The Four Things I Am Currently Investing In

If you’ve listened to the news or been involved in real estate discussions over the past year or two you’ve probably heard someone say “We are due for a recession.” Although it is true that we have experienced economic cycles of 7-10 years of growth for the past century, there has to be something that triggers the downturn. The slowing at this point just seems to be a self-fulfilling prophecy; The more people that talk about a downturn, the more people are going to be more conservative with their investing or even pull their money out of the markets.

In this late part of the cycle I think it is smart to be slightly defensive and look for investments that are somewhat recession resistant. This means that even if the market does turn down, these investments will be able to weather the storm and perform. Our outlook is that there is not a one size fits all investment but here is a look at what I am currently investing in:

Workforce Housing Multifamily 8% Pref 14-17% projected IRR 3-5 Year hold

Multifamily investments as a whole I feel are somewhat overheated due to so many people entering the space. Investing in a fund with a large well-respected operator eases some of my concerns. A fund invests in multiple properties so it has some built in diversification. The fund looks for properties along the sunbelt where the operator has boots on the ground and can use their competitive advantage. Workforce housing is recession resistant because the apartments are affordable; if anything, when there is a recession, more people will be needing this type of housing. The occupancy is typically 90-95% and the breakeven occupancy is only 70%. 

Mortgage Backed Notes 8-12% ROI 1-5Year hold

These notes are loans to operators that are backed by the property. These investments offer a set return for very little risk when you invest with an experienced operator on a property with LTV less than 80%. Typically, these notes will pay interest only for a set hold period. If the operator defaults, the investors would take control of a property that should have a higher value than what was invested.

Cannabis Start-up   2-3x 3year hold

Being young with lots of safe investments, I am able to take a few risks with my investments that I wouldn’t be doing with a large family, close to retirement, or dependent on passive income. Interesting investment opportunities pop up a few times in everyone’s lifetime. I believe that marijuana will be legalized nationwide and many companies will make lots of money for themselves and their investors. I am taking a chance on an owner who I believe has strong management skills, a unique business plan, and a good competitive advantage in their market.

Whole Life Insurance

I am big proponent of using whole or universal life insurance as an investment. Starting young, you can receive a 6-9% IRR if you hold your investment for the long run. Part of the money you pay goes to the insurance that gets paid out when you pass away and another part goes to a cash value that accumulates over time. Unlike an IRA or 401k you can take loans against your own cash value if you need to access the money, without being taxed. This investment vehicle is often used to help pass down wealth without an inheritance tax.

If any of these investments spark your interest feel free to set up a call or shoot me a quick note and I can set you up with more education or connect you to the right people-

Happy Investing- J. Eric Gillem