Why You Should Consider Private Placements to Grow Your Wealth
Private placement syndications are the best option for growing and protecting wealth that I have found in 20 years.
Let’s explore why in 3 simple steps:
They help investors diversify their risks
Investments serve a specific investor goal
Investors can enhance their returns with tax benefits rather than relying on the government to determine their tax bills
You may notice I’ll use private placements and syndication interchangeably. Private placements are simply private deals that are often referred to as syndication.
Let’s unpack each of the 3 benefits and why they are so powerful.
First, diversification. It’s just as important to protect your capital as it is to grow it. Robert Kiyosaki’s book “Rich Dad, Poor Dad” really re-framed this concept for me. His book highlights the importance of having a diverse set of income streams that exceed your monthly expenses. Without this, you are leaving your investments at risk.
You will hear professional financial analysts talk about the importance of diversification in the stock market. However, time and time again we have seen when the market corrects, everything goes RED! Here is an example from last March:
This isn’t the first time we have seen something like this. The same thing happened in 1999–2003. That time it took the market 4 years to recover.
So far, investors in equities have been lucky. However, if you were going to retire in March of 2000 or March of 2020, you would be incredibly nervous if your entire life savings was in the diversified stock market.
Did you know syndications offer investors targeted projects for a fixed amount of money that often pay quarterly payouts?
These payments are backed by underlying assets like real estate! These private placement deals are a great option to diversify risk into an asset that isn’t tied to the stock market. They can protect investors’ capital by holding a physical asset and generate cash flow quarter over quarter.
Secondly, private placements allow investors to pick a specific asset class to achieve a goal. Investors can pick assets for growth/appreciation, stable quarterly payments, or to solve tax problems.
They also can strategically invest in different projects to diversify risk across markets, asset classes, and geographies. This allows investors to achieve the same returns, and sometimes it’s better with less risk!
For example, an investor could invest in a vacation rental in Belize and an apartment development in Tampa Florida. That investor might have a total of 100K invested ($50,000 in each), and they now have the benefit of diversification across different markets, asset classes, and geographies. This would provide significantly less risk while allowing the investor to benefit from the forecasted returns of each project.
It’s also worth noting the investor can benefit from a larger portfolio, so they are taking less risk if there is a problem with a single property. This means instead of buying one rental house for 100K, the investor has two projects with more properties to contribute investment returns. This way, if something happened to one of the apartments (such as a pipe bursting) it would be a small decrease in the expected return versus if the investor bought a rental house.. The investor still gets all the tax advantages of the real estate in the syndication; however, they get to share the risk with other investors on a bigger portfolio of properties!
Lastly, private placements allow investors to take advantage of tax laws that stimulate the economy. Instead of relying on a one size fits all capital gain tax, investors can tailor their investments to create housing in communities and offset gains with depreciation.
Investors could invest in a carbon capture project to offset other taxable income from an employer. Tom Wheelwright passionately highlights that most people’s largest expense in their lives is taxes. He is so passionate that he developed his entire career around it and founded WealthAbility.
Strategic investors ensure they have a comprehensive approach to achieve their goals while minimizing risks. These often-overlooked benefits can offer peace of mind for investors. They can passively invest into a professionally managed project and not have to worry about buying or selling at the right time and holding back their gains to pay capital gain taxes on the hard-earned capital they put at risk.
Over the next few weeks, I will highlight how investors can invest in private syndications to take advantage of increased cash flow, reduced risks, and tax benefits!
If you would like to take action today, schedule a call! Until next time, continue to invest in your education and share the wealth!
Podcast of the Month: Money with a Mission
Be sure to check out the Money With Mission Podcast hosted by Dr. Felecia Froe. MWM is an investment company focused on empowering professional women to build wealth and achieve financial freedom through social impact investing.
Until Next Time, Share the Wealth!