Accelerating Retirement: Real Estate vs. Stocks and Bonds

 

The Challenge of Saving for Retirement

Retirement is an important life milestone that many people look forward to. After decades of working, retirement offers the freedom to relax and enjoy life on your own terms. However, being able to afford retiring comfortably requires diligently saving and investing throughout your working years.

According to a 2022 study, around 64% of Americans are worried about running out of money in retirement. The average American only has about $50,000 saved for retirement by age 50. With rising costs of living, increased lifespans, and shrinking pensions, actually having enough savings to retire is becoming increasingly difficult.

Building a nest egg large enough to retire usually requires consistent investing over decades. But with the right investment strategies, it may be possible to accelerate your progress and retire sooner.

The Appeal of Stocks and Bonds

For most people, investing for retirement involves putting money into traditional assets like stocks and bonds. These are seen as lower-risk, steady appreciating assets that form the basis of a retirement portfolio.

Stocks allow you to gain equity ownership in companies and benefit from their growth over time through stock price and dividend appreciation. Investing in bonds provides set interest payments along with return of principal upon maturity.

Balancing stocks for higher growth and bonds for stability is a common retirement investing approach. But this traditional 60/40 portfolio allocation may not provide high enough returns to build your nest egg quickly.

Average annual returns for stocks have historically been around 7-10%. Long-term bond returns only yield 3-4% on average. While these assets can grow your money safely over decades, they may not enable an early retirement.

The Power of Real Estate Investing

Real estate stands out as an alternative asset class that can potentially accelerate your retirement timeline. Property has unique advantages that can greatly boost your investment returns when utilized strategically.

For starters, real estate provides passive income through rents along with the potential for appreciation. Combining current cash flow and price growth can deliver higher total returns than stocks and bonds historically.

Real estate also utilizes leverage to multiply returns. For example, a 20% down payment can control a property worth much more. Appreciation from the full property value accrues to your equity. This beneficial leverage is not typically available with stocks and bonds.

Tax advantages provide another boost to real estate returns. Expenses can be deducted reducing taxable rental income. Depreciation deductions shelter a portion of gains from taxes upon sale.

Overall, real estate’s multiple return drivers enable average annual returns in the 10-15% range for active rental properties, higher for value-add deals. Passive real estate investments through funds can generate 10-25%+ averaged returns.

Founder of NT Capital Group, Taylor Loht joined Jim Pfeifer on the Passive Investing from Left Field podcast. During his journey to passive real estate investment, he recounted his thought process: “Once I learned again about cash flow through reading Rich Dad Poor Dad and then learning more about real estate investing more broadly, different strategies, how you can build cash flow, use leverage, and invest for the long-term while getting benefits in the short-term, that made a lot of sense to me. That helped me understand how people are able to retire in a shorter time frame through real estate investing than through stock and bond investing.

Real Estate Investing Options

There are various ways to invest in real estate beyond direct homeownership:

  • Rental Properties – Buying and managing rental properties generates monthly cash flow along with long-term price appreciation. However, being a landlord requires hands-on work.
  • REITs – Real estate investment trusts allow you to invest in portfolios of properties as a shareholder. This is more passive but limits control and upside.
  • Crowdfunding – Platforms like Fundrise pool money from individual investors to buy real estate assets. These have higher fees but are more passive.
  • Syndications – Partner with experienced sponsors to invest in large commercial properties as a limited partner. These are very passive with a high return potential.

Real Estate Syndications for Passive Investing

One smart real estate investing strategy is participating in syndications as a passive limited partner. Here’s how it works:

  • A sponsor sources, acquires, and manages a sizable commercial property like an apartment complex.
  • You pool your money with other investors to provide the equity to purchase the asset.
  • Ownership is structured as an LLC where you hold shares proportionate to your investment.
  • The sponsor handles all operations as the general partner while you earn passive income.
  • Typical investments are held 5-10 years before selling for a profit.

This allows everyday investors to benefit from ownership of institutional-grade assets. The sponsor’s expertise unlocks opportunities and returns otherwise inaccessible to individuals.

As a limited partner, you sit back and receive your pro rata share of profits with little day-to-day involvement. Syndications provide consistent cash flow, growing equity, and long-term appreciation without having to personally deal with tenants or toilets.

