RES 226 | Building Wealth

 

Being a member or a head of a syndicate or being a real estate investor comes with some vital rules for building wealth. Christopher Calandra, the founder and principal at Elliot Wealth Management Services, LLC, talks about the seven wealth-building rules every investor must know. Christopher is a certified financial planner with over 26 years of experience helping entrepreneurs, retirees, and families achieve their financial goals and objectives. His portfolio includes single family, multifamily, and commercial income-producing properties. Learn the seven wealth-building rules as Christopher goes in-depth on the topic.

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Wealth-Building Rules For Real Estate Investors with Christopher Calandra

Our guest is Christopher Calandra. Thanks for being on the show, Christopher.

Thank you so much for having me. I was looking forward to this episode of your show. I’ve listened to several episodes and it’s a great show. I’m excited to be on.

I appreciate that, Christopher, you listening and being guest. Christopher is the Founder and Principal of Elliot Wealth Management Services LLC, which has offices in Connecticut and Florida. He is a certified financial planner with over 26 years of experience helping entrepreneurs, retirees, and families achieve their financial goals and objectives. He has been involved in real estate investing for over 25 years and bought his first investment property at the age of 23. His portfolio includes single-family, multifamily and commercial income-producing properties. His proficiencies include investing, remodeling, maintenance and reselling. Christopher, thanks so much for being on the show. Will you give the audience a little more about who you are and what your focus is?

I’m a certified financial planner. My primary source of income and wealth building is my firm, Elliot Wealth Management Services, where we work with individuals, families and small businesses helping them win with money especially on the investment planning and financial planning side but my background in trying to accumulate wealth myself includes a lot of real estate endeavors including building spec homes. I’ve joined about ten flips over the years. I have invested in commercial and residential real estate. Speaking to your audience is great, because what I’ve learned over my 26-year career is that most people that I’ve met that have accumulated wealth have at least a portion of that wealth in real estate. I had wanted to talk to you and your audience about seven wealth-building rules for real estate investors.

We were going to talk about the seven keys for real estate investors to build wealth. From your line of work that’s a great topic because you are helping these individuals build this wealth and from so many different scenarios as well. I know that helps you to be extremely well versed and rounded to all these different aspects that people are in. They have so many scenarios that you have to help them with.

RES 226 | Building Wealth

Building Wealth: Most people that have accumulated wealth have at least a portion of that wealth in real estate.

 

What you’ll find is a lot of financial advisers in the marketplace will poo-poo the idea of investing in real estate. It’s a little bit of competition and I think that’s very small minded but you do get that a lot. Whereas I view real estate as part of someone’s overall wealth building process. Not everybody wants to get involved in real estate and some people do but they want to be passive. Other people are anxious to swing a hammer but most people that I’ve met that have accumulated wealth will have at least a portion of their wealth in real estate. I think it’s an important topic. It’s also been important from my wife and I as we built wealth over these many years is I have three legs to the stool, if you will as I build wealth. There’s the value in my business and then there’s the value in my real estate investments. I’ll throw my home into that category as well and then investments in your traditional markets, 401(k), IRAs, mutual funds, stocks, bonds and college funds. I found for me the combination of the three is much stronger than if I had all my wealth in one of those three categories.

There’s more diversification.

At times, you’ve spoken with lots of real estate investors. There are times when you might be getting knocked around in real estate. Prices could go down or you could have tenant-related issues. You could have a project that’s over budgeted. Any number of things can happen that might be negative at least in the short-term but I have the two other portions of my wealth that might be behaving very differently at that moment. I think over the long-term, these multiple sources of income, multiple sources of wealth will lead to a better outcome from me as I move towards retirement, which is crazy to say I’m 48. I start to think about that more and more.

That’s something we have to prepare for and hopefully sooner than later. Let’s go into some of those seven keys for real estate investors to know to build wealth. I can’t wait to hear it from your perspective too, since you’ve seen so many different scenarios.

There are seven wealth-building rules for real estate investors. Step one is to establish goals and this is a cliché. If any of your audience and you probably have listened to shows or read books, this is very basic but it is so very important. I’m a big believer in you have to write down your goals and you have to have the ability to think both short-term as well as mid and long-term. You want to establish your goals. That’s number one. Number two is you need to get prepared. You need to be educated. You need to do your homework. This applies to everything we just spoke about. If you want to be a real estate investor, if you want to put together a syndicate or be part of a syndicate, we could probably agree that you want to do your homework.

