Alternative Asset Classes

Assets that don't fall into the typical real estate investing categories are known as alternative asset classes. These include self-storage, ATMs, and car washes rather than the more conventional single-family homes, multi-family homes, or short-term rentals.

Some advantages of these alternative asset classes include the following:

  • the ability to use accelerated depreciation to reduce your tax burden
  • passive income
  • diversification of your portfolio

In this post, we'll review specific types of alternative asset classes for you to consider their feasibility as part of your real estate investment strategy.

What Is Accelerated Depreciation?

Accelerated depreciation is an accounting and income tax technique that lets you write off more of the cost of an asset in its early years. With accelerated depreciation, the owner of an asset will incur higher depreciation expenses in the first few years and lower expenses as time goes on. 

The depreciation of an asset influences your company's income statement—the more substantial the depreciation, the lower the reported profits in earlier years after acquisition. However, as it gets closer to the end of its useful life, there is less annual depreciation overall. As a result, later years show higher reported profit margins than when it was first acquired.

You use rapid depreciation methods to reduce taxes in the early years of an asset's life. Still, it's key to remember that the total tax deductions over the asset's lifetime will be unchanged no matter the method used. The upside of utilizing an accelerated method is the timing of when the deductions occur.

Alternative Asset Classes: Investing In Self-Storage

Self-storage properties can help people and businesses who need more storage space for their belongings. The future for self-storage appears to be healthy as of 2021:

  • More than 13 million (10.6%) of American households use self-storage
  • $39.5 billion annual industry avenue
  • $89.12 average monthly cost

Advantages

Consistency: Because self-storage units only make up a small percentage of the tenant's discretionary income, operators can increase rent while maintaining high occupancy levels. In other words, people tend to react less to price increases and continue using self-storage.

Recession resistant: According to Inside Self Storage, self-storage REITs were the only type of real estate investment that made money for investors during 2008's Great Recession.

In addition to the millions of households who use the storage, businesses utilize self-storage space frequently:

  • Contractors need a safe place to store their equipment
  • Landscapers need quick and easy access to tools
  • Retailers use self-storage units for additional inventory

Alternative Asset Classes: Investing In ATMs

If you're looking for a unique investment offering substantial returns, consider investing in an Automatic Teller Machine (ATM). With these opportunities, you can earn double-digit cash flow returns and tax-free income through depreciation.

With an ATM investment, you're investing in physical machines that will be placed and operated by a reliable management company. ATMs are often located in high-traffic areas like grocery stores, gas stations, and pharmacies.

You don't have to worry about liability for any damages or vandalism because the machine is insured and will be replaced if something does happen.

Alternative Asset Classes: Investing In Car Washes

The car wash market is expected to see growth over the next decade. 

Demand drives the expected growth

 As long as cars are on the road, car washes will always be needed. While drivers can hand wash their cars, they're turning more and more to automatic car washes because of the convenience and speed.

Car washes are easily scalable

Car wash businesses can make much money if managed efficiently, leveraged correctly, and can be automated for passive income. Car wash technologies are constantly evolving, which provides new opportunities for improved efficiency and higher throughput. The car wash point-of-sale collects detailed data that you can use to enhance your operations further and increase profits.

There is a clear exit strategy

 Look to the car wash industry for a business that is easy to profit from or sell as part of your retirement strategy. The emergence of unlimited wash programs creates reliable, repeated income that investors view favorably. Before weather-controlled car washes became popular and allowed operators to take back control, they were at the mercy of mother nature. With these newer plans in place, they can have a more dependable revenue stream.

Key Takeaways

Alternative real estate investments can provide investors with a steady revenue stream and great returns. These investments are often recession-proof, have minimal maintenance costs, generate passive income, and frequently require little to no tenant interaction.

However, investors must do their due diligence when considering an alternative real estate investment. Research the local market, understand the risks, and determine if you have access to capital for any potential repairs or maintenance. 

For those looking to explore the potential of alternative real estate investments, join our Royal Investing Group. Register today and learn about topics of importance to real estate investors. Click here to register now! 

Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.

Learn How To Achieve Total Asset Protection In This FREE 5-Part Series

Ready to know more than your attorney? You'll get over two hours of instruction combined with five ebooks to teach you how to best structure your real estate investments.

ACCESS THE ROYAL ACADEMY VAULT

SIGN UP FOR OUR EMAILS

Join thousands of real estate investors in all 50 states as they enjoy exclusive content, special promotions, and behind-the-scenes access to me and my guests. No spam, ever. Just great stuff!

SUBSCRIBE

FREE GROUP MENTORING

COMMUNITY NETWORKING

POSTS BY CATEGORY

Do you have asset protection questions? We can help!

GET A PRICE


© 2023 - Royal Legal Solutions