Wealth Acceleration with Syndications

Intelligently investing in commercial real estate syndications can significantly accelerate building your retirement nest egg compared to traditional assets. Here’s why:

  • Higher Returns – Syndications aim to achieve average annual returns of 15% or more thanks to rental income, appreciation, and debt paydown. Typical stock and bond returns are significantly lower.
  • Cash Flow – Profit distributions provide regular tax-advantaged income. This supplements your salary while your investment principal continues growing.
  • Appreciation – Commercial properties often gain value over the hold period. Upon sale, you realize your share of appreciation gains.
  • Leverage – A 20-30% down payment controls a much larger asset. Your returns are amplified by this leveraged exposure.
  • Diversification – Each syndication represents just a portion of your overall portfolio. You can spread money across different deals to reduce risk.
  • Wealth Compounding – Reinvesting ongoing cash flow distributions accelerates your capital accumulation exponentially.
  • Tax Advantages – Depreciation deductions offset taxes on rental income. Taxes on appreciation gains are also deferred and reduced.

The power of compounding is huge. If you earned an average of say 18% per year on your investments, you could turn $50,000 into over $1 million in 20 years. That much capital appreciation may be challenging to achieve with a traditional stock and bond portfolio.

As Taylor Loht reflected in the podcast, “‘Stock market investing’ isn’t going to do anything for me in the shorter-term or before I’m in my 60s. It’s not providing me any benefit. I’m stocking it away when I’m old. I need to find another way to get passive income coming in and get my money working for itself.”

Case Study: Investing for a $3 Million Retirement Portfolio

Let’s compare how investing in real estate syndications could potentially accelerate building a retirement nest egg versus traditional stocks and bonds.

For example, say your goal is to accumulate $3 million in 20 years for a comfortable retirement. Assuming you start with $50,000 saved already, here is one scenario of how investing in syndications could potentially get you to your goal faster:

  • Starting Capital: $50,000
  • Additional Savings: $25,000 per year
  • Return Goal: 18% average annual return
  • Investment Horizon: 20 years

By investing your current capital along with consistent future savings into syndication deals averaging 18% annual returns, your portfolio could potentially grow to over $3 million in 20 years:

  • Year 1: $50,000 initial capital plus $25,000 savings equals $75,000 total invested. At 18% return per year, this grows to $88,500.
  • Year 2: The $88,500 compounds at 18% return to $104,530. Add $25,000 savings to equal $129,530 total capital.
  • Each year, returns compound while additional savings continue to be invested.
  • In 20 years, the portfolio could potentially grow to $3.1 million.

Contrast this to projecting similar growth rates for stocks and bonds:

  • Bonds at 4% annual return only grow to around $850,000 in 20 years.
  • Stocks at 8% only accumulate around $1.6 million in the same timeframe.

The power of leveraged real estate returns could potentially generate nearly double the wealth over 20 years compared to stocks and significantly more than bonds.

This illustrates how strategic real estate investing, if executed prudently, could greatly accelerate your retirement timeline compared to more traditional passive investing in stocks and bonds. While past performance is no guarantee of future results, the wealth compounding potential of commercial real estate syndications is compelling. To read about one person’s experience in building wealth passive investing, check out this article from Passive Investing from Left Field.

Keys to Success with Syndications

Intelligently investing in passive syndicated real estate deals requires following some best practices:

  • Evaluate Sponsors Diligently – Do thorough due diligence on the experience, expertise and track record of sponsors. Their capabilities are crucial.
  • Analyze Deals In-Depth – Understand the business plan, financial projections, risks, and assumptions made. Get comfortable with the anticipated returns.
  • Diversify Investments – Deploy capital across multiple properties in different markets with varying strategies to mitigate risk.
  • Educate Yourself – Continuously learn about real estate markets, asset classes, and dynamics impacting your investments. Stay informed.
  • Reinvest Diligently – Re-deploy proceeds from refinancing and property sales into new opportunities. Continuously recycle your capital.
  • Take a Long-Term View – Be patient and persist even through market fluctuations. The power of compounding works over decades.
  • Work With Experts – Platforms like NT Capital Group provide institutional-grade access to commercial real estate previously unavailable to individuals. Leverage experienced sponsors.
  • Join Communities – Groups like Left Field Investors provide education, resources and opportunities to enhance your investing competency.

With the right approach, passive real estate syndications can potentially supercharge your retirement investing returns. But you need education and discipline to execute prudently. Utilizing platforms that provide access to thoroughly vetted sponsors can give added confidence.

