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Forget Buying a Rental Property. Consider This Passive Income Investment Instead – The Motley Fool

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One of the many ways to generate passive income is to buy a rental property. However, unlike most other passive income investment options, real estate investments often require that you actively participate in the business to generate income. Unless you hire a property manager, you’d need to find and manage the tenants, take care of any maintenance, and pay all the bills.

There are many other ways to passively invest in real estate without buying a rental property. One that mimics direct ownership without any of the management responsibilities is participating in real estate syndications. They allow you to become a limited partner in a single real estate asset without lifting a finger to collect the passive income.

Image source: Getty Images.

What are real estate syndications?

A real estate syndication is when a group of investors pools their money to purchase a property that would be too large for a single investor to buy, like an apartment complex, office building, or warehouse. The sponsor of the deal, known as the general partner (GP), will identify an attractive property they desire to purchase and offer other investors, known as limited partners (LPs), the ability to participate in the deal. The sponsor, usually an established real estate company, will manage the property or hire a property manager on behalf of limited partners. Many sponsors will offer the opportunity to invest in a real estate syndication deal via an online marketplace like CrowdStreet or EquityMultiple or directly through their website. 

Why consider a real estate syndication deal?

Real estate syndication deals have several benefits:  

  • Earn passive income: Once an acquired property has stabilized, the GP will start making cash distributions to LPs. It’s truly passive income because you’re an investor in the property, not the landlord.
  • Participate in the property’s long-term upside potential: LPs own equity in the underlying property. Because of that, they benefit as it appreciates in value, realized through a refinance or the eventual sale of the property.
  • Invest alongside experienced real estate professionals: GPs tend to have a lot of experience owning and managing real estate throughout the market cycle. Because of that, LP investors can invest alongside experienced real estate professionals with excellent track records.
  • Diversify your portfolio: The value of private real estate investments doesn’t follow the stock market’s daily gyrations. Because of that, they do a better job than publicly traded REITs at diversifying an investor’s portfolio from the volatility of the stock and bond markets.  
  • Access to properties you can never afford to buy: While real estate investors might be able to afford a duplex or a couple of single-family homes, they likely don’t have the capital to buy an apartment complex or office building. With real estate syndications, you can own a piece of a property you couldn’t otherwise afford to buy.

The cons to real estate syndications

One caveat is that most real estate syndications are only open to accredited investors. To qualify, an investor needs a net worth of over $1 million (excluding the value of their primary home) or an income above $200,000 annually ($300,000 if married). While many investors likely don’t currently meet those qualifications, they could eventually qualify if their net worth grows to exceed $1 million. It’s also possible that the SEC could make changes to the definition. Meanwhile, there are occasionally opportunities open to non-accredited investors.

Another detracting factor is that most real estate syndications have a high minimum investment, usually between $25,000 and $50,000. That’s a much higher minimum than many other real estate investments, such as a real estate investment trust (REIT). However, it’s lower than the typical initial investment required to purchase a rental property. 

These are also illiquid investments. Many syndication deals have three- to 10-year holding periods, and you can’t sell your LP investment until the GP decides to sell the property.

A final issue with real estate syndication deals is the fees. Most GPs make money through a promote, a percentage of the returns above a certain threshold. They can be substantial, with profits often split 20% to 30%/80% to 70% between the GP and LPs upon a refinance or sale of the property.  

Real estate syndications offer a passive alternative to rental properties

Rental properties often require active management, making them a less passive investment. On the other hand, real estate syndications are passive investments managed by seasoned real estate professionals. Further, they provide access to property types an investor couldn’t afford on their own, enabling them to diversify their real estate portfolio. That makes them worth a closer look for those who qualify as accredited investors and have the capital they want to invest in generating passive income from real estate.

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Top 3 investment bets for millennials to beat market volatility and make money – Economic Times

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There is a thrill for many to do things that are so-called out of the ordinary. As mentioned in the first part of this story, millennials are the impatient investor class who are all up to ignore the stereotypes, bet even on riskier investments.

