Where Do High-Income Earners Put Their Money To Work?

Posted by Parthiv Shah on Mar 6, 2023 1:01:48 PM

Parthiv Shah

If you are a high-income professional then chances are you are taxed at the highest rates. Any extra earnings are slapped with punitive taxes, and usually come at the cost of more work hours and a lot of additional stress.


So you don't have a revenue problem to solve... you have a hidden expense problem (called taxes).


And that must be addressed if you want to passively invest the successful way. The way that the truly wealthy have been doing.


First thing's first, we have to clarify that a robust investing strategy will diversify on a scale of:


  1. Conservative <---------> Risky
  2. Liquid <----------> Illiquid
  3. Modest Returns <-----------> Home Runs


For the rest of this article we're going to talk about systematic, repeatable, dependable PASSIVE investing. The kind where you can deploy a large chunk of your portfolio.


Of course, the ultra-wealthy will take some big risks for big rewards in a few of their investments. They can afford to! But that's not particularly dependable or systematic. And if we want it to be passive (since we already all have jobs, right?), then we'll likely have to give up some liquidity.


So we want to focus on the highest possible returns given the most conservative investments. And for that we will accept that our investment will be illiquid (meaning we can't just sell the investment whenever we want to pull out cash).


And finally, we come back to the tax issue.


If our investment is going to generate great returns, rain or shine, but then we lose a giant chunk to taxes... well it sort of takes the fun out of it.


That means we want to invest in assets -- like the uber-wealthy will target -- that give us a giant unfair advantage when it comes to tax deductions.


The answer is a particular type of real estate.


It's certainly not single family homes. No fixing and flipping, and no managing tenants.


No, we want scale. The type of scale where, if you lose one tenant, it doesn't really affect the overall operation in any meaningful way.


We also want scale so that it makes sense to have a professional property management company, and they can negotiate the most competitive rates for service and repairs.


Finally, we want to tap into the dominant economic culture of the country. One that seeks to perpetually drive up valuations while simultaneously offering the most competitive loans. In other words, the government, the Federal Reserve, and the legal system are all incentivizing it.


For the last few decades, and for the foreseeable future, that means investing in multifamily apartment buildings of 100 or more units.


But up until recently, there was no vehicle for a dentist or pediatrician or chiropractor -- no matter how high their professional income -- to outright buy a large apartment like that (or even get a favorable loan to do so).


Enter the real estate syndication.


In simple terms, a syndication is just a collection of people pooling together resources to achieve a common purpose.


But the powerful thing about a multifamily syndication is that there is a division of labor and a focus on specialization. So you the investor can be totally passive (meaning you simply invest your money), while the deal sponsor is tasked with finding and vetting the deals, operating them with the aid of local expert property managers, and leveraging a legal team and other professionals (like lenders, for the best possible loans).


These types of real estate deals typically involve buying and holding existing properties for 3-5 years, generating cash along the way (paid to you, similar to a dividend), and then doing thoughtful repairs that allow the asset to appreciate for an eventual sale.


Where it gets near-miraculous is that this type of investment vehicle also allows you to apply paper losses against your (very real) cash flows, such that you don't owe any taxes on that profit. And then, upon sale, there is a special tax break called a 1031 Exchange that allows some investors to defer capital gains taxes indefinitely.


If there are equivalent tax benefits for investors anywhere else on earth, I am certainly not aware of them (and I am a Chartered Financial Analyst).


Now, to explain the ins and outs of multifamily syndications, with all their money-making potential and seemingly barely-legal tax breaks, would take more than this simple article.


That's why I've created a free report for doctors, engineers, and other high-income professionals to learn exactly why and how I help people passively invest to build a high net worth legacy for their families.


My name is Omar Khan. I'm a third-generation real estate investor, with over a decade of experience in Mergers & Acquisitions in institutional finance. I've transformed the life of my family and my high-income clients through an education on multifamily syndications. I hope you'll take this opportunity to allow me to show the same possibilities to you (while they are still available).


To download that free report, just visit my website now:

Topics: Hubspot for dentists, real estate, investment

 parthiv shah


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