What are some alternative investment vehicles that someone can participate in?
Most people have been trained to get a job, put money into a retirement account, invest in stocks and bonds. Some reasons for this strategy are, it helps drive the economy and the other reason is that the custodians of these retirement accounts get payment when you purchase stocks and bonds.
Somehow when you invest in real estate, usually, these custodians do not get charge fees. This is also the reason why many people when they go to their fidelity account they are not allowed to invest in self-storage.
What you need to do is set up a self-directed retirement account (self-directed IRA/401K). This will allow you to invest in anything you want. Of course, there are certain parameters but for the most part, you are allowed to invest.
Fernando likes real estate because it’s a physical asset. For him, it’s a hedge against inflation. As the dollar continues to drop in values, at the same time the value of the real estate will also increase to keep up with the inflation.
According to him, he also likes real estate because it produces passive income. It allows you to lower your tax bracket.
One more reason for Fernando liking the real estate business, the self-storage specifically over stocks and bonds besides being a tangible asset is that he has more control over the outcomes.
His advice for those who do not have the time to buy real estate or self-storage is to participate in syndication. Meaning you can become an owner or silent partner of one of these real estate investments and get all the benefits of this business without having to do the work.
Fernando O. Angelucci is Founder and President of Titan Wealth Group. He also leads the firm’s finance and acquisitions departments. Fernando Angelucci and Steven Wear founded Titan Wealth Group in 2015, and under his leadership, the firm’s revenue has grown over 100% year over year. Today,
Find out more at
https://www.TheStorageStud.com
https://titanwealthgroup.com/
Listen to our Podcast:
https://thestoragestud.podbean.com/e/alternative-investment-vehicles/
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So, I've been asked in the past, you know, what are some alternative investment vehicles that someone can participate in? You know, I'm very partial to self storage for a multitude of reasons. And we'll get into that here, but you know, that most people have been trained to, you know, get a job, put money into our retirement account and have that retirement account invest in stocks and bonds. It's basically yet, there's been a few reasons for that. Number one, it helps drive, you know, the economy. Number two, the people that usually, are usually the custodians of these retirement accounts. They get fees for you purchasing stocks and bond. With real estate, on the other hand, usually these custodians do not get to charge fees if you were to invest in these, you know, physical assets or real estate.
And that's the reason why many people, when they go to their fidelity account or their Schwab account, they're actually not allowed to invest in self storage. And that's just because they, that, the custodian won't be able to make any money off of that. So, what you usually have to do is set up a self-directed retirement account of some kind, so self-directed IRA or self-directed 401k. And, that will allow you to invest in anything you want within certain rules. There are certain parameters, but for the most part, real estate counts, the reason I like real estate is because it's a physical asset and it's a hedge against inflation. So, as the dollar continues to drop in value, because of that, the value of your real estate will also increase to keep up with inflation. And that's all that's, you know, that appreciation is just built in that's in addition to say, forced depreciation by renovating or rehabbing the property, or found appreciation by buying the asset below, you know, what its market value is.
And that's because real estate is a, you know, it's a non-perfect investment vehicle unlike stocks and bonds where there's always buyers and sellers on both sides. The, you know, it's very difficult to get a deal on stocks because there's always buyers and sellers. It's a nearly perfect investment vehicle, as far as where the value being based off of, you know, who's willing to buy and who's willing to sell. I also like real estate because it produces passive income. So, it allows you to lower your tax bracket, kind of shifting things away from the capital gains side of the world. Another reason I like real estate or self-storage specifically over stocks and bonds is yes, it's physical. I can touch it. I can go see it. I know it's there, but I also have a better grasp and more control over the outcomes. You know, when you invest in a Fortune 50 company.
