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Is There a More Stable Alternative to Real Estate Investments?

August 15, 2023

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The Real Estate Roller Coaster

Oaktree Capital recently went public in discussing the rising volatility in real estate investments. The investment firm was upfront about what the data shows: that rising volatility is reshaping real estate investments, and that investors need to be prepared for this new normal.

Their analysis and warnings confirm what the National Association of Realtors® outlined in their comprehensive report ‘Top Ten Issues Affecting Real Estate in 2021-2022’: price instability, supply chain issues, and labor shortage strain. All of these factors can drive up the cost of real estate developments which then undercut your ROI as an investor.

The Counselors of Real Estate have also come forward with a report discussing another challenge in real estate investments: geopolitical risk. Increasing climate events and simmering political division and instability can lead to widespread volatility due to uncertainty about the future impact on economies and financial markets. Effects are difficult to forecast and measure, but can also have seriously negative impacts on real estate investments.

Beautiful Houses Under Blue Sky Real Estate Investments
Data points to slowing returns and increasing unpredictability in real estate markets. Photo by Curtis Adams.

The Future of Real Estate

Looking at the possible futures of real estate investing, CRE notes that cybersecurity concerns will become more and more challenging for real estate investors. Their report states that “Cyberattacks have increased and continue to impact global stability as they target critical infrastructure.”

We know that the homes of the future will incorporate more and more smart technology, making them increasingly vulnerable to malicious and disruptive networked attacks.

Many experienced investors have felt the sting of the unpredictable ebbs and flows of the property market. It prompts a question that is cropping up more and more in investment circles: Is real estate truly the best alternative investment?

Liquidity Concerns

The real estate market is not known for its liquidity. If you suddenly find yourself in need of cash, selling a property isn’t something that happens overnight. There are listings, showings, negotiations, and a ton of paperwork. And, even if you find a buyer immediately (which is a rarity), the entire process can still take months.

Tenant Troubles

If you’re in the rental business, a whole new set of challenges emerges. Finding reliable tenants, handling maintenance requests, addressing complaints, and the dreaded possibility of evictions can turn your passive income dream into a full-time job.

The Money Lock-Up

In most cases, the money you invest in real estate isn’t something you can touch for years if not decades. This lack of flexibility can be a significant drawback, especially if you encounter unexpected personal or financial challenges.

Fingers on iPad with Graph on Screen Real Estate Investments
Studies forecast increasing volatility in real estate. Photo by AlphaTradeZone.

The Pros of MCAs in Contrast

Enter Merchant Cash Advances. An MCA allows businesses to receive a lump sum of money in exchange for a portion of their future sales. Think of it this way: When you invest in MCAs, you are buying a portion of a business’s future income.

MCAs provide quick access to capital, especially for businesses that might not qualify for traditional bank loans. And for you, it’s an avenue to diversify your portfolio and potentially earn a tidy sum in return.

Consider the benefits of MCA from an investor’s perspective:

Shorter Investment Periods: Unlike the extended commitments often seen in real estate, MCAs typically have shorter durations, offering quicker returns.

High Potential Returns: MCAs can provide attractive yields, often outpacing traditional investment avenues.

  • We just published our actual returns data here. It’s pretty encouraging stuff.

Diversification: With MCAs, you can spread your investments across various businesses and industries, reducing the risk associated with any single sector’s downturn.

  • Your promissory notes are invested into hundreds of different MCA deals across a huge range of geographical locations, industries, and businesses for maximal diversification across all verticals.

Flexible Investment Amounts: Real estate investment demands significant capital outlays. Our MCA deals openly with a $25k minimum investment, so even smaller investments can fetch decent returns.

*Sophia is an investor who dipped her toes into the MCA pool. She invested in several businesses, from a thriving coffee shop to an online boutique. Some months, returns were astronomical, sometimes moderate, but always consistent. No tenant troubles, no long waits, just a steady stream of returns flowing into her account.

Breaking Down the Returns: MCAs vs. Real Estate

When it comes to investments, it’s all about the numbers. Both real estate and MCAs can offer impressive returns, but how do they truly stack up against each other?

Traditional Real Estate Returns

Real estate investments generally fall into two categories: appreciation and rental income.

Appreciation: This is the increase in a property’s value over time. Historically, the average annual home appreciation rate has hovered between 3-6%. However, this rate can be much lower or higher depending on the location, market conditions, and the property itself.

Rental Income: If you’ve got a property and decide to rent it out, the monthly rent you collect can provide a steady cash flow. After deducting expenses like maintenance, taxes, and insurance, the net yield for rental properties typically ranges between 4-10%.