Not everybody wants to get involved in real estate, and some people do, but they want to be passive. Click To Tweet

You could end up in a bad situation, you could make a mistake and knowledge is the great defender. You want to do your homework and be prepared. One of the keys to my success in real estate as well as in business is I tend to prepare well. That doesn’t mean I haven’t had bad real estate deals because I have and not everything goes perfectly but do your homework, get educated, know what you’re doing, talk to people, read, attend seminars, go to workshops and be prepared. If you’re investing in real estate, it is not something that you will likely be able to do successfully unless you put in the time, that’s step two.

You’ve got to put the time in and no matter what endeavor it is, if you plan to be successful.

Number three is to develop a wealth building plan and I think this is a very important part of my seven steps. It’s one that’s overlooked. If we talk about real estate investing, have a wealth-building plan of what you want to buy. Do you want to be part of a syndicate? Do you want to be the head of the syndicate or do you want to be a member of the syndicate? Do you want to flip where you actually at the property during the demos and fixing up the property? Would you do flips more like I did, where I subcontracted that out and I had a partner that did a lot in the trenches work? You have to have a plan that works for you based on your skills and have an end game.

One of the things that I’ve experienced over the 26 years is lots of people think they want to get involved in something, and they want to buy something, own real estate or buy an income-producing property but you often are going to be well-served if you figure out what your end game is and to work backwards. Do you want to hold property long-term or do you want to turn it in the relatively short period of time? Do you want to generate income? Do you want to be commercial or residential but you want to develop a wealth building plan? Moving away from real estate is the same thing. If you’re looking at investing for retirement, there are lots of vehicles that are available to you. You have 401(k), traditional IRAs, other IRAs, profit-sharing plans. There’s a whole variety of tools if you will, vehicles that can help you fund future retirement needs.

You need to develop a plan on how you’re going to fund them. How are you going to invest, how much you’re going to put in, how much risk you’re going to take? This may sound scary and I’m not trying to overwhelm your audience. It’s really not that complex but you do want to develop a wealth building plan. My wealth building plan is that three-pronged approach. I want to increase the value of my business, number one. I want to increase the value and the performance of my real estate holdings. I want to manage my investments in traditional stocks and bonds very well so that I could drive good long-term performance. That’s step three.

RES 226 | Building Wealth

Building Wealth: Building a team helps you be prepared, minimize your mistakes, and maximize good decision-making.

 

You’re diversified and you’re trying to nurture all three of those things to make sure they’re all in improving and increasing.

Some people, probably not your audience, don’t want to invest in real estate. Maybe they should but some people don’t want to do that. Other people don’t have a small business as I do. Maybe they’re focused on only one of the three or somebody else may have two of the three. You could put together the combination but you definitely want to develop a wealth-building plan. A lot of what we do for our clients here at Elliot Wealth Management is to help them figure out what their wealth building plan is and then help them execute that where we can be helpful. Step number four is to build a team. In your episode, I think it was number 176 with Vinney, he talked a little bit about that you want to build your network because this is a team activity building wealth. I know in the episode you did with Vinney, he talked about finding a partner in real estate. He also mentioned an attorney. I know you had an attorney on and she was great.

You want to build your network. I know I’m being self-serving, but a certified financial planner is great to have on your team. I am great to have on your team but then also real estate agents, inspectors and attorneys. You may have one attorney for real estate matters but you might have another attorney for other matters like will and estate planning, tradesmen and lenders. One I don’t think I heard mentioned on the show previously was to have a really good Certified Public Accountant or a CPA. If you’re investing in real estate, if you’re building wealth, having a good CPA is also a key part of your team. You can’t do it all. You can’t know everything. Building a team helps you be prepared and helps minimize your mistakes and maximize good decision making. That’s step number four.

Number five is to track your progress. This is something that is very underutilized. I am a huge fan of keeping track of your work on a net worth statement. In the business world, that’s called a balance sheet. There are ways you can do this technologically. On your Apple phone, there’s an app that even comes standard where you could keep track of your net worth. I personally do it a little old school on a spreadsheet but basically what I do is list all my assets. I have listed all my liabilities and if I take my assets and I subtract from my liabilities, that tells me what my net worth is. The way we’re playing the game, the reason why people invest in a syndicate is to build wealth and to make money.

Money is not the end all and be all, but that’s what we’re pursuing, it’s building wealth. Like any game, you want to keep track of your progress and the way that you keep track in my mind is to keep track of your net worth statement. You could do it as infrequently as one year. I wouldn’t suggest doing it less than that. I’m a tremendous geek, as you probably could tell. I keep track quarterly and it doesn’t take me much time because how often do the assets or the liabilities change? They don’t change that much and it’s all set up and I run the numbers every quarter so that I know if I’m making good decisions, it will be reflected in my increased wealth. It also highlights that there are only two levers that I could pull. I could either increase my assets or decrease my liabilities. Once your liabilities get to zero, then it’s only one lever you could pull and that is to increase your assets.

