The investment community defines anything that wouldn’t be found in a traditional portfolio as an “alternative asset.” So anything worth owning that isn’t a stock, bond, mutual fund, money market account, or CD at the bank would fit the definition. These are assets that we can understand because we relate with the values and the cash flows. And we are big on assets that create monthly cash flows, because cash in your mailbox every month creates quality of life and the reality of retirement. These assets aren’t based on Wall Street; they are based on Main Street.
We think of Alternative Assets as tangible goods that you own. This would include real estate, precious metals, a business; a stream of monthly cash payments, gemstones, the list is endless.
If you are looking to buy alternative assets with your retirement money, The IRS has some rules about what kind of assets you CAN’T own. The list is short: Life insurance, and collectibles. The most common assets we see are real estate and precious metals.
We see people buying homes that are priced at historic lows, and renting them at current rates, and creating net returns in the 14% range. We see people buying duplexes, 3-4 unit properties, and apartment buildings. We see people buying strip malls, or office buildings when the returns are right.
For smaller, single family home ownership, we have suppliers that find great markets with a broad employment base, and then buy homes in these markets priced well below value. They rehab the homes, and place a renter in the property. They provide a property manager to take care of the day to day. They make this real estate “package” available for purchase. Suddenly, real estate isn’t a part-time job; it has become an investment.
In an economy where governments continue to print money to try to solve economic problems, inflation becomes a challenge. For hundreds of years, gold and silver have been a “safe-haven” for wealth and maintaining purchasing power.
We see countries around the world literally buying tons of gold to help maintain the strength of their economies since the paper currencies like the dollar aren’t holding value like it used to.
Gold can be owned in coin format, called bullion, or in bars of many sizes. Gold can be held in off-site storage vaults or they can be held on your property.
Trust Deeds\Mortgage Lending
Lending in our economy from the banks has been sparse. This leaves opportunity for non-bank lenders. Lending that we speak about is based on the asset that secures the loan. The loans our clients make are usually 50% of the purchase price of the property, with the buyer bringing in the other 50% of the purchase price. Buyers 50% is a significant amount of “skin” in the game, and they won’t default on that loan. In the unlikely event that the buyer does default, our lenders individually own a property at 50% of the purchase price. Usually the purchase price of these properties is below the market value, and can be quickly sold for a nice profit.
Lending creates nice monthly mailbox money for our clients. Returns are usually in the 8% range. The loans are usually for 3-5 years, and receive monthly interest payments with the loan amount repaid at the end of the 3-5 years.
Structured Settlements\Pension Factoring
This asset class trades sums of money today for the right to receive a stream of monthly, quarterly, or annual payments in the future.
Streams of payments can come from people retiring from a big company or the government in the form of a pension. They can come from people taking an insurance settlement from an accident, or from winning a lottery.
For example, a retired US military veteran has a monthly pension that they receive from the US Navy. He needs a sum of money to settle a divorce today. So the veteran is willing to sell part or all of his retirement income from the Navy for the money to solve his legal challenge today.
Our clients need to evaluate the financial strength of the institution that is making the payments to them in the future. We see payment streams from CA Lotto, from top rated insurance companies like Prudential or New York Life or from any branch of the military. These kinds of alternative assets pay in the 6%-8% range. The higher returns come when our clients can wait a little longer for their payments to start coming in.