredible business model, because we've partnered with the operator, so they do all the heavy lifting, and we generate some pretty substantial cash flow.”

“Now, there's another strategy that people don't know about,” he said. “It’s not something that's as popular and that is residential assisted living facilities.” In one example, his group helped finance a rental property like this in Tampa and realized it was a really viable business that can generate passive income.

And now he’s experimenting in an overseas project in Tulum.?

“Those are going to be properties that we sell to consumers / vacationers. And we're looking to keep at least a third of that inventory, and turn it into short term rentals there,” he said. “So, obviously, we're going into a completely different country, we had to understand the rules and regulations, we had to build an entirely new legal team. And so obviously, that poses an additional risk. But the potential gains are outrageous.”

In 2022, with inflation being on the rise, Rick commented that “we haven't had these kinds of numbers in a very, very long time. But what it does mean is that inflation is inevitable. And so if you are going to be investing money, you need to consider the investments that you're putting in, that are going to be able to hedge against that particular inflation growth.”

He said inflation presents an opportunity, especially for those with mortgages and for those who have rental properties.?

“This is the time to lock in a low rate if you do have a mortgage, because inflation is only going to go up over the next 10 years,” said Rick. “And if that happens, if you have an asset like real estate that's going to grow with inflation, your rent is going to grow with inflation over the next seven to 10 years. Your return is going to exceed what you're dealing with inflation and that's what these hedge funds are betting on.”

“I think it's healthy that we slow down the appreciation growth, because right now, there's not enough inventory,” he said. “So people are going to overpay, so we want a healthy balance of slowing it down. And I believe that interest rates going up will make it a little bit more difficult.”

Of course, nothing is ever certain and we can’t predict world events that will have an impact on the economy and on the real estate market.

“There's always going to be a level of risk,” said Rick. “But when you look at the sound principles that history shows us, real estate has always been an incredible vehicle, because you're dealing with an asset class that allows you to generate cash flow, you have multiple strategies, you can actually have depreciation, you also get appreciation. And because of all of these incredible benefits, you really don't lose money unless you sell in a down market.”

You can watch or listen to Dan Lesniak’s full conversation with Rick Melero on Episode 356 of the HyperFast Agents podcast.

Available Here:?Apple Podcasts ?|?Spotify ?|?YouTube