You could end up in a bad situation or you could make a mistake, and knowledge is the great defender. Click To Tweet

The last thing I’ll say about that is for geeks like me, for people that are trying to build wealth, they are out there entrepreneurially. They are focused on getting smarter, making good decisions and partnering. It’s tremendously motivating. When I can look at my net worth statement, I could go back a number of years and see how my wealth has increased. How I have more assets, how I have less liabilities and my net worth is growing. It may not be every single quarter but it’s tremendously motivating to see it unfold as I have a bigger and bigger net worth.

It’s like going to the gym for three months. After the third or fourth month, you start to see some results.

That’s the plan.

Not the first week.

Additionally, in real estate like other endeavors, cashflow is very important. Two other ways that you could track your progress in addition to the net worth statement is to have a P&L. I have a profit and loss statement for my practice, Elliot Wealth Management, but I also have a P&L for my real estate holdings. I can also look at a profit and loss statement for each of my individual real estate holdings. You might have a portfolio of let’s say five properties and if you only look at the five properties, it may mask that one of the properties has a problem. I like to look at it as a group, but I also like to look at it individually to drill down into how each of the properties in my portfolio is doing.

RES 226 | Building Wealth

Building Wealth: Checking in with your clients on a regular basis leads to better long-term investment results.

 

At certain points, the properties may be underperforming and looking at a profit and loss statement will uncover that. The last of the track your progress items is to have an income statement. It amazes me how many people are not aware of where they’re generating income from, especially entrepreneurs. They’re out there making deals, hustling, working incredibly hard. They’re trying to be creative but I think they’re making a huge mistake, if they don’t keep track of where their income is coming from. I also keep track of where my income sources are. They’re broken out by the categories that we talked about. I could look at what income I’m getting from my business, daily wealth management services, investment planning practice but then I could look at the income I’m getting from the properties again as a whole but also individually by property.

Lastly, I look at my investment portfolio and keep track of what income that portfolio is generating. IRAs, 401(k) that thing, I’m not taking that income, but it’s all being reinvested. At some point when I retire, like most people, I will want to draw money out. I want to start taking the income out. I keep an eye on what income I can get from that portion of my nest egg. Even though I’m not taking it now, I want to keep an eye towards the future to see what that would do for me when the time comes and I do want to dive an income. That’s number five, track your progress.

You’ve got to track it or how do you know where you’re going?

It is crazy. In my experience, I’ve met some really talented, hardworking, smart real estate investors as well as other entrepreneurs and they’re so busy trying to work day in and day out on what’s in front of them. They don’t do these important wealth-building steps. They increased the risks that they make a mistake or they miss an opportunity. They’re too focused on what’s happening in the trenches. That could be intense but you need to step back and take a view of what’s going on the macro level with your real estate and with your wealth building activities. That’s why number five is so important.

I would say it goes back to your team a little bit. If you’re too busy in the trenches, hopefully you’re doing those high dollar tasks but you have somebody on your team that can help you do some of the tracking.

Money is not the end all and be all, but what we're pursuing is building wealth. Click To Tweet

I’m glad you brought that up because one of the hallmarks of my practice in working with clients is if you become my client today, one of the things that we would want to explore with you is how often should we meet to review things. Let’s just say for argument’s sake, it’s every six months. That means every six months I’m going to talk to you about your portfolio, review your goals, see what might’ve changed either with your goals and objectives in your financial situation. We’re going to review your investment plan, review your returns, your risk level by checking in with our clients on a regular basis. It could be quarterly, it could be semiannually and it could be annually. We find that our clients have greater levels of satisfaction. It increases the chances that we make good financial decisions and avoid potential pitfalls.

By checking in that communication, that leads to better long-term investment results and that’s an important part of what we do for our clients here and tracking your progress. Lots of times it gets lost because everybody has crazy lives and they’re busy and if they got families at home, lots of demands on our time but this is important. A very well-worth the little amount of time I’ve put to this each quarter for myself. We’re on to number six, be diversified. My mantra has always been whether it was in my business, in my investing or in my real estate investing. I never wanted to do anything that I would blow myself up. That’s my home terminology. I never wanted to try and take down something that I could possibly choke on.

