Most of us have been told that we should work hard, climb the corporate ladder, and invest in the stock market along the way to maximize our financial growth. This is exactly what I subscribed to for years. 

 

Early in my career, I’d work 60+ hours a week as an investment analyst on Wall St, then spend nights and weekends trying to figure out how to leverage the stock market and other investments to grow my wealth. 

 

I worked hard to build a modest portfolio, but the constant ups and downs made me realize the very real risks of investing in the stock market, which led me on a path to eventually discover real estate investing.  

 

My mother taught me a hard lesson.  When she went through during the 2001 bubble burst, she lost 75% of her portfolio, in what seemed like “overnight”.  That experience really stung, even indirectly, and made me realize that the stock market can be a very volatile endeavor. If you touched crypto in the last few years and held on to it, you probably know the feeling I’m referring to. 

 

Let’s take a close look at investing in stocks versus triple net real estate, the four basic risks of investing, how commercial multifamily real estate investments mitigate risk, and why the stock market can be much riskier than real estate.

 

A PRIMER ON RISK

 

With any investment, there’s always an element of risk (short of keeping your money under your mattress). Just as you could have been hit by a bus this morning, unexpected things come up in life, in the stock market, and in real estate.

The key is not to look for investments that are risk-free (that doesn’t exist), but to understand the risks thoroughly, determine your threshold for risk, and ensure that you’re doing everything you can to mitigate risk.

 

RISK #1 – CONSUMER BEHAVIOR COULD CHANGE

 

Stock Market

 

Stock market investors bet on the success of companies who create products for people to use. Facebook, iPhones, Happy Meals, and soap are all consumable products. 

However, it’s impossible to predict the length those products will remain in favor, and a companies’ popularity. Blockbuster, Kodak, and recently GE all had a long reign, but when technology and consumer behavior changed, the company stagnated, dragging investors down with it.

 

Triple Net Investments

 

Now, real estate comes in all shapes and sizes.  Residential is an extremely competitive market right now, which translates into thin margins.  Single family homes can get you checks anywhere from $5k to $50k and come with a ton of work. But commercial real estate deals generate much larger checks, and typically with less risk. 

In commercial real estate, tenants are usually businesses and corporations and a good commercial tenant will usually make your life easier.  A typical commercial lease runs for an average of 3 years, but many run 5, 10, or even 20 years.  Many leases are written with national tenants include corporate guarantees, adding lots of security to the strength of these leases.

When it comes to wealth preservation, we believe there is no better vehicle than through Triple Net Commercial properties. Triple net assets come with huge tax advantages, strong

historical track records, national credit backed tenants, and appreciating markets - making this asset class a go-to for many high-net-worth individuals.

 

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RISK #2 – RECESSION

 

Stock Market

 

One of the most common fears and possibly the biggest reason would-be investors remain on the sidelines is for fear of a sudden market correction.

During a downturn, investors often cut their losses through a quick exit (which only solidifies their losses). Others aim to accept short-term losses in exchange for long-term gains. Historically, the market bounces back, but clinging to that “trust” is challenging during the downward trend.

 

Triple Net Investments

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A recession is marked by a shrinking economy. People spend less money on discretionary purchases, focusing instead on essentials. Companies may slow down hiring or begin laying off workers to bolster their bottom lines. Stock prices often drop in the face of uncertainty about the economy.

Here is the good news – recessions create bargains.  As liquidity leaves markets, you are competing against fewer buyers, leading to more opportunistic deals. We target opportunities that generate cash flow from day one, and that are priced right. 

Real estate can also act as a hedge against inflation in the event that inflation persists. Real estate prices tend to keep pace with rising consumer prices, making them a more inflation-proof investment. Do you think Triple Net investing could be worth learning more about?

 

RISK #3 – COMPETITORS COULD COME ON THE MARKET

 

Stock Market

 

When Netflix stormed the scene, they beat out Blockbuster because not only did they target the same audience, but they also got ahead of the technology and consumer trends.

 

Consumers don’t have insight into technology development or companies’ operations. Thus, new competitors can have a significant impact on investment returns.

 

Triple Net Investments

 

Triple Net competitors don’t just spring up out of nowhere, because space, zoning, and permits are limited. For example, class B industrial real estate is a depleting asset class.  When new buildings are built, they’re always class A (i.e. high cost to build) and for that reason cannot compete based on cost against existing, stabilized assets. 

 

 

RISK #4 – NOT HAVING CONTROL AND TRANSPARENCY

 

Stock Market

 

Investing in stocks is like buying a train ticket. The train is leaving, with or without you. Whether you’re on board or not is up to you.

When the market is sailing upward, the ride is smooth and exciting. During a correction, a terrible, helpless feeling takes over. The conductor (CEO) is unreachable and you better buckle up.

 

Triple Net Investments

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At Cascade Capital, we perform rigorous diligence to identify superior risk-adjusted opportunities, and then place opportunities with investors based on their needs. In cases of syndications, we target 2 to 4 year investment horizon, and ongoing quarterly cash-flows.   

 

No headaches + Passive Income = Triple Net Investing

 

CONCLUSION

 

There’s certainly no one “right” way to invest. There are people who make money in the stock market, just as there are people making money in real estate.

The key is to assess your own goals and risk tolerance, then decide on the path that will best help you meet those goals.

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The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.