On that note, in the first part we talked about three new-age investments that go beyond the ordinary for the millennials or the digital natives. To know more about millennials and more about the investment options, you can read the first part here:
Top 3 new-age investment bets for millennials looking to take risk and earn big

Nonetheless, it is never bad to be cautious. A roller coaster ride is fun at the amusement parks but when it comes to using the hard-earned money, no one will be keen to lose their savings. It is often said volatility is the daily crux of the market. Experts also opine it can be a motivation to capitalize on the imbalances.

“Volatility is the ghost that haunts you only if you look at it. The best way to avoid volatility is to ignore it; don’t trade into a market when there’s euphoria or out of it when there’s panic. Instead, constrict and hold a diversified portfolio for the long term, or better still, a mutual fund, which isolates individuals from volatility shocks,” Utkarsh Sinha, managing director at boutique investment bank firm Bexley Advisors said.

The economy too is at a volatile juncture with slower-than-expected growth recovery and galloping inflation. For stocks, the plausibility of earnings growth is diluting and valuation is said to trade below the long-term average. So, what could be better than to have some safe options even during a volatile period, enjoy the thrills of new-age investments and still achieve the monetary goals?

Girirajan Murugan, the chief executive officer at FundsIndia, lists more instruments that will help millennials to avoid some volatility:

InvIT – Infrastructure Investment Trust

This involves a trust channeling investments from individuals/institutions toward infrastructure projects. In a developing country like ours, the demand for good infrastructure is huge and perennial, in my opinion, Murugan said, adding that an investment in an InvIT with a good management will be a fruitful investment for the long term.

However, most infrastructure projects are subject to government regulations and interference. Change in the political space could affect such investments. Lack of choices to choose from is a severe disadvantage. Being a budding avenue, the participation in this investment is comparatively low. This means that selling them in the current market could be difficult. However, if the market for this type of investment takes off, then this concern will be void.

REIT – Real Estate Investment Trust

Similar to InvITs, REITs pool resources to invest in real estate assets. “Real estate investment has not lost its flair even today, despite being a conventional investment. That’s exactly why I’d like to call this a “grandfather-approved investment,” Murugan said.

By enabling part ownership, REIT has made real estate more accessible for all sections of people. REIT investments buy you ownership to the property in question, proportionate to the investment made. The income from this asset shall also follow the same proportion.

There are 2 categories of REIT – tradable and non-tradable. Some non-tradable REITs disclose the share values only after 18 months. Non-tradable REITs also carry the disadvantage of less liquidity.

ESG (Environmental, Social and Governance) Investing

In this mode, the investment is directed toward the development of businesses that toil for the betterment of the world. One can either invest through readily available ESG Mutual Funds, or they can identify the right companies and invest in their stocks.

“As far as ESG investing is concerned, it’s a thumbs up from me, and I say this from an ethical standpoint. The reason is that a good planet and a harmonious society are something we can’t survive without. When it boils down to it, man will eventually be forced to choose survival over profitability. If you choose to do it for the purpose, rather than for profitability, this may be one of your best investments,” Murugan said.

ESG assets are on track to exceed $53 trillion by 2025 and represent more than a third of the $140.5 trillion in projected total assets under management (AuM), according to Bloomberg Intelligence.

Bexley Advisors’ Sinha said millennials are at the best point of their lives currently to invest, as they have the bulk of their lives ahead of them. With these options explained, the millennials perhaps have better insight on the options available. Remember how we introduced the generations in the first part of the story and talked about an angry young man from Bollywood? Well, keep the swag and invest with prudence.

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How rising interest rates impact insurers' investment decisions – Canadian Underwriter

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Recent interest rate hikes aimed at curbing inflation, and the potential for more rate hikes next year, has the insurance industry keeping an eye on its investment returns.