Chris Franckhauser

Vice President of Strategy & Growth, Advisory Partner

Chris Franckhauser, Vice President of Strategy & Growth, Advisory Partner for Left Field Investors, has been involved in real estate since 2008. He started with one single-family fix and flip, and he was hooked. He then scaled, completing five more over a brief period. While he enjoyed the journey and the financial tailwinds that came with each completed project, being an active investor with a W2 at the time, became too much to manage with a young and growing family. Seeing this was not easily scalable or sustainable long term, he searched for alternative ideas on where to invest. He explored other passive income streams but kept coming back to his two passions; real estate and time with his family. He discovered syndications after reconnecting with a former colleague and LFI Founder. He joined Left Field Investors in 2023 and has quickly immersed himself into the community and as a key member of our team.  

Chris earned a B.S. from The Ohio State University. After years in healthcare technology and medical devices, from startups to Fortune 15 companies, Chris shifted his efforts to consulting and owning a small apparel business when he is not working with LFI (Left Field Investors) or on his personal passive investments. A few years ago, Chris and his family left the cold life in Ohio for lake life in the Carolinas. Chris lives in Tega Cay, South Carolina with his wife and two kids. In his free time, he enjoys exploring all the things the Carolinas offer, from the beaches to the mountains and everywhere in between, volunteering at the school, coaching his kids’ sports teams and cheering on the Buckeyes from afar.  

Chris knows investing is a team sport. Being a strategic thinker and analytical by nature, the ability to collaborate with like-minded individuals in the Left Field Community and other communities is invaluable.  

Jim Pfeifer

President, Chief Executive Officer, Founder

Jim Pfeifer is one of the founders of Left Field Investors and the host of the Passive Investing from Left Field podcast. Left Field Investors is a group dedicated to educating and assisting like-minded investors negotiate the nuances of the passive investing landscape and world of syndications. Jim is a former financial advisor who became frustrated with the one-path-fits-all approach of the standard financial services industry. Jim now concentrates on investing in real assets that produce cash flow and is committed to sharing his knowledge with others who are interested in learning a different way to grow wealth.

Jim not only advises and helps people get started in passive real estate syndications, he also invests alongside them in small groups to allow for diversification among multiple investments and syndication sponsors. Jim believes the most important factor in a successful syndication is finding a sponsor that he knows, likes and trusts.

He has invested in over 100 passive syndications including apartments, mobile homes, self-storage, private lending and notes, ATM’s, commercial and industrial triple net leases, assisted living facilities and international coffee farms and cacao producers. Jim is constantly looking for new investment ideas that match his philosophy of real assets producing cash flow as well as looking for new sponsors with whom he can build quality, long-term relationships. Jim earned a degree in Finance & Marketing from the University of Oregon and a Master’s in Business Education from The Ohio State University. He has worked as a reinsurance underwriter, high school finance teacher, financial advisor and now works exclusively as a full-time passive investor. Jim lives in Dublin, Ohio with his wife, three kids and two dogs. In his free time, he loves to ski, play Ultimate frisbee and cheer on the Buckeyes.

Jim earned a degree in Finance & Marketing from the University of Oregon and a Master’s in Business Education from The Ohio State University. He has worked as a reinsurance underwriter, high school finance teacher, financial advisor and now works exclusively as a full-time passive investor. Jim lives in Dublin, Ohio with his wife, three kids and two dogs. In his free time, he loves to ski, play Ultimate frisbee and cheer on the Buckeyes.

Chad Ackerman

Chief Operating Officer, Founder

Chad is the Founder & Chief Operating Officer of Left Field Investors and the host of the LFI Spotlight podcast. Chad was in banking most of his career with a focus on data analytics, but in March of 2023 he left his W2 to become LFI’s second full time employee.

Chad always had a passion for real estate, so his analytics skills translated well into the deal analyzer side of the business. Through his training, education and networking Chad was able to align his passive investing to compliment his involvement with LFI while allowing him to grow his wealth and take steps towards financial freedom. He has appreciated the help he’s received from others along his journey which is why he is excited to host the LFI Spotlight podcast and share the experience of other investors and industry experts to assist those that are looking for education for their own journey.

Chad has a Bachelor’s Degree in Business with a Minor in Real Estate from the University of Cincinnati. He is working to educate his two teenagers in the passive investing world. In his spare time he likes to golf, kayak, and check out the local brewery scene.

Ryan Steig

Chief Financial Officer, Founder

Ryan Stieg started down the path of passive investing like many of us did, after he picked up a little purple book called Rich Dad, Poor Dad. The problem was that he did that in college and didn’t take action to start investing passively until many years later when that itch to invest passively crept back up.

