How Passive Income Real Estate Helps Offset Stock Market Volatility

The stock market has been incredibly volatile in 2022, and there’s no clear sign that we’re out of the woods yet. A number of macroeconomic and geopolitical events have been weighing heavily on the the markets, causing large swings seemingly with every news headline.

The economic headwinds began early in 2022 with the war between Russia and Ukraine and continued fallout from the COVID-19 pandemic. Due to the war, sanctions have been flying around, primarily targeting Russia. These sanctions are impacting global trade, as are the responses that Russia has made such as restricting natural gas flows to western nations.

For the majority of the year, the story has been around inflation. Despite hawkish actions by the Fed, inflation remains stubbornly is still high in America and many other nations that printed large amounts of currency in order to help their economies to survive during the early stages of the pandemic. Supply chains, while seeing recent improvement, remain sub-optimal in many nations and are still recovering from the pandemic.

The end result for stock investors has been one of the most volatile, unpredictable markets on record, and many of investors are getting fed up with all of the volatility and poor performance.

Exactly How Volatile Has 2022 Been?

2022 has actually been one of the most volatile years for the stock market in decades. In the first six months of 2022, the S&P 500 saw a 20% drop and the Nasdaq 100 saw a roughly 30% drop. One. way to measure volatility is to look at how often the stock market has moved by more than 1%; according to a recent study, the last time we saw so many 1% moves was in the Great Recession of 2008. (Unfortunately, the majority of these swings have been to the downside.)

Even the usual inflationary safe havens haven't been immune. The Fed's tightening has caused a strain on the bond market, and rising yields haven't been able to keep pace with inflation, meaning net loss of purchasing power for those investing in high yield savings accounts, money markets or CDs.

While aggressive interest rate hikes were expected, many were hoping to see inflation peak and reverse course earlier this summer, followed by a pause or even a drop in rate action. That obviously hasn't happened; while we're now looking at more aggressive hikes many analysts expect stock market volatility to remain at elevated levels for the foreseeable future.

What Can Investors Do?

One of the best things that investors can do to improve their portfolios this year is to turn to multifamily real estate investing. If you can allocate at least a portion of your investment portfolio into a passive income-generating investment such as multifamily real estate you can avoid the wild swings of the stock market.

1. It generates passive income

Multifamily real estate can generate passive income for investors that can keep pace or frequently outperform inflation.

With the costs of single family housing soaring, demand for rentals has only increased in 2022 and multifamily investors have benefitted. Good operators have been able to increase rents while controlling optional costs, boosting regular cash flow and optimizing returns for their investors.

2. It is very low-maintenance

Unless you're actively going to manage the properties yourself, real estate investments can be extremely low maintenance. With multifamily syndication, all that you have to do is to provide the capital to the sponsor, and the sponsor will find the investments, manage them on your behalf, and deal with the payouts for you.

Because sponsors do the vast majority of the work, investing in syndication is one of the single most convenient ways to deploy capital and generate good returns. It's a big reason why so many wealthy individuals and families choose to allocate a significant portion of their wealth into real estate.

3. Real Estate Tends to Appreciate in Value

While real estate generates cash flow in the form of rental payments, it also tends to appreciate in value over time.

Good multifamily real estate syndicates are excellent at selecting properties in the right neighborhoods with the right features and amenities in order to optimize appreciation and cash flow, creating a great balance of growth and income throughout the life of your investment.

Making the Move to Real Estate

A lot of investors are chomping at the bit already to reallocate some of their capital out of the stock market and into a different type of asset class to avoid the incredible volatility. If you fall into this category, you're not alone. Institutional money has been increasingly flowing into multifamily investments as well.

Some people wait to invest in real estate because they think it will be too complicated or stressful. If you're hesitant, making the switch might be easier than you think. You can avoid all of the difficulties of becoming a successful real estate investor by choosing to invest with a multifamily syndicate instead of going it alone.

If you qualify, you can gain access to some of the best multifamily property investing opportunities in your region. Most multi-family syndicates require initial investments of at least $50,000-$100,000 to get started. So, meet the investor requirements and are looking for a proven way to escape the volatility of the stock market, then you could be a great candidate for multifamily real estate investing.

If you do decide to move into multifamily real estate investing, do your research and make sure you partner with an operator that aligns with your goals. For newly accredited investors, consider what the right investment size is to fit your budget and liquidity needs. You can always make additional investments as you go.

Want to Invest with Blue Lake Capital?

If you are interested in learning more about passively investing in multifamily properties, click here to schedule a call with the Blue Lake Capital Team.

About the Author

Ellie Perlman is the founder of Blue Lake Capital, a commercial real estate investment firm specializing in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.

A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.

Ellie is the host of REady2Scale, a podcast that highlights the assets, processes, and strategies for the multiple approaches to successful real estate investing.

She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.

Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.

You can read more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.