For busy entrepreneurs and professionals with time constraints due to demands on their time at work or in their businesses, investments that generate passive income are essential for building wealth. And that is why cash-flowing real estate, specifically commercial real estate (CRE), is consistently at the top of the list of preferred investments of wealthy investors, including entrepreneurs and high-income professionals.
One such group of wealthy entrepreneurs and high-income professionals is TIGER 21. Consisting of around 1,400 members with a collective net worth of $150 billion, TIGER 21 publishes a quarterly asset allocation report disclosing how its members allocate their portfolios.
Here is the latest report:
The Appeal of Real Estate
For busy entrepreneurs and professionals, building wealth through passive income often becomes a priority when their time is limited. In this context, real estate emerges as an ideal vehicle for passive income, offering numerous advantages such as steady passive cash flow, potential appreciation, and tax benefits. For busy entrepreneurs and professionals, real estate checks off all the boxes for those who wish to build generational wealth without actively managing their investments day-to-day.
You don’t have to be a good real estate investor.
Entrepreneurs and professionals frequently face the challenge of balancing their demanding work schedules with the desire to invest wisely in an appealing asset such as real estate. While many entrepreneurs and professionals excel in their business endeavors or chosen profession, many lack the skills or time to effectively manage a time-consuming investment like real estate.
Fortunately, there are multiple vehicles for investing in real estate without the steep learning curve or the high capital and time commitments. Therefore, the challenges of transitioning from running a business or managing a professional practice to investing in real estate are alleviated by the opportunity to invest in companies or partners already seasoned in this asset class.
The process of overseeing active investments such as stocks can be time-consuming and often requires constant attention to market fluctuations. Real estate, on the other hand, allows entrepreneurs to partner with seasoned professionals with expertise in a particular real estate segment, geographic location, or property type who do all of the heavy lifting while allowing investors to still benefit from regular rental income and appreciation of their assets.
Passive Income and Wealth Preservation
For entrepreneurs and busy professionals, the concept of passive income is particularly appealing. Real estate, through rental properties, offers a reliable stream of passive income, which requires little day-to-day involvement once the property is operational. This passive income is an essential element for building wealth through compounding and can also serve as a financial cushion, allowing entrepreneurs to weather economic downturns or unexpected business challenges.
Cash flow generated by real estate can also be a significant contributor to preserving wealth over time. By contrast, active investments such as stocks may not yield consistent returns and often come with greater risks. Furthermore, real estate tends to be less volatile than other investments, making it a safer option for those who need a steady return while focusing on other pursuits.
Additional advantages of real estate investments are the valuable tax benefits they provide. Structured correctly, typically through partnerships, investors can take advantage of depreciation, interest deductions, and other tax incentives that allow them to reduce their taxable income while growing their wealth. This tax efficiency enhances the long-term profitability of real estate investments.
Diversification and Risk Mitigation
One of the biggest lessons entrepreneurs and professionals can learn is the importance of diversification. Entrepreneurs build wealth by concentrating their efforts and resources on a single business, and professionals are skilled in a single profession. What happens when the business falters or a profession can no longer perform the duties of a particular profession, like a surgeon who suffers a permanent injury to the hands? This is where diversification through investing for income becomes valuable.
Preserving wealth is just as important as accumulating it and requires spreading risk across different asset classes. Real estate fits perfectly into a diversified investment strategy, acting as a stable, income-generating asset that compensates when income falters or other investments fail. Real estate provides a tangible, long-term asset that grows in value, helping to preserve wealth across generations.
For entrepreneurs and busy professionals seeking to build wealth through passive income, real estate stands out as an ideal investment. It offers steady cash flow, long-term appreciation, tax benefits, and the ability to leverage the expertise of others through partnerships to manage day-to-day tasks in order to reap the benefits of investing in real estate without the headaches. Additionally, real estate allows busy entrepreneurs and professionals to diversify their portfolios and preserve their wealth for future generations.
