Scott Steinberg 7-9 minutes
It takes money to make money, or so they say – and accredited investors are certainly afforded more opportunities to place financial bets. Below, you will find a number of today’s top investment opportunities for accredited investors, and why each of these ways that you can invest your money is worth considering.
As alluded to before, note that because they are subject to less regulation and scrutiny, many of these investments may also come with higher risks attached. Investors considering the idea of exploring each of these investment opportunities for accredited investors are advised to conduct adequate due diligence and consider their personal financial strategy before dipping their toes in the water.
Crowdfunding
Crowdfunding is the practice of raising funds online (for a project, product or company) from the general public and internet at large. In other words, under the crowdfunding model – which is facilitated through online crowdfunding platforms that provide websites and apps where deposits can be made – everyday investors come together to pool resources. Equity crowdfunding platforms (wherein investors obtain a share of a company or project, typically proportionate to their investment, in exchange for funding) can offer exclusive investment opportunities to accredited investors. Real estate crowdfunding in particular is burgeoning in popularity as of late and helping accredited investors explore a variety of new opportunities (multifamily housing, commercial real estate, etc.) beyond personally buying and flipping homes.
Real Estate Syndication
The practice of real estate syndication (also known as property syndication) refers to a method of investing in which a group of investors pool funds to purchase real estate property that they otherwise couldn’t individually afford. For example, accredited investors might team up and combine their capital and resources to buy an apartment complex, strip mall or larger holding that would be too expensive to purchase on their own. A increasingly popular model, real estate syndication is structured by a syndicator, who scouts out and secures properties and investment contracts (as well as manages the investment for a commission and fee), then pairs investors together.
Convertible Investments
Convertible investments are financial securities (say, bonds or preferred shares) that – for a predetermined price – can be converted into common stock that has the potential to appreciate in value over time. Accredited investors typically use these solutions as tools through which to back businesses that they believe have strong long-term growth and revenue potential. A form of hybrid security that combines both debt- and equity-type features, convertible investments are often looked to as a way to split the difference between stocks and bonds and enjoy potential appreciation opportunities while also safeguarding against loss.
REITs
Short for real estate investment trusts, REITs are companies (structured as trusts) that pool together and oversee funds that are invested in a variety of different profit-generating forms of property. By way of example, they might own a wide range of holdings such as condo and apartment buildings, warehouses, retail locations, and even hospitals or other commercial structures. In effect, an REIT offers accredited investors a means through which to invest in a variety of different types of real estate and earn income on these holdings, without having to deal with the day-to-day challenges of property management. Some may even be publicly traded.
Venture Capital
Venture capital (sometimes known as risk capital) is a form of equity financing through which venture capitalists and angel investors provide funding for promising startups and small businesses in exchange for a share of company ownership. These monies generally help receiving firms with seed capital (funds used to help develop and test new business/product ideas) or rounds of capital that help fuel expansion and growth. As companies grow and appreciate in value, accredited investors gain the potential to enjoy ever-larger returns on their investment, generally commensurate with their ownership holdings and the amount of their investment.
Hedge Funds
Like exchange traded funds (ETFs) and mutual funds, hedge funds are professionally managed by career investors, but they’re subject to less regulation and scrutiny. As a result, they are able to invest in more complex and sophisticated asset classes than these other investment holdings. Because hedge funds can apply all sorts of approaches to investment (including options, shorts, derivatives and other strategies), and make alternative investments, they can likewise provide accredited investors with all manner of exclusive investment opportunities. If you favor a specific approach to investment, you can also pick and choose the hedge funds that you prefer based on a particular money manager or investment fund’s specific investment philosophy and strategy.
Private Equity Real Estate
Thinking of investing in private equity real estate as a way to make money in real estate? Then you are essentially considering investing in purchasing, financing and owning a piece of property (or group of properties) by means of a pooled private or public investment fund. So to avoid confusion: REITs provide investors with access to publicly traded shares in real estate investments that primarily generate revenues via rental income. Private equity real estate instead refers to the practice of investing in professionally managed funds that might invest in varying speculative property offerings from undeveloped land to the development of new luxury high-rises.
Interval Funds
An interval fund is a closed-end fund whose shares do not typically trade on the secondary market, but rather functions as an investment company that periodically extends offers to repurchase shares from its shareholders. These offers, which may be extended every 90 – 180 days or so, do not have to be accepted by shareholders, who can elect to hang onto them until pricing becomes more attractive if they wish to wait to sell shares back to the fund. Accredited investors may turn to interval funds if they wish to diversify their financial portfolio and enjoy regular opportunities to divest themselves of their holdings at a profit.
Hard Money Loans
Hard money loans are short-term loans that are provided by individuals or private companies (not banks, credit unions or other traditional lenders) who are willing to accept an asset or piece of property as collateral. For instance, a borrower who wishes to avoid the lengthy process of seeking traditional loan approval or who has had a mortgage or loan application denied may turn to hard money loans as an alternative way to drum up capital. Under the terms of a hard money loan, any sums lent are guaranteed and secured by the asset (for example, the property) that they are being used to purchase. If a borrower defaults on the hard money loan, the lender can assume ownership of the asset and sell it to recoup their losses.