What do the Wealthy Invest In? (Part 2)

Syndication

Last week I described what the wealthy don’t invest in.  This week I’ll go into what they do invest in and why.  As I discussed last week, I’ve looked at thousands of financial statements of the wealthy during the course of my career and there are similar patterns in the wealthy person’s investments. 

For a 50,000 foot overview, they invest in tangible assets like businesses and real estate, things that can be secured or collateralized.  They invest for cash flow.  If the investment is not providing cash flow they are generally not interested in investing. 

The wealthy invest in people, ideas and projected business plans.  They are not investing in real estate that they have to manage on a day to day basis.  They are not interested in getting the call at 2am to fix the toilet or heat.  They invest “PASSIVELY”.  This means they find a team with a great track record and business plan and a compelling piece of real estate. 

They invest their money and the team actively manages the project daily and sends the wealthy quarterly reports and a check every month.  In this type of investment the wealthy get to take advantage of the same tax benefits as if they had a single family rental i.e. depreciation and get a portion of the appreciation when the property sells. 

This type of real estate investment is called a syndication.  You may be thinking that is well and good Stephanie but I’ve never heard of this for one and secondly is this just for the super wealthy?

Syndications have been around for a long time.  They have been utilized largely by big banks, insurance companies and the very wealthy because of the great returns and low risk they provide.  But you may qualify to invest in a syndication depending on the project and team.  Next week I’ll talk about syndications and if you can qualify to join one.   

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