Understanding The Flow(TM) of Alternative Investments
Introduction
Have you ever wondered why some people get uber-rich from their ideas while other people struggle through life? I have. I did for a long time until I discovered this little secret that I'll share with you today.
I didn't invent this and it may not even be an original idea. When I lost everything during the 2008 recession, it traumatized me for a few years. I hated what I'd done to my family, as I thought I was doing everything right. 401k, check. Spend less than I make, check. Own my home, check. Emergency fund, check. Invest in the stock market, check.
“The Flow (TM) opens up choices and decisions to build a life of YOUR dreams rather than building someone else’s dream.”
So what happened and why did I lose it all? This was the question I had to answer. More importantly, I had to answer how can I keep more.
That's when I discovered The Flow (TM). Kiyosaki, Trump, Buffet, James, Allen, Hill and so many others of the sharpest investors in history laid this out beautifully in multiple different ways. After several years of reading and seeing it, the dam broke. I was hooked.
First, let's start with what most of us are taught and look at where it comes from.
HISTORY OF FINANCIAL EDUCATION
If you're like me, I grew up in a working-class home and was not taught anything at home about money other than a few of the staples. Work hard. Get good grades. Get a good job. Pay your bills on time. Save (if you can).
Notice college wasn't on my list. Education was not a high priority at our home. Only through high school. Then get out there and work hard.
I understand in some homes, higher education is pushed because it can lead to higher-earning jobs. With higher earning jobs, add things like investing in the market, max out your 401k, set up 529 plans for kids’ education, emergency funds, etc. I learned those things later while working for the bank. I thought I had it all figured out.
After the recession, I realized that the banks and Wall Street are the major sources of our financial education. They teach people how to invest in their financial products to build wealth. Isn't that interesting? The ones profiting from our investments are selling the wealth-building tools? When things go south (which they do), those products lose a lot of value.
Look at the last 40 years
LatAm sovereign debt crisis of 1982
Savings & Loans Crisis of the 1980s
The stock market crash of 1987 - ie. Black Monday
Junk Bond crash of 1989
Tequila Crisis of 1994
Aisa Crisis of 1997 - 1998
Dotcom bubble of 1999-2000
Global Recession 2007-2008 (lasted into 2012 for most)
Global Pandemic 2020-2021
Today - Fears of another looming Recession & high inflation?
Notice one thing in common? The banks and Wall Street are at the epicenter of all these. So why do we keep investing in these "doomed to fail" scenarios?
I'm here to offer another solution...
THE FLOW (TM)
Before we get to the solution, I'll share this very elementary building block scenario that will explain why the rich keep getting richer. They understand some fundamentals that the rest of us are not taught. I like to think about it as the Truth About A LIE!
Making money is very simple. Money is simply a medium of exchange for things of value. Our entire world revolves around the idea.
Some people make money by trading their time for hourly wages or a salary. This is the vast majority of our population. We keep looking for higher-paying wages. That's what the schools teach us to do. Most of our parents teach us this, as that's all they know.
The wealthy are different. They make money differently. They invest and allow their money to make money. They've learned how to make money come to them rather than going out to trade their hours for it.
Look at the basic building blocks A L I E - Assets, Liabilities, Income & Expenses.
The majority view it as income - our job. A steady paycheck, bi-weekly or weekly checks - & expenses. Most have liabilities like car loans, home loans, student loans, and credit cards that create expenses. The goal is to have more money than a month rather than more month than money, right?
Take a look at the direction money flows for the average person. Paycheck > Person > Bills > Paycheck > Person > Bills. Notice the Flow (TM). The individual is a revolving door for the money as what comes in is = to what goes out.
Wealthy people are different. Their Flow is different. Revenue > Person > Bills & Investments > Revenue > Person > Bills & Investments > Revenue > Person. Notice how the Investments kick revenue back to the person so the Flow (TM) actually redirects the cash to always find a path back to the individual, thus, increasing wealth.
How do we do this? I'm glad you asked.
ALTERNATIVE INVESTMENTS
Alternative investments refer to things that are not sold by banks and Wall St. These include businesses, private equity, notes, real estate, art, luxury cars, etc. The goal is to create the Flow (TM) in your life creating a non-stop wave of cash flow into your life and investments. This cash flow funds your lifestyle rather than trading hours for dollars, the Flow (TM) through alternative investment vehicles gives you FREEDOM in your life to live by your rules! The Flow (TM) opens up choices and decisions to build a life of YOUR dreams rather than building someone else's dream.
At Groundswell Assets, we chose to focus our efforts on commercial real estate, in particular, multi-family apartments. Why? We are investing in a few things when we invest in multi-family real estate.
First, multi-family is a business with staff and a product line, a.k.a. apartments.
Second, Cash Flow - from rents and other fees on the property
Third, Forced Appreciation - the value of the business/apartment community is based on the net operating income which we drive in multiple ways.
Fourth, Tax advantages - The IRS is our partner in incentivizing investment in real estate through depreciation which can greatly reduce tax liability allowing us to keep more of what we earn.
Fifth, Hedge against Inflation - during high inflationary periods, rents tend to rise increasing cash flow and forced appreciation.
Sixth, Hedge against Recessions - during recessions, fewer people tend to buy homes, so they rent which drives demand and upward pressure on rents.
Multi-Family investing is thought to be unattainable to the average person. I'm here to tell you that's not true. In our article "How to Accelerate Your retirement through self-directed IRAs", I share how much capital is sitting on the sidelines in the average person's life that they didn't know they could tap into building a very different future.
What we do is simple. Let's use a $100,000 investment example. When buying a multi-family asset, most (if not all) of us do not have $15-20 million dollars lying around to invest. So we pool our resources through a process called syndication buying. The General Partners (GP) are the operators of deals who find them, structure them with the SEC, and then make a private (non-Wall St) offering to Limited Partners (LP) for a $100,000 stake in that Multi-Family property. On a $20 million dollar asset, the bank will cover 70% or $14 million needed to buy the asset. Then the GP investors raise the remaining $6 million plus repairs and closing costs through the syndication. Assuming $100,000 investments, there could be as many as 60-75 investors all coming in to acquire this asset.
Each month, LP investors receive cash flow through preferred equity AND common equity distributions. Then during a capital event (such as a sale or a refinance) LP investors get a return of their initial investment plus upside equity based on their pro-rata investment.
In the stock market, with a 6% return, it can take up to 12 years to double your money. In multi-family investing, the returns are much higher and can double your investment in as little as 3-5 years exponentially increasing your lifetime returns. Now consider that if you're using money in a self-direct IRA, your wealth grows either tax-free or tax deferred. It is next to impossible to achieve this in the stock market.
That's why we, at Groundswell Assets, provide opportunities to help our partners and investors make returns on their money that will truly change their lives. We have regular opportunities to invest that can be seen on our website. We want to break the chains of what we've been taught and help more people live the American Dream by getting into the Flow (TM) with Alternative Investments.
Let's be honest. As operators, if we had the cash to invest and keep these returns, we would probably do that. The truth is that just as much as you need us to fractionalize and syndicate these offerings, we need you to be our partners and invest alongside us in these deals. As we take our $100k and add it to your $100k, together we can rewrite our futures!
