Why AiRE?

So, why not just tackle the big wide world of real estate on your own? Real estate can be difficult, expensive and is a risky endeavor. An investment in any single asset class can provide its own series of risks, and despite peak performance, what happens when that sector of the market takes a dip could be detrimental. AiRE will enable you to manage the risk of real estate by owning parts in a number of different assets throughout the AiRE Generations Fund 01. Let us illustrate what two different real estate investment strategies and philosophies look like.

Graph 01 illustrates how conventional real estate investment is done. An asset is identified, developed and then it hits stabilization. The asset starts to generate income, which is great! The Net Operating Income (NOI) is derived from taking the total income received and subtracting debt service and operating expenses, with the target being at least an 8% return on equity invested.

Hypothetically, the building is doing great; it is growing in the NOI as well as the value. At some interval of time, the building value will likely grow to the point that another group is willing to buy the asset … at a great premium. The sale is completed and a windfall of cash comes in the door, pretty great right!? Well, sort of, the downside is: now there is a tight deadline to find another investment before you risk losing a large chunk of your money to taxes.

Graph 01. Conventional Project Example.

• $13,000,000 Total investment & debt
• $3,000,000 In cash equity
• $10,000,000 In financed debt at 5% for 25 years
• Assumes an 8% return in year 1 of payable returns
• Assumes a 3% per year inflationary growth for the life of the asset

Conventional Investing.

• Develop an asset
• Receive a cash return for 7-10 years
• Transact on the property in year 7-10 and experience a cash withdraw with associated tax implications
• If traded at a 6% cap the asset would trade for $17,500,000 in a year to cash flows
• Total net value received $4,500,000 at closing
• This is all the money that would ever be earned on the asset

Takeaway.

Conventional investing using this example would generate a cap of $7.25M. Furthermore if that money is not reinvested you would pay approximately 25% of it in capital gains taxes, leaving you with less than $5.4M.

Graph 01

Let’s consider the alternate approach with Graph 02. Everything looks and feels exactly the same, except when someone comes knocking because they are willing to overpay for an asset, you politely decline and feel grateful for your very wise investment. We hold on, and over the next decade or so, the debt service disappears and you receive a sizable cash infusion annually, as that money that was previously paying the bank is now paying us. We continue to let it ride because this wasn’t ever just about making more money, this is about successfully planning to transition wealth from one generation to the next. Many years from now, your loved ones will continue to reap the benefits of the decision that you made now: to invest in their future (and you’ll make some good cash along the way).

Graph 02. AiRE Project Example.

• $13,000,000 Total investment & debt
• $3,000,000 In cash equity
• $10,000,000 In financed debt at 5% for 25 years
• Assumes an 8% return in year 1 of payable returns
• Assumes a 3% per year inflationary growth for the life of the asset

AiRE Generational Investing.

• Develop an asset
• Receive a cash return for the life of the asset
• Term the debt
• Experience a substantial shot of cash as a result of the debt being completed

Takeaway.

Investing using the AiRE model offers infinite profit margins – the example in Graph 02 earning $15,310,000 at a traditional retirement age in addition to yearly earnings.

Graph 02

Disclaimer: The targeted return to Members is expected to be 8% annually. A return is not guaranteed, especially during the early period of an acquisition or development project, as the Fund may need to use that time to stabilize the Asset. Upon stabilization, the Manager will evaluate cash flow and intends to distribute any returns realized to the Members. However, an investment in the Fund is inherently speculative and no specific return on invested capital or even return of invested capital can be promised or guaranteed.

AiRE for the Long-Term

Placing investment dollars is easier said than done. Once a potential investment is identified, consideration for an exit strategy must be addressed. Traditional funds have an exit period ranging from 2-7 years. Regardless of the return on investment, the next steps are not always clearly laid out. Investments with AiRE are long-term and will ebb and flow with the market. This allows the individual’s investment to pay off over time and grants the ability for immediate use of benefits without added or continued debt.

Real estate transactions are for generating cash. Real estate holdings are for creating a legacy of wealth for generations.