Charles Farnsworth | Fund Director, 1892 Capital Partners
Throughout my 30-year career in Wealth Management, I've learned that there's a distinct difference between building wealth and safeguarding it. Initially, the path to wealth often involves calculated risks aimed at achieving specific financial milestones. However, as your wealth grows, your priorities invariably shift from risk-taking to safeguarding your hard-earned principal.
So, what are some of the most effective strategies for this transition? Optimizing your tax strategy, exploring high-yield investments, and tapping into the potential of private capital.
In this article, we will explore effective strategies for safeguarding your principal wealth and delve into how private capital can be a cornerstone for ensuring its long-term security and delivering robust returns.
As you consider the array of approaches available to protect your wealth, keep in mind that our journey isn't just about securing your assets; it's about creating a pathway to enduring financial prosperity and stability. Our first strategies: savvy tax planning and secured investing.
Optimizing your tax strategy is one of the most effective ways to safeguard your principal without exposing it to risk. By employing smart tax strategies, you can reduce your tax liabilities and therefore lower taxes to return without the associated risks, provided it's done correctly.
Moreover, safeguarding your principal entails investing in secured high-yield options. The key word here is 'secured.' These investments are backed by tangible assets, significantly reducing your exposure to risk. In case of trouble, you can sell these assets to protect your principal, a vital safety net that prevents you from diving back into the risky world of wealth-building.
As your wealth reaches substantial levels, preserving your principal becomes your top priority, and liquidity takes on added importance. While options like Certificates of Deposit (CDs) promise principal protection, their coverage is limited to $250,000 per bank account. Treasury securities and money market instruments offer decent returns, but after taxes, they might barely keep pace with inflation. Precious metals like gold and volatile cryptocurrencies like Bitcoin can introduce unpredictability into your wealth equation.
This is where private lending emerges as an invaluable tool for preserving and growing your wealth, especially if you are an individual investor or a family office with a focus on real estate. Private lending opens doors to investing surplus capital in short-term loans spanning 6 to 18 months, with potential yields ranging from 7% to an impressive 20% or beyond. The scope of these returns depends on your level of involvement in the lending process, which accommodates various resource levels.
As a real estate-focused family-run lending firm, we have both assets under management and the ability to lend our surplus capital to our core business, which is real estate. Lending against real estate gives us access to deal flow for lending and investing, making lending a valuable addition to our core objective of accumulating real estate under management.
We don't lend with the intention of taking ownership, but we only lend against properties we wouldn't mind owning. This approach ensures principal protection while yielding secured, high returns. Our lending operation is robust enough to manage the entire lending process, allowing us to achieve higher yields. Even if we have to dispose of a non-performing asset, our conservative loan-to-value ratios mean we may not achieve our typical yield, but we never lose principal. In some cases, we acquire the property and, with our acquisitions and development team, turn it around for even greater returns than if the loan had performed as expected.
For us at 1892 Capital Partners, private lending is a win-win. Our loans are secured, yield high returns, and whether they perform as expected or not, we consistently achieve our primary goal: protecting and preserving wealth while generating superior yields compared to other investments that align with our core focus on real estate assets under management.
Throughout my extensive career in wealth management, I've seen firsthand the profound impact of private lending on wealth preservation and growth. Only some investment avenues can match its unique advantages. If you apply the rule of 72 to these potential returns, at 7% you can double your money in 10.2% years, and at 20% you can double your money in 3.6 years.
Imagine having the power to protect your principal with secured, high-yield investments, all while minimizing risk. That's precisely what private lending can bring to your financial strategy.
If you're seeking these exceptional results and the expertise to navigate this world effectively, consider 1892 Capital Partners. With our seasoned experience and dedication, we're uniquely positioned to help you thrive in private lending. Your financial aspirations deserve the best, and that's precisely what we deliver. Let's embark on this wealth-building journey together.