Alternative Investments

This category pertains to ideas or articles about Alternative Investments. Alternative investments can be characterized as investments which are not traded on public markets. Examples of alternative investments are: physical real estate, raw land, farmland, timberland, tax liens, private mortgages, physical gold and silver, private company stock, franchises, private equity, venture capital, equipment leasing, Oil & Gas Limited Partnerships, and more.

Top 10 Ways That Wealthy Families Protect and Grow Their Wealth

 

wealth

“Wealth is the ability to fully experience life.”

– Henry David Thoreau

“Wealth” —  can be defined as assets or resources which are in excess of present or future expected expenses. A more simple explanation is that wealth is made up of assets which exceed what will be needed for this generation, and could be passed onto the next one. Even though a family’s assets may not be needed for this generation, proper stewardship is required to make sure those assets will last for future generations.

The main considerations in protecting wealth for future generations are that the assets must be sustainable over several generations, resistant to inflation, and resistant to political and economic turmoil. It is possible to invest in certain assets that can fortify your wealth against some of these external risks. However, there is a much greater risk of future generations not being good stewards of the sustainable wealth. Whether you are the first generation to create generational wealth, or whether you are researching how to sustain the wealth you have inherited, this list will give you some guidance.
 

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The Real Estate Investor’s Guide: Using a Self Directed IRA to Buy Real Estate

Using a self directed IRA to buy real estate

 

“Every nickel I make gets put back into real estate.”

This is what an investor told me my first week of working on Wall Street. At the time I didn’t understand it, but this quote epitomizes the mind of the typical real estate investor. All they know is real estate, all they trust is real estate, and they are not remotely interested in any other type of investment.

I get it. Real estate is a very attractive asset class. I discussed some of the reasons for this here, These Top 7 Powerful Tools Can Create Legacy Wealth from Real Estate, and Inflation – The Secret to Building Wealth in Real Estate. Real Estate is unique in a number of ways. One of which is the ability to use massive amounts of leverage. When leverage is paired with inflation, you have a powerful combination.

As great of an asset class as real estate is, many real estate investors still come up frustrated.

While real estate investors may choose to invest every nickel they have into real estate, they are reluctantly forced to invest their retirement accounts into stocks, bonds, and mutual funds. Some investors are so turned off by non-real estate investments, they choose to not contribute to their IRAs or 401ks at all. This is mainly due to the “inadequacies” (in their mind) of the other available investments.

If they only knew the truth…

So rather than saving for their retirement in a tax-deferred or tax-free account, and potentially getting the significant tax deductions, they choose to ignore the retirement account option completely. Until now…

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What is the True Cost of Owning a Home?

 

Cost of owning a home

 

In the prior post of this series, Should You Rent or Buy a Home?, I wrote about the pros and cons of home ownership vs renting. It is important to start here when you are considering whether to rent or buy a home. The decision of where to live should not be solely made on emotional attachment or financial considerations. It should be made up of both if you are planning on living in a home for many years. You want to love where you live.

This week’s post will be focused more on the financial considerations of renting vs buying a home. More specifically, what is the true cost of owning a home. If you have never correctly run these numbers before, the data may surprise you.

This week I will give you an example of what the true costs of owning a home are. In next week’s post, What You Don’t Know About Renting vs. Buying a Home Can Cost You Money, I will compare some real life examples of costs of renting vs buying a home.

I hope I am able to forever change how you look at buying the home you want to live in.

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What You Don’t Know About Renting vs Buying a Home Can Cost You Money

 

renting vs buying a home

“If you rent a home, it is an expense. When you buy a home, it is an expense. If you buy a home and rent it out to a third party, it becomes an investment. A better way to put it is that when you are renting, you rent from a landlord. When you buy a home to live in, you are renting from yourself.”

This is the third and last post of this series. The first post, Should You Rent or Buy a Home?, examined what factors you should consider when renting vs buying a home. The second post, What is the True Cost of Owning a Home? , examined the true cost of owning a home. In this final post I will be examining whether it makes sense to rent or buy a home. Numbers don’t lie, so lets look at some real numbers.