Now, consider some of the hurdles: mortgages, down payments, maintenance costs, insurance, and potential vacancies and void periods. Taken together, these combined factors can make your net profit a lot lower than anticipated.

MCA Returns with Supervest

In raw numbers, investing in MCAs can offer consistent and often higher returns than traditional real estate, especially when you account for the cumulative effect of reinvesting your returns – an effect we call compound velocity.

Let’s craft a hypothetical scenario:

Jeremy, an experienced real estate investor, and Olivia, an MCA enthusiast, both decide to invest $100,000 in their respective domains.

Jeremy finds a property that promises a net yield of 6% annually after all expenses. He thinks this is a good deal so he goes ahead.

Olivia invests her $100,000 in an MCA offering through Supervest.

After a year:

  • Jeremy earns $6,000 from his real estate investment. Not bad.
  • Olivia, with her Supervest MCA, accumulates an impressive $12,000. That’s a whopping 12% return.

And this doesn’t even factor in the flexibility and liquidity that MCAs offer over real estate!

Concept of waiting for cash credited to bank card Real Estate Investments
MCAs can offer high returns, high diversity, and high liquidity. Photo by Monstera.

Zooming Out: Diversification and Risk

While MCAs offer impressive returns, you already know not to put all of your eggs in one basket. Diversifying your investment portfolio by including both real estate and MCAs, for example, could strike the balance you’re looking for between stability and high returns.

However, it’s crucial to understand the risks associated with any investment. MCAs, like any other investment, have their risks. But when you’re potentially outpacing real estate returns by such a margin, it’s an avenue that’s worth considering.

The Simplicity of MCA Investments vs. The Complexity of Real Estate Management

If you’ve ever dabbled in real estate, you know it’s not just about buying a property and watching its value soar. It demands a considerable amount of time, effort, and, eventually, even more money post-purchase.

Real Estate Management Challenges

Maintenance and Upkeep: From regular wear and tear to unexpected repairs, properties constantly demand attention. A leaky roof or a broken furnace can be not only a headache but also a significant expense. You can delegate these tasks out to a property manager of course, but this will eat into even more of your potential returns.

Tenant Management: If you’re renting out a property, you’ll deal with tenant turnover, potential disputes, rent collection, and sometimes even eviction processes. You might enjoy the more interactive aspects of real estate investing, in which case dealing with tenants might be fun for you. Weigh up for yourself how stressful you are likely to find dealing with tenants and/or management agencies.

Market Fluctuations: Real estate doesn’t always go up. Market downturns can impact property values and rental incomes. Please see 2008.

Liquidity Concerns: Selling a property isn’t instantaneous. It can take months, or even longer, to sell a home, especially if the market is down. Buyer chains, surging mortgage rates, crazy inflation. It all takes its toll.

Coins, Sheet and Card Real Estate Investments
Which stacks up better for you? Photo by Crazy Motions.

MCA’s Streamlined Investment Process

Contrast all of the above with MCAs, and you’ll see a world of difference:

Straightforward Investment: Once you’ve done your due diligence and decided on an MCA product to invest in, the process is simple. At Supervest, we make it even easier with user-friendly interfaces and clear guidelines.

Passive Earnings: MCAs offer the opportunity to earn without the active management required in real estate. Your investment works for you without the need for continuous oversight.

Predictable Returns: With set target interest rates like the 10% note and the 12% note offered by Supervest, there’s a clearer picture of what your returns might look like.

Higher Liquidity: With terms like those of Supervest’s Mid-Term Note I and II, you can anticipate when you’ll be able to access your capital, making it more liquid than most real estate investments.

A Case in Point

Consider Alex, a real estate mogul, who spends hours managing his portfolio of properties. Between handling tenant issues, overseeing repairs, and keeping track of market trends, his hands are full.

Then there’s Taylor, who’s ventured into MCAs. Taylor did thorough research upfront, made her investment, and now receives consistent quarterly returns. While both are valid investment strategies, the effort-to-return ratio is markedly different.

While both real estate and MCAs have their merits, the simplicity and efficiency of MCAs can’t be overstated. Especially for those looking for an investment avenue that doesn’t demand daily involvement, MCAs offer a compelling alternative.

The Power of Diversification: MCAs in a Well-Rounded Portfolio

Diversification is often lauded as the most rational portfolio strategy for any investor, primarily because of how powerful it is in mitigating risks. Real estate has been a go-to diversification tool for many, but Merchant Cash Advances are emerging as an attractive additional piece to this puzzle.

Why Diversify?

