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EL Johnson Sep 11

For years we’ve been trained to look at the stock market as a safe and solid source of wealth building, while that may be true in some cases, there are other ways to build wealth that don’t include tying your money up securities.

We touched on the topic of alternative investments before, so this can be a defacto part 2. Yield Street came up with 5 wealth building alternatives that don’t require investing in the stock market, along with a handy difficulty scale. Check it out below.

Rental properties and Vacation homes:

The drop in homeownership rates has led to a rental boom, so purchasing a second property can be a great way to boost your finances. Rental investments can generate returns plus any rise in equity; however, it can be difficult to be a passive landlord. If you don’t want to manage tenants and handle maintenance yourself, you’ll need to hire a trustworthy property manager. If you want to build equity, you also must purchase property in a market that has strong interest in rentals and vacation homes. While many online portals will give you a feel for the market, you will need to build your own payback/investment model.

Setup: Hard
Time commitment: High
Money required: Medium ($20,000 to $100,000)
How: Self-research


Commercial property:

The approach is similar to that of rental properties, but in this case, you’re buying into a one- or two-star hotel (think Days Inn [WYN] or Holiday Inn [IHG]) or a strip mall. The initial investment is significant, and you need to vet potential partners to ensure they’re reliable and have domain expertise. But if you’re willing to put in the initial time and capital, you can expect a 6 to 12 percent return, compared to a 1 to 4 percent return on a single-family home. LoopNet (NASDAQ:LOOP) is a great source to get started on research.

Setup: Hard
Time commitment: Medium
Money required: High ($250,000+)
How: Self-research


Franchise play:

Invest in a single franchise or a group of successful chains, such as Subway or Dunkin’ Donuts (NASDAQ:DNKN). The franchise industry is set to grow by 1.7 percent this year, generating up to $552 billion. That trend will likely hold, as franchising has grown every year since 2010. A franchise investment could earn you a 10 to 15 percent return on your investment. The biggest drawback is that buying just one or two will not generate enough income to make it interesting. You’ll need to purchase several for the investment to be worthwhile, which usually means a larger check size and additional time spent finding the right partner. To get started, you could attend a franchising trade show to get the lay of the land.

Setup: Hard
Time commitment: Medium to high (if you run it yourself)
Money required: High ($50,000 to $1 million)
How: Self-research


Peer-to-peer lending, social lending, and crowdfunding:

These platforms enable borrowers to connect with a wide range of potential lenders (that’s you!) instead of having to rely on traditional banks for financing. The borrowers are individual consumers or small businesses, and the investments usually target an 8 to 12 percent return. Even by conservative estimates, the industry is growing rapidly. Most platforms focus on consumer lending and SMB lending, and you need to be aware of credit cycles and changes in interest rates.

Setup: Easy
Time commitment: Short
Money required: Low ($5,000+)
How: Online platform


Alternative lending:

Investing in specialty finance products such as real estate, commercial loans, legal settlements, and payables and receivables loans can yield 8-20 percent returns, and it requires less time and energy than buying and managing physical investments. In the past, alternative investments were generally exclusive to investors with ultra-high net worth and large investment banks. Today, they’re increasingly available to retail investors through platforms like YieldStreet, an alternative investment marketplace that offers investment opportunities in real estate, litigation finance, and consumer lending.

Setup: Easy
Time commitment: Short
Money required: Low ($5,000+)
How: Online platform

In conclusion, having a diverse portfolio of investments is key to reaching your financial goals and hedging your wealth against the volatility of the stock market. Always do your research, never invest more than you can afford to lose, and never put all of your eggs in one basket.

Happy Investing!

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EL Johnson

Creative Problem Solver, Entrepreneur, Co-Founder of Billion Or Bust Media

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