104: The Stock Market has Killed Millenial’s Retirement Plan
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The 2022 stock market crash is the worst thing to happen to your retirement plan!
This sharp decline after a banner 2020 and 2021 for Wall Street is extremely unsettling to many investors especially, millennials who entered the investing world largely after the 2008/ 2009 crash and have never experienced a huge drop in their investment nestegg before.’
You may be wondering if the worst of it is over? And what alternative assets I should be looking to invest in instead of risking it all in the Wall Street Casino. ♥️🎲🎰
Today, we will go over what alternative asset class you should pivot to as the stock market continues to bleed away your wealth. And stick with us until the end to get access to our Ultimate Passive Income Guide.
Let’s get into it.
Before we jump into the alternative asset class you should pivot to, we want to share some astonishing stats about the stock market downturn, especially for the tech-leaning investors. It is going to be bloody for the foreseeable future.
As of November 21, 2022, the S&P 500 is already down 17.1%. Nasdaq a major benchmark of Silicon Valley Tech Companies, has experienced a nearly 30% declined.
According to Forbes even “a sustained equity rally in the second half of October barely lifted the stock market out of its 2022 doldrums.” The same articles goes on to cite a quote from Greg Bassuk, CEO of AXS Investments as saying “inflation is going to be remain the investors narrative in November and frankly, through the end of the year. The market’s hyperfocus on this single factor means it should remain the source of volatility and uncertainty in the month ahead.”
Sharp and sudden crash in the stock market took a huge bite out of many investors’ retirement savings including 401(k)s. The market skid has caused tremendous anxiety amongst investors.
The woes with the stock market really started with the abundance of cheap money flowing into the economy since the start of the COVID-19 pandemic. Not only has the FEDS printed trillions of dollars, but they also directly bought shares of above mentioned companies amongst others which contributed to skyrocketing prices.
These artificial measures aren’t based on the fundamental strength of the underlying business and thus once the FED stopped feeding cash into the system, these publicly traded companies are left with just a trickle of fuel to support their growth.
Sadly a lot of retail investors, that’s us, common folks, tend to invest in companies simply because they are recognizable to us. Investing into companies based on speculation with no true fundamental strength, some of which are yet to reach profitability. Clearly, this is a problem– but there is a solution.
The speculative nature of the market can be avoided with apartment investing. We’ve said it once and we’ll say it again. When it comes to building your wealth, there is nothing with a better risk-adjusted return than multifamily apartments.
Multifamily apartments are our bread and butter. We know it well because we have seen the ROI’s, witnessed amazing returns in volatile markets, and have saved money in taxes to seal the deal. If the stock market is the disease that is killing the Millennials Retirement Plan, then multifamily apartment syndication is the antidote we need to help people recapture their wealth and regain financial freedom.
No. 1: Multifamily Apartments Are Hard Assets
We don’t have to tell you the difference between eating amazing food at a restaurant, versus watching food being prepared on the Food Network or your Instagram feed. Until Taste-a-Vision becomes a thing, there’s like nothing like enjoying a good meal in real life.
Similarly in real estate, and to illustrate our first point, there is a very real difference between paper and hard assets. Bonds and cash simply don’t have the value they used to because they lose their purchasing power when prices for goods and services are rising. That same $100 you used to budget for groceries 🥖🥓🍟seems like a lot less these days.
Commercial real estate is generally a fantastic hedge against inflation because it holds true intrinsic value, is in limited supply, and is a yielding asset. We know “real estate,” especially commercial real estate, can be a broad term. For us, we chose multifamily apartments to invest in on the simple truth that everyone needs a place to live. Shelter and safety are the minimum for humans to function.
Not to mention, we view multifamily apartments as one of the best inflation hedges within commercial real estate because lease structures in multifamily are far better positioned to benefit from an increase in inflation than other asset types. Other commercial real estate assets might have lease durations of five, seven, or even ten years, but multifamily leases can reset at six, nine or twelve months. And when leases reset, that gives us the opportunity to reprice rents as prices increase.
The annual turnover of an entire multifamily property is usually around 100 percent. This high frequency provides investors the opportunity to quickly react, increase rental rates, and hedge against rising inflation.
No. 2 Multifamily is an Income Producing Investment
Everyone wants to see their investment come back to them immediately. And doubled. This is a ‘have everything now’ type of generation we’re living in, which means a lot of people don’t have the patience to wait and see.
This brings us to our second point, multifamily is an income-producing investment. 💰
One of the biggest benefits of being a passive investor is seeing your gains come in on a quarterly basis, unlike the stock market where there’s no tangible benefit or gains realized until the stock is sold.
Furthermore, buying income-producing assets helps reduce the risk, because the returns are based on the fundamental strength of the property and not on speculation of future value.
You know, I actually read something that illustrates this point exactly.
Oh yeah? What did it say?
