There are a multitude of places you can put your money to invest, but it is hard to know what options are available to you, and if they are the right fit. We know that the very wealthy choose to invest in real estate, but that can feel unobtainable to someone working full time in tech. You’re so focused on building the newest and greatest technology that you don’t have time to even think about real estate investing.

I’ve been there before when I was working at a big tech company.  I was getting a high salary and Restricted Stock Units (RSUs) but didn’t feel financially educated enough to invest outside of the stock market.  The stock market didn’t feel like a great place because I felt like I was gambling by betting on stocks and didn’t particularly like the volatility of the market in general.  I was interested in real estate, but it seemed like way too much work.  Now that I’ve been investing in real estate for years, there are a bunch of things I wish I knew back then.

I’m sure you’ve seen the stock market tank a few times by now.  Maybe you’ve felt it as well by having a large position in the stock market.  Maybe it was in 2008 or more recently when coronavirus hit.  Either way, it doesn’t feel good to always wonder – “is this the right time to sell or is it better to wait?”  What if there was a way to have your equity grow, but also give you passive income on a regular basis?

The exciting thing is, there are ways to get into real estate investing without all the work of managing the property and tenants.  You can get regular distributions and build out passive income.  When I was at a big tech company, I wish I knew about the following 5 things:

1. There are other places to invest besides the stock market and index funds

There are a lot of tools popping up that make it easy to invest in the stock market or index funds.  You have your 401k provider who pushes you to index and mutual funds.  There are apps like Robinhood and Stash that make it really easy to invest in stocks, but these are not the tools that the extremely wealthy use.  In fact, the very wealthy invest a large amount of money in real estate and much of that is in places where they do almost no work at all.  You can passively invest in real estate by providing capital to the investment and someone else handles the day-to-day.

2. Think of your RSUs as cash

Leaving all of your company stock in one place, especially if it is the place you currently work, makes the majority of your wealth controlled by the success or failure of that one company.  It is the opposite of diversification and leaves you without control of your financial future.

When I first worked at a big tech company, I was right out of school.  That meant all of my wealth was in the form of my salary or stock in the form of vested RSUs.  While the company did well, keeping all of my wealth in one place was not a wise decision.  My wealth and well-being were out of my control.

3. Investing in real estate does not have to mean dealing with tenants, toilets, and termites

We are all familiar with the fix and flip where you patch and paint yourself or self manage a property where you may get a phone call about a running toilet at 3 am.  For some, that might sound appealing.  For many, not so much.  There are other ways, one of which is multifamily syndication, where you can invest passively, and get the upside of real estate ownership without ever dealing with on the ground problems.

4. Investing in real estate can create passive income streams

When I first thought about real estate investing, I thought immediately about appreciation – buy, hold, and sell for profit.  Real estate investing can be so much more than that.  In a multifamily/apartment syndication, for example, the passive investor can receive quarterly or monthly distributions on their investment by the tune of 8-10%.  That’s $10,000 per year on a $100,000 investment from the income generated by the property.  The apartment complex also appreciates in value over time and by making improvements that force appreciation to be higher than natural market appreciation.  The complex can be sold for a profit so you get the benefit of appreciation as well.

5. There are tax benefits to investing in real estate

Going back to the extremely wealthy and why many invest in real estate is the potential tax benefits.  Even when you’re not the sole owner, you can still get benefits like depreciation to offset the income stream. Another benefit is something called a 1031 exchange which allows you to defer taxes when the property is sold for a profit. (I’m not an accountant so you should talk to yours as to how this might help you decrease your taxable burden.)

You can definitely keep doing what you’re doing, but it is probably frustrating not feeling informed about other investment strategies.  The stock market can be volatile and may not feel like the place you want all of your wealth.  Furthermore, the stock market doesn’t really make sense if you want to create passive income or leverage the tax benefits.

If you want to take hold of your investment strategy and have more control over your wealth, schedule a call with us to learn more about ways you can passively invest in real estate.