There are many calculators available online to help you figure out whether to rent or own. Unfortunately very few include the true costs of owning a home in their calculations. If you read the prior post, you will have some understanding of what was left out and how to calculate it. The math in post this will be relatively straight forward and a bit more fun.

I will be showing you some examples of real properties that I have found in the past year to illustrate this secret that very few people know. Whether you are a real estate investor or looking to buy a home to live in, you will want to know this secret.

“you are paying someone else’s mortgage, so why don’t you pay your own?”

There is a myth out there that when you rent, “you are paying someone else’s mortgage, so why don’t you pay your own?” This is a farce. It doesn’t matter whose mortgage you are paying, what matters is your costs to live in that home.  No matter where you live, your cost to live in that home is an expense. If you rent, you pay rent to a land lord. If you own, you pay a mortgage, taxes, insurance, maintenance, etc. There are costs for both options. Unless you live in a tent you will be paying for a home either way.

The reason many people think that owning is better than renting is that they equate owing a home as an investment rather than an expense. Once they make the realization that it is…

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Should You Rent or Buy a Home?

American dream rent or buy a home

“But there has been also the American dream, that dream of a land in which life should be better and richer and fuller for every man, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”

James Truslow Adams

Is the American Dream Really an Illusion?

There is a great illusion when it comes to real estate. This illusion is that owning your home is an investment.

When you own real estate and use it to generate monthly income… it is an investment.

When you buy real estate and develop it to sell for a profit… it is an investment.

When you buy real estate to live in… It not an investment. It is a personal expense.

Where did this idea come from that every American should own their home?

I heard that Fannie Mae came up with the “American Dream” idea as part of a marketing campaign that everyone should own their own home. Great idea on their part, but I have not been able to confirm that they were the ones to initiate this idea.

Should I Rent or Buy a Home?

Most people believe that owning a home should be considered an investment. Some go as far to become “house poor” so that they can leverage themselves into a bigger home. What they don’t know is…

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Inflation – The Secret to Building Wealth in Real Estate

 

building wealth in real estate

“The major fortunes in America have been made in land.”- John D. Rockefeller

After more than 75 years John D. Rockefeller is still considered the richest man in history when you adjust for inflation.

According to the New York Times as of 2007, his net worth reached $192 Billion. Compare this with Bill Gates whose fortune is only $82 Billion. This shows how enormous the fortune of John D Rockefeller actually was. Only Commodore Vanderbilt and John Astor have even come close with $143 Billion and $116 Billion.

Rockefeller at one time controlled 90% of the nation’s oil and his fortune was approximately 1.5% of the nation’s economy. That is legacy wealth. Wealth that is hard to lose of destroy.

Even though all his wealth was made from oil, he still attributes major fortunes being made in land or real estate. That is a powerful statement.

What I am going to discuss here is one of the reasons why real estate is able to create legacy wealth. Wealth that can last for many generations if it is managed properly. Interestingly enough this is also one of the least understood benefits of owning real estate.

This post is the second part of a four part series about real estate. The last post, These Top 7 Powerful Tools Can Create Legacy Wealth from Real Estate, briefly touches on the importance of inflation to your real estate assets. I plan on going into much more depth this week.

The Advantages of Investing in Real Estate

Real estate is one of my favorite asset classes. Here is why.

In the prior post of this series I touched on a few of the reasons that real estate is such a favorable asset to invest in.

  1. You can easily use leverage to buy it,
  2. there is a limited amount of real estate
  3. Tax benefits
  4. It can create cash flow
  5. Appreciation potential
  6. It is inflation Proof
  7. You can reduce the debt in real terms over time.

Just one of these alone would be a good enough reason to invest in this asset class, but all 7 make it especially powerful. With exception of the tax benefits and the limited supply of real estate, all of the other benefits rely on inflation to enhance the performance of real estate over time. While I will discuss these in more detail, let’s first discuss what inflation is and how it works.

