Presented by Ashcroft Capital – Two common forms of investment strategies that smart investors use to grow their wealth with passive income are building a diversified stock portfolio and investing in real estate. While investing in the stock market is beneficial for a number of reasons, investing in private market real estate such as apartment buildings offers several benefits. Here are three key reasons why some investors prefer multi-family private placements over stock market investments.
Stocks can exhibit volatility that is not found in most private placement offers. Real estate offers long-term cash flow, residual income, and the promise of appreciation (1).
The stock market is particularly vulnerable to various types of risk, including economic, inflation, and market risks. This volatility can occur due to company-specific or geopolitical events. The real estate market in the US has been strong for more than a decade. Since 2010, the national housing market has created $ 11.3 trillion in value – an increase of more than 50% (4).
If you sell a property you’ve invested in and use the proceeds to buy a similar property, your capital gains taxes can be deferred to a later date known as a 1031 tax-deferred swap (3). During this process, a qualified intermediary holds the sale proceeds until the money can be transferred to the seller of the other property. By getting involved in a 1031, you can avoid the long-term capital gains tax rate of 15-20% (5).
Over time, the value of a dollar increases due to inflation. While the value of the currency will inevitably rise over time, the rate of inflation is not always constant. As inflation rises, so does the cost of everything, including real estate (2). As the value of the property increases, the owner can ask for more rent, which ensures a higher source of income. By keeping up with inflation, you gain an advantage that is difficult to achieve with equity investments.
It’s never too early to start generating passive income. Investing some of your money in multi-family private placements can help you balance your portfolio and reduce the potential for loss. To help you along this journey, download this free 20-page guide to understanding real estate private placements.
- Investopedia. “Reasons for investing in real estate vs. stocks”
- Forbes. “How buying a house can hedge against inflation.”
- Internal Revenue Service. “IRS 1031 Exchange.”
- Zillow. “The recovery added $ 11.3 trillion in US residential real estate value in the 2010s.”
- Investopedia. “1031 Exchange Rules: What You Need to Know.”
DISCLAIMER: Ashcroft Capital LLC is not an investment advisor or broker-dealer and is not registered with the Securities and Exchange Commission. The information contained in this e-mail should not be used as the sole basis for investment decisions, nor should it be construed as advice on the advisability of investing in, buying or selling securities or as advice on the investment needs of any particular individual or legal entity to cover a specific investment situation. Nothing in this advertisement constitutes legal, accounting, tax, or customized investment advice. The reader assumes responsibility for performing their own due diligence and takes full responsibility for all investment decisions.