If you have audience members out there that are in their twenties, they might be more apt to take on risks. They may have less resources. It may not be the same advice for them but if you’re investing, you’re trying different things especially in the real estate realm, there’s no reason to do something that you could wreck yourself and be difficult to recover from. If you’ve spoken with real estate investors, if you do enough deals, there’s going to be some that don’t work out. It’s a numbers game, even the best real estate investors. I used to use Donald Trump as an example but you can’t do that anymore. Anybody I’ve ever met that does deals real estate wise or buying and selling of businesses or anything, if they’re putting themselves out there, if they’re trying to build wealth, if they’re high-income earners and affluent folks, they’ve all got knocked around. I’ve always tried not to do anything. What I would advise people to do is be diversified and don’t enter into deals that would blow you up. I don’t know if that’s a good term for it but that’s my term.

There are ways to mitigate risk and being diversified is one of them. We talked about it already a few times. I diversify my risk by having the three components of my wealth building plan. Another way is to have emergency funds. If you’re investing and you’re doing different things with your money, you should have an emergency fund, a certain amount of money that you have in the bank so that if you needed some money in a pinch, you would not have to sell out of the syndicate. You wouldn’t have to sell your multifamily house. You wouldn’t have to sell your flip prematurely.

The amount of money that someone should have in their emergency fund depends on circumstances, but having some money available is a good idea. You should not invest your last nickel. That’s common sense, but sometimes people get so excited and so enthused. Real estate investors by and large are optimistic, hard-charging folks but you do want to mitigate your risk. An emergency fund is a good simple way to do that, not put all your eggs in one deal and look at other opportunities. I love real estate, but I’m glad that all of my wealth is not just in real estate. A real estate does have a downside. It lacks liquidity. It is subject to economic ups and downs. It is a great long-term wealth building vehicle.

RES 226 | Building Wealth

Building Wealth: If you’re using debt but you have cash behind it, that, in and of itself, is a way to mitigate the risk.

 

If you’re dealing with tenants, they don’t always behave. If you’re flipping, you’re not always able to flip as fast as you want. If you’re involved in a syndicate, sometimes the exit of that syndicate may take longer. Maybe it doesn’t generate as much cashflow because you have unexpected expenses. Things can happen. Being diversified is a clear path to success and being diversified is an important contributor to that. I like that I have a five-investment portfolio. I have some commercial and I have some residential, I have an office building, I also have multifamily. I also have one single-family. I personally like that I have a couple of different types and that works for me. It may not work for everyone, but that’s another way that I diversify by having different property types.

You’re not just real estate, stocks and bonds, whatever your business specifically or personally but even in the real estate sector, you’re going to diversify amongst different properties. Maybe different syndicators even, even if it’s your own portfolio, you may do single-family, multifamily or commercial.

I have one office building and I have two partners in it and actually my business is headquartered in it. A few years ago, it was not performing well. We had trouble and I don’t want to go into the details but it was a rough year. We had to put money into it. For real estate investors, when you have a deal, you’ve got to put money in and you’re not taking money out. It sucks but now it’s performing so well. A couple of years ago I didn’t like the property. It wasn’t performing well but now it’s performing great but a couple of years ago, the property that I love the best is the one that’s struggling a bit. We had a bad tenant and we’re going through an eviction process. It’s been a little bit of a drag.

With the properties in any given year, there’s going to be one that I liked the best, which is always the one that is generating the most amount of revenue. I do the least amount of work but they’re going to flip places over time. That’s normal. Over the arc of time as I do this year in and year out, all of them will work out but it makes the ride a little bit smoother. That’s how I positioned myself and the amount of diversification between real estate versus traditional investments versus possibly a small business, and we could throw bank holdings into there as well. That’s something that has to be worked out. There’s no single right answer for everyone but I think being diversified is the right answer for most people most of the time. When we get to number seven, be careful with debt.

I’m not religious in saying you should borrow as much as you can, nor am I religiously saying to don’t borrow it all ala Dave Ramsey, but I do think you need to be careful with debt. That’s one way that you can blow yourself up debt magnifies returns but it also magnifies losses. I urge people to be careful with debt. I subscribe to what Robert Kiyosaki of Rich Dad, Poor Dad fame says. I do believe there’s a difference between good debt and bad debt, bad debt being consumer debt, like car loans and credit cards. That stuff you should stay away from. You’re not going to accumulate wealth with a big credit card debt. When you’re using debt to buy properties, it’s okay but you do want to be very sober about doing it. Be very careful, be very discriminating and don’t get yourself in a mess. Step number seven is to be careful with debt.

I like how you talked about debt magnifies returns but it also magnifies losses.