The rationale behind diversification is straightforward: don’t put all your eggs in one basket. By spreading your investments across various assets, you’re less likely to suffer severe losses if one asset underperforms.

The Role of Real Estate in Diversification

Real estate has been the cornerstone for many diversification strategies for decades. Properties often provide a tangible sense of security. They’re real, they’re there, and there’s a certain peace of mind knowing you own a piece of land or a building. But, it’s not all roses. Real estate has seen a lot of volatility as well as decreasing returns, especially since 2019.

MCAs: A New Layer of Diversification

Unrelated Market Dynamics: MCAs operate based on business dynamics and cash flows. This means that, unlike real estate which might suffer during economic downturns, a well-vetted MCA might still provide returns since it’s based on a company’s operational cash flow.

Consistent Cash Flow: Because of their structure, MCAs offer regular payouts, like the monthly or quarterly payments we have covered already. This consistent cash flow can be a boon if you’re looking for regular returns.

Counter-Cyclical Opportunities: This is a big one. A lot of businesses seek MCAs precisely during tougher times when traditional financing might not be accessible. This can mean robust investment opportunities for you even during economic slowdowns.

A Hypothetical Portfolio

Imagine an investor, Jordan. He has 60% of his investments in stocks, 20% in real estate, and the remaining 20% in bonds. After learning about MCAs, he reallocates, keeping 50% in stocks, 15% in real estate, and 20% in bonds, and introduces 15% in MCAs.

By doing so, Jordan has:

  • Introduced an asset that might perform differently than his stocks or real estate.
  • Added an investment that offers consistent returns.
  • Enhanced his liquidity with the shorter-term nature of some MCAs.
Wallet with coins banknotes and credit card for payment
Adding MCAs to your portfolio can bring welcome low-correlation risk mitigation. Photo by Monstera.

The Future Landscape

Technology & MCAs: The increasing integration of technology in finance is set to streamline MCA investments further. Platforms like Supervest are leading the charge, offering detailed insights, transparent operations, and user-friendly interfaces. This ease of investment is something real estate has traditionally not been able to match.

Real Estate Innovations: Having said that, the real estate sector isn’t staying still either. With the advent of REITs (Real Estate Investment Trusts) and property tech, the barriers to entry are lowering. Still, the tangible nature of real estate investments often means slower adaptability to rapid market changes.

Economic Predictions: As we look ahead, economic experts hint at a turbulent stock market influenced by global geopolitics. In such scenarios, both MCAs and real estate can serve as stabilizers. However, the shorter-term nature of MCAs might offer a quicker response to changing investor needs.

Concluding Thoughts: Making an Informed Choice

Choosing where to invest your hard-earned money is never a straightforward decision. Each investment avenue, be it Merchant Cash Advances or real estate or anything else, comes with its own suite of pros and cons. We know you want to make an informed choice and ensure your money is working as hard for you as possible.

MCAs vs. Real Estate: Quick Recap

Liquidity: MCAs, especially through platforms like Supervest, offer quicker returns, while real estate often ties up your capital for longer durations.

The barrier to Entry: Starting an investment in MCAs can be less capital intensive, providing an opportunity for new investors to test the waters without committing vast sums of money. Our investments start at $25k.

Diversification: Both investment channels offer diversification but in different ways. MCAs diversify through a huge spread of industries, locations, and businesses, while real estate provides diversification across locations and property types.

Tech Advancement: At Supervest we use unique proprietary technology to provide real-time data, making the investment process seamless. Real estate, though increasingly becoming tech-friendly, may not offer the same level of immediacy and transparency.

In the grand scheme of things, your investment choice should align with your financial goals, risk appetite, and investment horizon. While MCAs present an exciting opportunity, especially for those looking for shorter-term, high-yield avenues, real estate stands as a tried-and-true long-term asset class.

Balancing Act

For those in a position to do so, a balanced investment strategy incorporating both MCAs and real estate investments might be the golden ticket. This combination allows for immediate high returns from MCAs while enjoying the long-term appreciation potential of real estate.

Stay Informed, Stay Ahead

The world of investments is ever-evolving, with new opportunities arising every day. By staying informed and adaptable, you give yourself the best chance to maximize returns and achieve your financial objectives.

Here’s to making the right choices and watching your investments flourish!

Start Investing. Inspired by the potential of MCAs? Join the thousands who are revolutionizing their portfolios with Supervest. Begin Your Investment Journey.

Note: It’s vital for potential investors to remember that all investments come with risks. The scenarios and characters mentioned are for illustrative purposes and should not be taken as financial advice.

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