Most people are pretty familiar with the concept of the stock market. You open a brokerage account, choose some stocks, and then nervously check in each day as to whether you get a green arrow or red arrow. One day you make five hundred bucks, the next day you lose a thousand. It’s all part of the Wall Street game. Unless you’re an active day trader, you probably choose your investments, then leave them in for a while, hoping and praying that they’ll go up in the long run. As Benjamin Franklin once said, “Keep your eyes wide open before marriage, half shut afterwards.” Or, as applied to investing…
Keep your eyes wide open before investing in stocks, half shut afterwards.
For many people, because they don’t have the time, interest, or know-how to keep their eyes wide open throughout the investing process, this is the reality. But it doesn’t have to be this way. You can take control of your investments, and further, you can invest in physical assets that make a tangible difference in the lives of others. In this article, I will introduce you to one of the best kept secrets of the investing world, and one of the best ways to build passive income and generational wealth for your family.
What’s Wrong with Investing in the Stock Market?
If you’re like most people, you probably experienced a moderate amount of optimism, and perhaps trepidation, when you first invested in the stock market. Following that, there might have been a week or two of excitement as you checked back in each day. Then the excitement died down, and you left the investments where they were, checking back in every few months or so, or perhaps even less frequently than that. Day to day, you rely on the hope-and-pray investing methodology, also known as the turn-a-blind-eye strategy. After all, if you invest in Facebook, it’s not like you can call up Mark Zuckerberg to ask what happened if your stocks drop a few hundred bucks. Whatever the returns, you’re stuck with them.
Maybe it’s just me, but this seems terrifying.
Entrusting your hard-earned money to the whims of corporate America seems scary at best, costly at worst, and I’m not ready to gamble my life savings away. Even when I worked at a big Silicon Valley tech company and received company stock, it was painful to watch when that stock lost value a times. Even though I worked at the company, I was just one person of thousands, all working together to increase company profitability. And did everyone at the company work hard, all the time? I’m sure you know the answer to that. The bigger the company, the more ways people find to waste money, albeit most of the time not on purpose.
I don’t want my paycheck to pay for their mistakes.
I don’t want to have to rely on big companies to make money, so I can make money. I want my money to do good in the world. Yet, I’m not wealthy enough to just give away gobs of money to charity. This is where passive real estate syndications come in.
What Are Passive Real Estate Syndications?
Real estate syndications are essentially group investments. Multiple investors come together, each investing a certain amount of money, and purchase a real estate asset, like an apartment building. As a passive investor, I can put my money in, then sit back and receive regular passive income while the deal sponsor operates, improves, and optimizes the asset. Unlike the stock market, I’m not riding an unpredictable roller coaster with big ups and downs. Instead, I’m receiving steady passive income every few months, with the potential for appreciation on top of that. By investing passively in an apartment building, I can get great returns on my money while simultaneously helping others, by improving their living space and impacting their communities and the environment. And just like the stock market, I don’t have to be involved day to day.
Why Passive Real Estate Syndications Have Been So Exclusive…Until Now
Okay okay, hold on there, you’re thinking. If these real estate thingies are so great, why haven’t I heard of them before, you ask. And if they’re as profitable as you claim, why am I not reading about them in the Wall Street Journal? And herein lies the problem. Wall Street is running one of the world’s best marketing campaigns. Seriously, I take my hat off to them. At the core, they have a decent product; the stock market averages 8% annual returns, which by far beats out savings account interest rates and certificates of deposit. And they know it. As such, they make enough dough to pour a boatload of money into marketing and advertising. However, I’ll bet even the top execs on Wall Street can tell you that the stock market is not the most lucrative investment for everyone. For the select few who put in the time, research, and effort, there are millions to be made. But for the vast majority of the rest of us, who rely on limited research, gut feelings, and index funds, those returns are more muted. On the flip side, you have independent real estate investments, many of which average closer to 20% annual returns. However, they don’t operate under a common banner with a big marketing spend. Instead, each investment team runs their own marketing, for individual deals. So if you don’t know someone who does this kind of thing, you might not have heard of these types of opportunities before. Plus, there’s the SEC to think about (the Securities and Exchange Commission, that is). A big part of their job is to protect investors. As such, up until recently, they have disallowed the public advertising of these types of real estate investments, because they just couldn’t guarantee that they were any good.
However, this has recently changed.
Why Now Is the Best Time to Invest Passively in Real Estate Syndications
Over the last few years, the SEC has loosened their regulations, so that A) certain real estate syndications (i.e., passive group investments) can be publicly advertised, and B) non-accredited investors can get involved in certain investments. This may not sound like much, but let me tell you, it’s HUGE. This means that we’re living through a turning point in history. The SEC is recognizing the power of real estate investments in building wealth, and as such, they’re opening these investment opportunities up to a wider pool of investors. Over time, as real estate crowdfunding sites gain traction, and more and more people become aware of the value and benefits of passive real estate investments, we’ll reach a tipping point. I can’t sit here and pretend that I know enough about macroeconomics to predict the future and the impact on global economy, but I do think things will shift in a significant way. Will Wall Street collapse? Probably not. There will always be people who invest in the stock market, and I won’t even hold it against you if you do. However, if you’re like me and are tired of relying on the red arrow / green arrow method of dictating how much money you have in your portfolio on any given day, or you want to ramp up how hard your money is working for you, or you’re tired of investing in big corporations and would rather invest in people and communities, consider giving real estate a try.
I promise, you can keep your eyes wide open going in, and wide open all along.