With inflation now likely an enduring presence, it’s more vital than ever to devote financial resources to vehicles with the most robust returns.
When investing, everyone wants maximum returns. Weighing in only to make 1% to 2% on your money just isn’t as exciting as getting back 8%, 10% or more, and during periods of inflation, high returns become even more essential (as it will make that 1% to 2% a net negative). The question, of course, is which investments with high returns are the best? In my experience, after analyzing the data, there are five you should consider. (It’s worth imparting the disclaimer here that past performance is no guarantee of future returns. All investing involves risk of loss.)
1. Real estate syndications
A strategy in which a number of investors pool resources to purchase a property, real estate syndications are arguably one of the best ways of achieving high returns. Investors typically get about 8% to 10% per year, plus they enjoy appreciation as the building increases in value (while appreciation varies, it’s not uncommon to see increases of 30% to 50%). Since the investment period is five years, these instruments have the potential to double your money or more: A $100,000 investment may make $50,000 over five years in rental income, plus $50,000 in appreciation.
Pros: Easy to start (totally passive), high ROI and you can pick your investments and projects.
Cons: Typically requires at least a $50,000 buy-in, and investors must be accredited to engage in these private offerings.
2. Rental real estate
Another way investors can get into real estate, and which also has substantial ROI potential, is through rental properties. People often buy single-family homes or condos and rent them out; some will even rent out rooms or floors in their primary homes. The ROI depends heavily on the market, but typically you’re looking at somewhere between 5% to 10% per year.
Pros: This method is a straightforward investment with high returns. You merely need to pick the home, buy it and start renting it out.
Cons: You will be responsible for managing tenants, coordinating any repairs or maintenance and collecting rental income. You’ll also need at least 20% down to get a mortgage, and if a tenant decides to skip out on rent, you will be stuck paying it. Additionally, tenants might damage the property, leaving the owner with repair bills that cut into returns.
3. Real estate investment trusts
Another excellent way to start investing in real estate, REIT companies trade on the major stock exchanges and typically have various real estate assets. They tend to pay reasonably good dividends, with yields that can rise as high as 5%.
Pros: REITs represent one of the easiest ways to start investing in real estate. You can even trade these stocks from your 401(k). Plus, the dividend yield can be substantial.
Cons: These are stocks, and as such are subject to many market whims. Even if the dividend is sound, that doesn’t mean the underlying stock price will appreciate.