Entrepreneurship is a grind. Most business owners invest most of their time and capital into their business, especially when in startup mode. Most capital goes back directly into growing the business.

It is hard to think about much else when you are in the early stages of building your business or start-up, but here are some very compelling reasons why businesses should consider investing in passive real estate.

As small business owners, most eggs are in one basket of the business, but smart business owners know to diversify in real estate. While the wealth of Jeff Bezos is built from a concentration into business assets (their equity and stocks) they also deal with that volatility and can lose tens of billions in a short timeframe. To protect against market volatility each company diversifies its business portfolios which include hard assets like real estate. Amazon for example owned over 402 million square feet of commercial real estate, which produces a ton of depreciation that Amazon can write off against their corporate taxes each year. 

Business owners can reduce this volatility and stress of their net worth as they plan for retirement. 90% of millionaires are real estate investors. That is a telling statistic!

So how do you own real estate if you are a small business, like an LLC? 

Let’s dig in.

Equity in real estate is available through HELOC or refinancing

If you operate your small business out of your home, you can take a cash-out to refinance and invest in passive real estate like Growth Vue Properties provides, and owe NO tax on the money that was pulled out of the cash-out refinance. This allows you to redeploy your original capital into a new large asset, while still keeping the original asset. Or if it is your primary home, you can get a HELOC against the mortgage, and invest the money with a significantly higher return than on the percentage cost of the HELOC loan. Access to your real estate liquidity with a HELOC makes it faster than easier to get cash when needed vs. a standard loan. In the world of Private Equity investing, these deals pop up fast and investors need to be ready to move on a great opportunity. 

Investing in Private Equity real estate with your business LLC allows you to diversify your business portfolio, add another stream of income, and can be a fantastic hedge against volatility that is in your specific business. Also, if you have significant gains in your personal business real estate depreciation can help shelter some of the gains from your business in that tax year. Please speak to your CPA for additional information on your specific scenario and situation. 

Tax Deductions – they can be massive

If you run a business and require retail, warehouse, or office space, buying the building instead of renting creates a large tax benefit. If you are paying monthly rent for your building, consider the upside of owning the building outright. 

Run the numbers. Compared to the volatility of the stock market, it could make sense to own the building outright vs. paying rent. You could also have tenants cover parts of your mortgage if you rent out sections of the building.

Buying the building at the early stages may not be possible, but long term this tax play is a major value add. 

If you own your building, you can also take out a loan against the building and invest in Private Equity real estate, and again diversify your business portfolio without adding additional hours to your work week. 

Passive income streams through syndications

Real estate syndication groups like Growth Vue Properties help business owners bring in extra income alongside their businesses’ paycheck. Taxed-advantaged cash flow from passive private equity real estate investing is a powerful tool alongside your main income (w2) or your owner’s distributions of your business.

Passive income can add up to become a sizable amount of earnings depending on how many assets you own and the total margin of those assets you invest in, which also provides a sizable amount of tax shelter for your business.  

As an LP (Limited Partner) in syndications (single assets) or funds (multiple assets) you can diversify your income stream with recession-resilient commercial multifamily real estate. Learn why we love multifamily real estate in this webinar.

If you are interested in adding passive real estate to your personal portfolio or your business portfolio, reach out to Growth Vue Properties today. Register here. 

Reduced Volatility compared to stocks

While most income from the business goes directly back into the business, many business owners create retirement savings or invest in stocks or mutual funds. Rather than investing in volatile stock market equities, savvy business owners consider the stability of passive real estate investing. 

This last year has proven how volatile the stock market can be. Data shows that private equity investing is skyrocketing due to the uncorrelated returns to the stock market!

Below is a few examples of some of the most successful tech companies from the last decade + Amazon and Meta (Facebook) are both down 70%+ and 40% + as of this writing! 

Owning hard assets like commercial multifamily real estate is an evergreen investment, meaning in a recession people still need food, water, and shelter.  With extremely conservative underwriting our team assumes there will be recessions or depressions that could restrict cash flows, and we model out to worst-case scenarios, and we only buy assets that cash flows would still come in even with reduced rents paid or slow growth in the market (It is important to understand the underwriting of each deal, we will talk about this more in another piece as it is a deep topic of its own).

Passive investing means you don’t have to do the work

As you run your business, what if you received $10,000, or $20,000 each month for doing exactly NO MORE WORK? Investments in passive private equity real estate deals allow you to be completely passive while earning large profits and having excellent tax shelter for your business. Growth Vue seeks out strong multifamily deals in markets with population growth, job growth, and job stability to maximize returns to our individual investors and business investors.

But is getting into real estate risky or difficult? You inquire. It’s not as complex as some investors believe, and usually takes less than 10 minutes to set up on our investor portal, and large commercial multifamily carries as little risk as government bonds, while having returned as high as short-term stocks. See below for risk vs return characteristics. 

Passive real estate investments are far simpler than starting a successful business. You owe it to yourself to use all of the resources available to you as an entrepreneur to elevate your business AND protect your business. 

The Takeaway

Business owners get tremendous benefits from passively investing in real estate. Commercial multifamily real estate has some compelling benefits of cash flow, tax incentives, and reduced volatility of one’s portfolio from the stock market. 

Learn more about Growth Vue, our deal flow, and how we can make a massive impact and difference in helping you focus on your brand while bringing an inflation and volatility hedge to your business.