That you never want to date a person who has potential but is already potenched.
Because it’s true– you want to invest in something you know will produce value for you, you don’t want to waste your time on scrubby stocks that may or not make it for ya. 🥰🥰
All of this to say, how much income should you expect? Our professional opinion, and the target you should be going for, is that your cash flow annual average should be anywhere between 5-7%.
No. 3 It’s All About Value
Our third biggest reason why multifamily apartment syndication can help you reclaim your financial freedom is through value-add.
We’ve said this before and we’ll say it again, much like the housewives, even apartments need to get a look work done.
Hey! You’ve seen the tabloids go crazy every time the Kardashians get a new face, hence, adding value to the already legendary last name. No press is bad press, right?
I’ll leave that one to the tabloids. For us, the reasons are simple as to why you want to invest in a value-add multifamily property. You know they’re going to need repair and upgrades, and adding value helps to justify the rent increase, which adds to your return overall.
Not every sponsor sees it this way, and some simply don’t have the ability, but it’s one of the best reasons to consider purchasing a particular property. Plus, there are so many ways to add value, big or small. From painting the exterior and landscaping, to complete unit upgrades like new kitchens and baths.
Adding new technology is also a good one and a huge draw for renters. Not to mention adding luxury amenities like a washer and dryer, EV charging station, valet trash pick up are all wonderful ways to increase rent.
But do you know what doesn’t see your value as we do? Stocks. Purchasing stocks does not allow you to add any value to them, since you have no control over the company’s management and strategy.
No. 4 Get Those (Leverage) Gains
Number four is all about gaining leverage. 💪
If you purchase stock on margin, you’ll need about $50,000 in order to buy $100,000 worth of shares. And if the stock loses value, that means you’ll have to come up with more cash or the stock will be sold to cover your position.
The beauty of investing in real estate is that you can do a lot more with a lot less versus what you can with stocks. There are only three times where the value of the multifamily apartment matters: when you buy, refinance or sell.
At no other point in time does the underlying value of the asset impact operations. It doesn’t impact how much we can charge for rent nor impact the mortgage.
No. 5 Tax Hacks
You know the phrase, nothing is certain in this life but death and taxes. Taxes are, inevitably, a part of this life. However, our guess is the first person to say this probably wasn’t investing in multifamily 🏢 apartment syndication.
Paper loss sounds like a negative, but honestly, it’s nothing but gains. As in, gaining an advantage above other investors. Unlike the stock market where you pay capital gains on profits, multifamily properties let you pay little to no tax on capital gains due to bonus depreciation, which can be sizable.
Imagine this scenario: An investment of $100,000 may yield a $100,000 K-1 paper loss and can be used to offset like-kind passive gains. That’s a one-to-one ratio between your investment and your paper loss. We don’t mind the ghosting effect when it comes to our tax statements by the time April arrives.
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No. 6 It’s Called Passive for a Reason
Our last point today is arguably the most important. It’s called passive for a reason. We don’t preach on our corner of the internet because we love to hear ourselves talk– We’re introverts, remember?
But because we know there’s a better way to live and believe everyone should have fair and equal access to financial freedom and the life they envision for themselves.
In a recent poll ➡️ when asked if people would rather work 60-70 hours a week versus spending a dozen hours on the weekend trying to figure out this investment gain, nearly 100% of people voted to not work more than those 60-70 hours.
Instead, most people would prefer to have the option of doing the least amount of input for maximum results.
Makes sense to us! And if you’re sitting there thinking “that’s just not how life works,” we hear you because we subscribed to the same type of thinking for so long, too. But you’re missing a crucial element to this piece– you don’t have to rely on just you to achieve this. Half the battle is getting the right people on your side and knowing where to look and listen.
The ability to leverage people’s expertise, talent, and time is crucial to living the lifestyle of not just your dreams, but also theirs. You have an incredible ability right now to start looking for people who know where to look, have been in this game a while, and who want to see you succeed.
Hint! They’re closer than you think. Like, in your ears, or on a speaker, or even on your screen close.
Multifamily apartment syndication is thee way to secure your investments with the least amount of risks for all the reasons we listed above and more. It allows passive investors to participate in large investments with a strong risk/reward profile while not managing the not-so-glamorous parts like tenants, toilets, trash, and termites.
Your financial future is dependent on no one else but you. How you leverage your time and utilize the resources around you will make you a better and stronger investor in the long run. The stock market is a way but we certainly wouldn’t call it the way. If history has shown us anything, it’s that those wolves on Wall Street can’t always be reliable.
We’re all human. We all make mistakes. The economy is fickle and nothing in this life is guaranteed.
So when you see your 401K not cutting it, and you’re stressed about the future, know that housing isn’t going anywhere and your investment into apartment syndication can reap some incredible returns for little time.
You can reclaim your American Dream. ☁️
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