There's very little, you can do it as an individual investor to sway that company into acting in a certain way, unless, you know, you're like Warren Buffet or somebody that can come in and buy a huge chunk of the available stocks to have voting rights that actually make a difference in that company. So, we've seen it time and time and time again, where companies will make terrible long-term decisions because they're driven by short term returns. You know, the problem with stocks is that they run on a quarterly basis every quarter, they need to show profit and they, many times do that at the detriment of long-term growth. And that's, you know, when it comes to becoming wealthy, the delayed gratification is a very important thing. The other thing I like about self storage is, if you're able to get into a deal, you can start using that for multiple tax advantage strategy.
So depreciation is a huge thing, where you can reduce your taxable income. Some of the issues that my investors have, is not that they don't make enough money is that they make too much money on paper, which puts them into the highest tax bracket. And they want ways to drop that down. So, investing in real estate is an easy way to drop your income fund. By applying that depreciation, there's also some called cost segregation. It's a cost that usually, it allows you to accelerate the depreciation schedule. So say, you know, a property has a usable life or a useful life of 29 years or 27 years. You, what you can do is you can take the value of that property divided by that useful life. And that's how much you can write off on your taxes and I'm generalizing here. But for the most part, that's how much you can write off on the depreciation schedule.
What cost segregation does is it says, well, you know, an engineer will come through, we'll look at everything in the building and say, well, these doors aren't going to last 29 years. These doors are going to last seven years. And you know, this flooring is only gonna last five years. And you know, these lights are only gonna last X amount of years. And what it does is then it contracts the depreciation schedule allowing you to take much more depreciation upfront. So for example, I bought an $800,000 self storage facility in Illinois. We paid $6,000 to have a cost segregation study done. And in the first year, we were able to write off $184,000 in depreciation because of that cost segregation study. So, these are things that you can't do with stocks and bonds. Again, the passive income is huge for us.
We, think that the easiest way to become wealthy is by having multiple streams of income and multiple streams of income that come in when you're basically sleeping. So, passive income. Now say you're, you know, you're an executive, or you're a busy professional, and you don't have the time to buy real estate or buy self storage. An option that is available to you is to participate in syndications. So, you can become an owner or a silent partner of one of these real estate investments and get all of the benefits of that real estate investment without having to do any of the work. So, you get passed through depreciation, you get passed through passive income, whatever your goals are, that's what you should look for in that syndication. I prefer syndications over the stock market. Usually the returns are much better, than what you'd find the stock market, even though right now, the stock market's doing really well.
I don't think that will last very long. So typically, you know, let's say, someone in the stock market is receiving about 8% average. I think that's a pretty solid number, on these syndications I've seen, because not only do I run syndications, but I also look at investing in other syndications to diversify my own personal portfolio. You know, I'm seeing stuff out there anywhere in the 12 all the way up to the 20% range, as far as returns, on some of this indications available. And that's, you know, that's really great, you know, I had at a 12% return, you're doubling your money, every seven years, which is pretty, you know, that's pretty fast accumulation of wealth. So, those are some options that are available to you. If you want to get involved in self storage, you know, you can either go out and buy your own and, you know, learn trial by fire.
And I really recommend everybody do that. But I understand some people it's just not for them or they just are too busy. They don't want to deal with it. Then they have the ability to invest in someone else's syndication when it comes to that, you got to be very careful about not only due diligence, the deal itself, but then also the due diligence on the spectator response because without them, the deal wouldn't happen. So, number one, you gotta make sure that they're being incentivized to complete a deal, especially if it's a longer term deal in the five to 10 year range, you got to make sure that they have the experience and you know, that the proper team around them to execute on their business plans. So, those are things that I really recommend to those that are seeking alternative investment vehicles.
You know, number one, if it's through an retirement accounts, set up a self-directed, if it's just your, let's say investment money, that's not in a retirement account, and then you don't need to do that. And then, go out there and start finding reputable sponsors with, you know, with good track records. They know what they're doing and know their asset class really well. So, let me know if you have any questions, feel free to put comments below if you have additional topics you'd like us to cover, you can drop those in there as well, and then feel free to reach out to us on our website or various social media platforms there. So again, this is a Storage Stud and see you guys next time.
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