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These Top 7 Powerful Tools Can Create Legacy Wealth from Real Estate

real estate wealth

“Buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy.”  – Marshall Field

Marshall Field was an American Entrepreneur who lived in the 1800’s. His quote was obviously made in an era before tech stocks, hedge funds and excess money printing by the Federal Reserve. However the principal of owning real estate to become wealthy still holds true.

Real Estate is arguably the best asset class if you want to build enormous wealth. While you may have heard of real estate investors such as Donald Trump, or Sam Zell, there are countless more who are relatively unknown and are just as wealthy. Many of these investors prefer to live in relative obscurity.

What I want to show you are the 7 powerful techniques that these real estate tycoons were able to use to build their enormous wealth. While most of these techniques apply to both real estate investors and homeowners, there are more benefits from owing real estate as an investor rather than a home owner.

The 7 reasons you should own real estate as an investment:

real estate leverage
 

Leverage

Real estate is one of the few assets where you can use enormous amounts of leverage to own the asset, and banks will happily lend it to you. Leverage is a way to amplify the returns you receive on that asset, in both directions. Leverage is both beneficial and dangerous, so make sure that leverage is working in your favor.

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The Big List of Alternative Investments – 75 Investments That Can Help You Invest Outside The Stock Market

 

list of alternative investments

 

A few weeks ago I wrote about 10 alternative investments that you have never heard of. I got so much positive response from it, that I decided to add to it by creating the Big List of 75 Alternative Investments so investors could have more options to diversify their portfolio. This is available as a special report here.

In 2008, many people lost money by investing in the stock markets around the world. There was a cascade of events that caused people to flee the markets in favor of cash, safe bonds and other assets such as gold.

More than 7 years later, this fear has stayed in many investors’ psyche due to the massive losses that they took on their stock portfolios during that difficult period of time. It is hard to forget such a traumatic experience. Some investors were only a few years from retirement and they lost 50% of their money. What if the stock market had not come back so sharply? Worse yet, what if the investors sold at the bottom and stayed in cash?

More importantly, how could this have been avoided?

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10 Top Alternative Investments You Probably Have Never Heard of

 

10 Top Alternative Investments You Probably never heard of

 

“Curiosity about life in all of its aspects, I think, is still the secret of great creative people” – Leo Burnett

Most people are familiar with the stock market. There are TV stations which have the stock market and stock market related information on 24 hours every day. It is hard to escape it. When the stock market crashes, it makes the headlines in every newspaper, news station, and media outlet. When it reaches all time highs, it is on every magazine cover, even the shoeshine boys are talking about it. But what about other investments?

Huh? There are other investments?

Yes there are investments outside of the stock market. There is no rule that says you have to invest in the stock market, pitting yourself against the best and brightest investors in the world. Investors compound this problem by investing in areas that they are not experts in. Do you think that is a good idea?

Maybe there is a better way to invest…

Can You Invest Outside the Stock Market?

Peter Lynch famously said , “Invest in what you know.” While he was referring to stocks, the concept is sound. If you are an expert in technology then why not apply your knowledge and expertise into your investments. Invest in technology. Don’t invest in horses, or diamond mines. That would minimize your advantage with your investments. This does not mean you should not diversify your investments, rather it means you should take advantage of your particular skill set and expertise and ply it to your investments to make good choices.

While the stock market provides investors easy access to a wide variety of companies, it is somewhat limited to publicly traded companies. These companies cover a wide range of investments: technology, timberland, transportation,  real estate, commodities,  health care, etc. , but they are still stock shares in companies run by other people.

You could also invest in bonds of these companies. This is also an investment strategy many people and institutions use to invest their capital. It is a good strategy to use, but why stop there? What else can you invest in?

There is a whole world of investments outside the stock market that individuals and institutions invest in. There are no limits to these investments except for your creativity.

What are Alternative Investments?

The term alternative investments requires some explanation due to its lack of definition in popular media. The term alternative investments does not actually refer to any specific group of investments. It is only a descriptive term typically used to describe investments outside the stock market. This includes assets that are also available in the stock market, but available individually. The first investment on the list is a good example of that.

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