But while the transition from a low-interest-rate environment to a higher-rate environment will create short-term challenges, it also creates a long-term opportunity, noted Gord Dowhan, CFO at Wawanesa Insurance in a recent Canadian Underwriter interview.

“Over time…higher interest rates can create an opportunity for us to increase our yield moving forward,” Dowhan said. “As bonds mature, it gives us the opportunity to invest at a higher rate.

“You’ve seen this experience in Europe and elsewhere, where they were at zero percent and negative interest-rate environments in some cases. Having higher rates is healthier than being in that environment [of extremely low or negative interest rates], and there’s definitely an opportunity for us to pick up yield and investment returns within our investment portfolio as those instruments mature.”

For an insurer’s portfolio, Dowhan noted a rising interest rate environment makes certain investment instruments more attractive. And his firm has some of these in place, including preferred shares, limited recourse capital notes, and floating-rate or variable-rate debt.

“We’re also looking at real estate and infrastructure investments. From a rate-reset, preferred-share perspective, this gives us the opportunity to increase our yield; the dividend yield resets regularly based on five-year government bond yields,” he said.

“In a rising rate environment, this gives us an opportunity to increase our returns. Floating-rate, or variable-rate, debt has become increasingly attractive as rates rise. We’ve invested in and will continue to invest in floating-rate debt and look for opportunities to grow our portfolio there.”

What’s more, Dowhan said that during high inflationary periods, real estate and infrastructure tend to outperform other asset classes.

“The underlying instruments within these products, leases and other revenues that produce revenue streams linked to inflation, is one reason why they typically outperform other asset classes during periods of high inflation,” he told CU. “So, opportunities exist for us to enhance our yield in the long term and continue to deliver value for our policyholders.”

This article is excepted from one that appeared in the August-September issue of Canadian Underwriter. Feature image by iStock.com/porcorex

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Landa Sees More Growth, EPac Gets New Investment And More | Label and Narrow Web – Label & Narrow Web Magazine

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Demonstrating its commitment to supporting its growing customer base and interest from future customers, Landa Digital Printing is aggressively expanding its global team and business development infrastructure with the appointment of several new sales professionals.

New Landa appointments include:

  • Bill Lawver, Inside Sales Representative
  • Michael Weyermann, Regional Sales Manager – Northeast
  • Steve Smith, Regional Sales Manager – Southeast
  • Danny Green, Regional Sales Manager – Mideast
  • Michelle Weir, Regional Sales Manager, Southwest

Sharon Cohen, chief business officer, Landa Digital Printing, comments, “We are delighted to have secured the talent and experience of Bill, Michael, Steve, Danny and Michelle. Their highly relevant backgrounds will be instrumental in supporting our growth plans across North America, while also supporting the wider team to ensure continued high customer satisfaction, innovation and success.

Meanwhile, Amcor has announced a further strategic investment of up to $45 million in ePac Flexible Packaging. The investment will increase Amcor’s minority shareholding in ePac Holdings LLC.

Amcor’s executive vice president of strategy and development, Ian Wilson, comments, “This additional investment reflects our confidence in ePac’s entrepreneurial team and their proven ability to rapidly scale in the high growth, often higher value short run segment. Since our initial investment last year, we have been deeply impressed with ePac’s focused and innovative business model centered around deploying a very high level of digitalization and customization. ePac’s proven digital technologies enable the delivery of exceptional service levels and significantly reduced lead times. These specializations are designed to meet the unique speed to market and service needs of locally based small to medium customers, skill sets that are highly transferable to areas of Amcor’s core business.

Here are the highest-trafficked news items for the week ending on September 23:

1. Landa announces five senior additions to NA sales team
2. Amcor expands investment in ePac Flexible Packaging
3. FLAG enjoys productive Labelexpo Americas
4. Mondi invests in new research and development center in Germany
5. S-OneLP recognized as Global Label Award winner

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