Uncovering Your Real Estate Investor Thesis with Ryan Goldfarb

New to the property rental space? If you truly want to make the most out of your investment, there are things you need to consider when it comes to purchasing rental properties. 

Ryan Goldfarb, the co-founder of Liberty Hudson Solutions, which specializes in short-term rental property management in New Jersey, shares the driving forces behind their real estate investing thesis that has become the basis for most of their investing decisions.

1.  Invest in supply-constrained sub-markets.

In an area that was much more supply-constrained than a lot of the other sub-markets, we saw because it was 

In a more urban environment, there is usually less available land for new developments. Instead, look into submarkets that are more supply-constrained than other submarkets since there’s an opportunity for appreciation there.

2. Tap into the magic of clustering.

Clustering refers to buying a bunch of properties – either individually, with a partner, or with friends – that are all in the same general vicinity. And so, you’re buying as much on all the blocks as you could. 

This allows you to scale on your appraisal values. So if you buy in high on one, you're only helping your other values. The more you have in one area, the more it helps you. For instance, if you have four properties on one block, you can flip two and keep the other two. Once you sell the two flips, you just increase the potential on the other two holds. Then you can refinance out at those higher appraisal values that you just sold, take the money out, and do it all again.

3. Invest in Opportunity Zones.

Launched in 2017, the Opportunity Zone program that offers tax advantages to capital gain investments.

For instance, if you sell a property in 2021, you have to pay taxes on that gain with your tax returns for the tax year 2021. Now, if you invest that money in an Opportunity Zone fund for business, you can defer that gain through the tax year 2026. This means you can put that into an investment and generate a return over the subsequent four or five years until that tax bill is due, which otherwise would have gone to Uncle Sam in 2021.

The second benefit is if enough time elapses between when you elect your investment in an Opportunity Zone fund and when your tax liability is due in 2026, you can realize a slight decrease in the tax burden.

The third benefit of investing in opportunity zones is if you hold that property for 10 years or longer and then sell the property, your basis in the investment is marked up to fair market value.

If you want to learn more about the driving forces behind your real estate investing thesis, check out www.trustgreene.com/podcast/zen/011.