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MYTHS ABOUT ALTERNATIVE INVESTMENTS
MYTHS ABOUT ALTERNATIVE INVESTMENTS
Myth: Only the Big Boys Can Invest or You need to Know Someone
Fact: Traditionally early stage investments and other alternative investments have been considered the domain of Insiders, Hedge Funds and Venture Capitalists. However changes in Securities Laws have opened these investments to individuals.
Myth: Small Real Estate Investments are Too Risky
Fact: The risk of any investment is dependent on the individual investment not its size. One investor/developer we worked with under took over 250 small distressed property projects paying the investors who funded these projects 10% to 18% without a single default, even in the market crash of 2008. Whereas, one of the largest real estate investment firms, listed on the New York Stock Exchange, paid its investors on average 6% to 7%, then went bankrupt in the crash with a total loss to almost all of its investors.
Myth: The Best Time to Invest in Real Estate is in a Hot Market
When the estate prices are rapidly rising many new and inexperienced investors are drawn to the market and the Hotter the market the greater the investment activity. Unfortunate, this is many times just before the market peaks, then crashes. When investing, we believe in Warren Buffett’s advice:
“Be Greedy when others are Fearful and Fearful when others are Greedy”
We believe the best a safest time to invest in real estate is when values are depressed, not when everyone is chasing a bubble. Buying when values are depressed not only results in greater profits when the market rebounds but also limits loss should the market fall further. Also rental incomes may be higher because rental income usually fluctuates less than property values.
Myth: The Only way to Get High Returns on Real Estate is with Leverage
Fact: The use of Mortgages (Leverage) is a proven tool to deliver higher returns to investors, but it’s risky. If investors put up 20% of a property’s value and the project’s promoters get a mortgage for 80%, and the market dips by 20%, the investors lose all of their equity in the property. Distressed property investments are many times made for cash with a turn around. If a cash property dips 20% investors lose 20% of their investment not 100%.
Turn arounds are structured to increase the property’s value. A turn around can provide investors a good return without the risk associated with leverage. Also many times a distressed property can be refinanced allowing the investors to be repaid their entire investment while retaining an interest in the property.
What are Alternative Investments?
Alternative Investments are investments in small Companies and Projects. They can range from less than 100K and are usually under 5 Million Dollars and too small to be considered by institutional investors.
These Investments are not sold by Wall Street or available through brokers, but are offered to investors directly by business owners and project developers. Until recently because of prohibitions on advertising these investments were effectively restricted to insiders; however changes in securities laws have opened these investments to individuals.
Some of these projects can provide higher returns than are usually found in traditional investments. Others allow investors to get in on the ground floor exciting opportunities. These programs can be used to fund a wide variety of projects including distressed and undervalued Real Estate, early stage investments in Promising New Companies and Technologies, and a wide range of other projects.
Northeast Opportunity One’s offering would be considered an Alternative Investment. We would invite you contact us to find out more about Alternative Investments and Northeast Opportunity One’s project. We hope you will consider make Alternative Investments a part of your investment portfolio.