“Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.” — Andrew Carnegie
A quote given ages ago.
Whether the percentage is accurate or not, the fact remains the same.
The ultra-wealthy use real estate to protect their wealth, regardless of how it was built.
According to Tiger21, a club for the ultra-wealthy, their members allocate 25% of their investment portfolio’s to real estate.
Buy why?
Let’s break it down…
Diversification
Real estate can offer a diversification strategy to a portfolio that helps minimize risk by spreading investments across multiple asset classes.
You can’t put “real estate” in one big bucket. There are so many types of real estate, the potential to diversify your portfolio is endless.
- Industrial
- Multifamily
- Car Washes
- Self Storage
- Mobile Home Parks
The list goes on and on… and there are different classes of each of these assets (opportunistic, value-add, stabilized) that provide different return profiles based on their risk.
Wealth Protection
The ultra-wealthy are looking for long-term ways to protect their wealth.
Unlike stocks or other investments that can be volatile, real estate can provide steady and consistent returns over the long term.
Real estate properties tend to increase in value over time.
This is driven by factors such as inflation, population growth, and supply and demand dynamics in the local market.
As property values increase, investors can enjoy long-term appreciation in the value of their investment.
Passive Cash Flow
The wealthy know cash flow is king 👑.
If you are looking for a steady stream of income that requires minimal effort, real estate is a great choice.
High-net-worth investors hire a third-party manager for their properties or invest passively with a sponsor they know, like and trust.
This allows them to enjoy the benefits of real estate (cash flow, appreciation, tax benefits) without having the manage the real estate itself.
Offset Impact of Inflation
You might be thinking, “real estate values are dropping right now when inflation is rampant…”
Yes, inflation typically leads to an increase in interest rates, which in turn push down the values of properties as demand decreases.
These decreases in value are no where near the shock the stock market often sees.
Remember: we are investing for the long term.
If you buy real estate conservatively and have a long-term plan to hold, it can help offset the impact of inflation. Why?
- Rents – leases are 12 months long. In inflationary environments, you can adjust rents to keep up with inflation (or get close).
- Fixed Debt – if you busy an asset before an inflation boom using fixed-rate debt, as inflation booms and your income increases, your mortgage payments remain the same. This can lead to an increase in cash flow.
- Income – if you invest in cash flow businesses, like car washes, you can adjust your pricing quickly if you see changes in your operating costs (chemicals, labor, etc).
Reaping these benefits requires an experienced operator who can manage rising costs.
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When you’re ready, there are 2 ways we can help you:
1. Interested in partnering with us as a passive investor? Schedule a call with us here. We’d like to learn more about your unique investment goals.
2. Ready to apply to invest? Fill out our application here. We’ll be in touch shortly after to see if we’re a good fit for you.
** Please note, investments are for accredited investors only at this time. **