Ryan became an accidental landlord after moving from Phoenix back to Montana in 2007, a rental he kept until 2016 when he started investing more intentionally. Since 2016, Ryan has focused (or should we say lack thereof) on all different kinds of investing, always returning to real estate and business as his mainstay. Ryan has a small portfolio of one-to-three-unit rentals across four different markets in the US. He has also invested in over fifty real estate syndication investments individually or with an investment group or tribe. Working to diversify in multiple asset classes, Ryan invests in multi-family, note funds, NNN industrial, retail, office, self-storage, online businesses, start-ups, and several other asset classes that further cement his self-diagnosis of “shiny object syndrome”.

However, with all of those reaches over the years, Ryan still believes in the long-term success and tenets of passive, cash-flow-focused investing with proven syndicators and shared knowledge in investing.

When he’s not working with LFI or on his personal passive investments, he recently opened a new Club Pilates franchise studio after an insurance career. Outside of that, he can be found with his wife watching whatever sport one of their two boys is involved in during that particular season.

Steve Suh

Chief Content Officer, Founder

Steve Suh, one of the founders of Left Field Investors and its Chief Content Officer, has been involved with real estate and alternative assets since 2005. Like many, he saw his net worth plummet during the two major stock market crashes in the early 2000s. Since then, he vowed to find other ways to invest his money. Reading Rich Dad, Poor Dad gave Steve the impetus to learn about real estate investing. He first became a landlord after purchasing his office condo. He then invested passively as a limited partner in oil and gas drilling syndications but quickly learned the importance of scrutinizing sponsors when he stopped getting returns after only a few months. Steve came back to real estate by buying a few small residential rentals. Seeing that this was not easily scalable, he searched for alternative ideas. After listening to hundreds of podcasts and attending numerous real estate investing meetings, he determined that passively investing in real estate syndications was the best avenue to get great, risk-adjusted returns. He has invested in dozens of syndications involving apartment buildings, self-storage facilities, resort properties, ATMs, Bitcoin mining funds, car washes, a coffee farm, and even a Broadway show.

When Steve is not vetting commercial real estate syndications in the evenings, he is stomping out eye diseases and improving vision during the day as an ophthalmologist. He enjoys playing in his tennis and pickleball leagues and rooting for his Buckeyes and Steelers football teams. In the past several years, he took up running and has completed three full marathons, including the New York City Marathon. He is always on a quest to find great pizza, BBQ brisket, and bourbon. He enjoys traveling with his wife and their three adult kids. They usually go on a medical mission trip once a year to southern Mexico to provide eye surgeries and glasses to the residents. Steve has enjoyed being a part of Left Field Investors to help others learn about the merits of passive, real asset investments.

Sean Donnelly

Chief Culture Officer, Founder

Sean holds a W2 job in the finance sector and began his real estate investing journey shortly after earning his MBA. Unfortunately, it could not have begun at a worse time … anyone remember 2007 … but even the recession provided worthy lessons. Sean stayed in the game continuing to find his place, progressing from flipping to owning single and multi-family rentals to now funding opportunities through syndications. While Sean is still heavily invested in the equities market and holds a small portfolio of rentals, he strongly believes passive investing is the best way to offset the cyclical nature of traditional investment vehicles as well as avoid the headaches of direct property ownership. Through consistent cash flow, long term yield and available tax benefits, the diversification offered with passive investing brings a welcomed balance to an otherwise turbulent investing scheme. What Sean likes most about the syndication space is that the investment opportunities are not “one size fits all” and the community of investors genuinely want to help.

He earned a B.S. in Finance from Iowa State University in 1995 and a MBA from Otterbein University in 2007. Sean has lived in eight states but has called Ohio home for the last 20+.  When not attending his children’s various school/sporting events, Sean can be found running, golfing, shooting or fly-fishing.

Patrick Wills

Chief Information Officer, Advisory Partner

An active real estate investor since 2017, Patrick Wills’ investing journey began like many others – after reading the “purple book” by Robert Kiyosaki. Patrick started with single family rentals, and while they performed well, he quickly realized their inability to scale efficiently while remaining passive. He discovered syndications via podcasts and local meetups and never looked back. He joined Left Field Investors in 2022 as a member and has quickly become an integral part of the team as Vice President of Technology.

An I.T. Systems Engineer by trade, he experienced the limitations of traditional Wall Street investing firsthand in his career and knew there had to be a better way to truly have financial freedom.

Unfortunately, that better way is inaccessible to those who need it most. His mission is to make alternative investments accessible to everyone who seeks to take control of their financial future and to pursue their passions in life.

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