When you go to seminars about real estate and they talk about the wonders of investing in real estate, I don’t believe a lot of those presentations adequately explain the risks of debt on the downside. I’m all interested in the upside but you need to have a keen awareness that having debt can be problematic. You want to be careful. You want to have an emergency fund, if you’re using debt but you have cash behind it, that in and of itself is a way to mitigate the risk. If you borrow as much as you can and you have nothing in reserve, those are the people I like to buy real estate from. When something bad happens, they become very motivated sellers because they have no options. It’s not to say I want to prey on anyone that ends up in a mess but that is the reality of the situation. If you have cash reserves, you haven’t borrowed everything you possibly could, and you don’t have it all on the line, you could withstand some negativity and overcome some obstacles. You want to be careful. I’m glad you like that point. It’s an important one too.

Obviously, as a financial planner, they’re speaking with you about their wealth-building strategies, what they’re doing, where they’re at in this process of building wealth and they come to you with a syndication deal. They say, “Christopher, I’m thinking about investing in this real estate deal.” What does that look like? What guidance can you provide them? How much in-depth into that are you able to get with them?

We could get into as much depth as they want to. When I’m working with clients, it’s one of those value-added things and it’s a good way for me to learn. If they present me with the documents, I could review it and advise them, knowing who they are, what their goals are and what their overall financial situation. I’m in a good position to give an unbiased opinion and I’m looking out for my client. My client’s best interests come first. I’ll give them my plainspoken, independent opinion on whether it’s a good deal or not. Sometimes clients will follow my advice and sometimes they won’t but having that candid conversation I think is helpful. Maybe I can give them some thoughts that they hadn’t considered before. I’ll give you a quick example. I had a client come in, she was in a partnership, it has nothing to do with real estate. The partnership soured. She was blindsided and got bounced out of the partnership and she essentially got knocked down.

We had met about a week later and we went through some of the financial ramifications of this. She’s like, “I think I found this business I want to buy into,” and she wanted to talk about. What my conversation with her was like, “Timeout, Maggie. Maybe you should just take your time. You just took a big body blow and you don’t need to rush into anything.” That advice that I gave her is not about investments but it’s about knowing your client, wanting to be helpful, putting their needs above all else and that was the idea. She’s like, “Chris, you’re right. It’s just a week, I’m not even sleeping yet because I’m so bummed out about what happened,” and so that’s not the time. She ought to plow into another deal. She doesn’t have to, she could take her time. That’s the example I would give. I’ll look at deals all the time with clients and give them my opinion. They could do with it what they want.

I wondered about if someone came to you with a deal like that or a syndication deal with somebody, a financial planner like yourself, pursue being able to help them know if that’s a deal for them or not or the best opportunity. Christopher, tell the audience how they can learn more about you and get in touch with you.

A couple of quick things. I’m a podcaster too. My podcast is Simply Financial with Christopher Calandra. Please check that out. Go to the website, www.ElliottWealth.com. You could get more information about the team and me. We have a special tab on the home page and you could get a white paper that talks more about the Seven Rules for Real Estate Wealth Building or Wealth Building For Real Estate Investors. If your listeners click on that tab, we’ll send them a free report. We covered just a quick view of this but if they want a deeper dive, they could do that as well at the website. They could sign up for a complimentary initial consultation where they could discuss with me their goals and objectives. We could talk to them about how we might be able to help them win with money as we’ve done with our other clients. The Simply Financial podcast is at the ElliottWealth.com website. Click on the tab and get the free white paper report that talks more about what you and I discussed. Please sign up for the complimentary no-cost consultation.

Thank you, Christopher. Thanks for offering that white paper and the free consultation to the audience. I hope the audience will reach out to Christopher. I hope they also go to Life Bridge Capital and connect with me. I’m also happy to get on a call and help you any way I can. I hope you also go to the Facebook Group, The Real Estate Syndication Show where we can learn and grow our businesses from experts like Christopher.

Thank you.

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About Christopher Calandra

RES 226 | Building WealthChristopher Calandra is the founder and principal of Elliott Wealth Management Services, LLC which has offices in Connecticut and Florida.  Christopher is a CERTIFIED FINANCIAL PLANNER ™ (CFP ® ) with over twenty-six years of experience helping entrepreneurs, retirees, and families achieve their financial goals and objectives.

Chris has been involved in Real Estate Investing for over 25 years and bought his first investment property at the age of 23. His experience includes new home construction, flipping, residential income properties, commercial income properties and creative financing.  His current portfolio includes single family, multi-family and commercial income producing properties. His proficiencies include investing, remodeling, maintenance and reselling.

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