“An investment in knowledge pays the best interest.” — Benjamin Franklin
Real estate is changing.
It’s getting harder to invest because of lending and rising interest rates.
If you’re buying single family houses, interest rates have quickly risen from sub 3% interest to a roughly 7% interest rate.
And when you add things like mortgage insurance and taxes…
That can be up to a 41% payment increase!
We’re seeing these increases in multifamily as well.
We have 2,000 multifamily units.
It’s challenging to get a deal across the finish line.
We feel good about the stuff we have, but we are also looking outside of real estate.
As a passive investor, you shouldn’t just be invested in your favorite asset class.
You should look at other things.
Find unique and awesome deals.
That’s one of my passions.
Today, we’re going to talk about my three favorite investments outside of real estate.
Let’s jump in!
1. ATM Machines
One of my favorite investments right now is ATM machines.
When I first heard about ATM machine investments, I wondered if anyone still used ATMs.
I haven’t paid an ATM fee in years!
In reality, around 7% of the population uses ATMs regularly.
These are people who rely on getting paid under the table.
People who like having cash on them.
Government benefits come on debit cards.
The people using ATMs this way are called the unbanked or the underbanked.
As much as we keep going digital, this cash-reliant group keeps growing.
I love the returns as an investor.
If you invest $100,000, the projected preferred returns are 24.7% and are paid monthly starting 4 months after investment.
That sounds too good to be true!
There are some caveats to the deal, of course, but usually in a little over two years, about half the money comes back if things perform as expected.
You can even reinvest with the money you get back.
We partner with the fifth largest operator of ATMs in the country.
They own around 50,000 ATMs.
But even with that great partnership, I was still skeptical at first!
I talked to a few friends who had invested in ATMs for close to a decade.
I did my own background checks. I look at random ATM machines to make sure they were labeled correctly and belonged the this operator.
After a while, I started to understand the business.
Eventually, I thought it was a great match and went for it.
ATMs also offer a lot of depreciation.
With this depreciation, there is no depreciation recapture, unlike most real estate investments.
If we buy an apartment building and hold it for five years, we get that bonus depreciation in year one.
With that investment, you have to recapture whatever depreciation you took in the beginning for the years that you didn’t use (meaning the remaining years of the normal depreciation schedule).
ATMs don’t have any depreciation recapture.
They go to zero.
For any investment, that’s pretty amazing! Happy to explain this further if you decide to join our investment club below and we have a chance to chat.
We typically offer this opportunity in our investment fund a few times a year.
It’s something you may want to look into alsol.
2. Franchise or Small Business Roll Up
The second investment I love is called a small business roll up or a franchise roll up.
Don’t get it twisted – I’m not talking about fruit roll ups!
But the concept is kinda similar.
Business roll ups happen when someone buys multiple small businesses of the same category rolled up as a whole.
Let’s use car washes as an example.
If you have one to ten car washes, they often sell around 8x to 10x their earnings.
If you have 50 car washes, they’ll often sell for over 20x their earnings.
The earnings are higher because you have more in a package.
Why is that?
The buyer (typically private equity or Wall Street firms) doesn’t want to buy one or ten car washes for a few million dollars.
They want to buy 50 of them for $250 million (for example).
Some people have done this with medical practices.
They’ve either sold their medical practice or a group has started buying medical practices of that same type, pulling them together and finding a buyer.
You can also do this with franchises.
All of those can be called a small business rollup.
3. Oil and Gas
The final investment I love is oil and gas.
I’ve invested in oil and gas myself as a passive investor.
We have not offered this to our investment group yet, but we hope to have some offerings in this space soon!
There are many benefits in the oil and gas industry.
It offers some unique tax benefits.
A lot of times you can reduce ordinary income or have a write off against active income.
Energy itself is a commodity.
Prices have soared due to inflation, among other reasons.
I’m gonna say something pretty controversial:
I think green energy is somewhat of a scam.
Climate change is real, of course, and we should always be aware of its effects on our ecosystem.
However, I think it’s impossible to achieve change with the limited minerals and resources out there.
It takes a lot of heavy metals and pollution to create things like solar panels or electric cars.
This article says, you would need to drive almost 50,000 miles in a Tesla to offset the emissions of a standard gasoline powered car.
It takes a long time to transition.
Right now, green energy (wind and solar) is only producing 3% of the world’s energy.
There are currently initiatives to raise this number, such as where I live in California.
I can fill up my electric car basically for free and the city of Pasadena will subsidize me to charge my car.
This is ironic because the electricity is produced by burning natural gas. California actually burned about 50% natural gas to produce its electricity.
What we think is green is really not green.
There’s a wonderful book called The Moral Case for Fossil Fuels.
The author, Alex Epstein, says our lives are better off because we’re using fossil fuels.
He gives the example of being in a third world country that doesn’t have consistent power.
Due to these conditions, there may be a child in a hospital that needs a certain piece of medical equipment powered by fossil fuel.
That equipment is useless because fossil fuels or other energy wasn’t available.
The child could never get better.
In Epstein’s opinion, our lives are way better because we have fossil fuel.
We’re going to have a continual shortage of oil and gas over at least the next 30 years.
We’ll end up transitioning to greener sources of energy, but that timeline will be longer than many think.
Another issue is a continual undersupply of drilling for oil and gas.
There are trillions of dollars in funds.
A lot of these funds have taken a pledge called the ESG pledge.
This means large financial firms aren’t investing in oil or gas.
This leads to underinvestment in things we really need.
It will take years to get energy back up to a point where there’s not an incredible strain on driving cars and using natural gas.
That’s why I like the investment!
With less supply, we have more demand.
Now I want to hear from you!
What’s your favorite non-real estate investment?
Is it one of these three?
Is it something else?
Let us know in the comments!
Before you leave, make sure to check out our special report about inflation investing. It shares the best choices to invest during an inflationary environment.
If you are interested in investing with us, we are happy to answer any questions that you may have. Join our investment club today and we will be in touch.
Disclaimer: I am not your investment advisor. This is for educational purposes only. I am not giving specific advice on what you can do. I am simply giving my opinions.