Rabih El-Khoury

I help people invest in U.S. real estate and generate passive income. GP at CM Genoa Fund.

[Rabih El-Khoury @rabihmk]

@IMJustinBrooke GCP, thanks!

[Rabih El-Khoury @rabihmk]

@stephterroir this post is so you, Steph. J'adore!

[Rabih El-Khoury @rabihmk]

My late father had me pay ~$50,000 in taxes.

He worked all his life for us. I'm forever grateful for the things he left behind.

A setup that would shelter me from taxes wasn't one.

Inheritance costs are real, especially with property.

They can be avoided. Do your homework.

[Rabih El-Khoury @rabihmk]

If you make an investment you may win or you may lose money.

Any sum of money you have in the bank above your safety stach is, by default, losing.

Think about that for a minute.

[Rabih El-Khoury @rabihmk]

Good debt is good.

If you are in debt for a $1,000,000 worth of mortgages on cash generating real estate, i say bravo to you.

If you have $1,000 on a maxed out credit card that's overdue, i say you shouldn't sleep until you sort this out.

[Rabih El-Khoury @rabihmk]

A) the unit continues to beat our expectations.

B) it allows us the time to wait to get a better quote. This not only saves us money, it quiets any stress.

Unless you're flipping houses, real estate is a long term play. You can't afford to stress.

Run your numbers right.

[Rabih El-Khoury @rabihmk]

Be vigilant with you real estate investment assumptions.

It is better to plan for a 5% annual ROI that factors appropriate assumptions, than smile at a 9% ROI investment that has weak bones.

Here's an example:

[Rabih El-Khoury @rabihmk]

We can afford it to wait.

Why?

Because when we bought we factored in a vacancy rate (% of days the unit is vacant) that was slightly higher than the average for the area.

Higher vacancy = less rental income = less investment ROI.

The assumption has paid off though.

[Rabih El-Khoury @rabihmk]

There are many reasons why real estate is so prevalent in investment portfolios.

None quite expand on my favorite: simplicity and longevity.

4 walls and a tenant. The equation can last 5 or 50 years. You decide.

[Rabih El-Khoury @rabihmk]

It's going to scare you.

You've saved and saved, and now have a good sum sitting in the bank.

You feel good. You feels safe.

You then #invest it. Seeing it go, you feel uneasy.

If you don't have a plan, that fear will eat you. If you do, the rush is incredible.

[Rabih El-Khoury @rabihmk]

If you want to set up your kids' future, understand you must take care of yourself first: set yourself up--retirement, passive income etc. Investing is a long term game; you can't burn out and you can't be stressing. Your investment plan should reflect this.

[Rabih El-Khoury @rabihmk]

But some of the people I talk to have these instruments as their primary vehicles.

Build your investment plan on solid foundations. Your bedrock is your knowledge and comprehension. Then come the instruments.

[Rabih El-Khoury @rabihmk]

I hear people tell me they're buying luxury watches as an investment.

They're wrong.

They tell me they're buying gold as an investment hedge.

They're wrong.

Here's why:

[Rabih El-Khoury @rabihmk]

There's nothing wrong with luxury watches or gold. What's wrong is these people i hear don't understand how these markets work.

So they're not investing. It's more like they're gambling.

You wanna gamble, that's fine. Stake 3% or 5% of your cap.

[Rabih El-Khoury @rabihmk]

8/ Oh, here's a curve ball:

Class A/B tenants are attractive. You want them in your property.

But the might lose their job.

Section 8 tenants are C/D Class tenants. They're called Section 8 because the government pays up to 90% of their rent. The gov never misses rent!

[Rabih El-Khoury @rabihmk]

Just like with stocks, real estate investments can also satisfy your risk and return levels.

In the US, properties fall on a classification spectrum between A, B, and C.

So you'll hear: "this property is a class B+/A."

Here's what you need to know.

[Rabih El-Khoury @rabihmk]

7/ So, what should you go for?

Your decision is an intersection between:

- your target returns
- cash flow vs. appreciation
- capital you have on hand
- your property management team (crucial!)
- what your gut is comfortable investing in