Experts: 7 Biggest Wealth-Building Opportunities the Middle Class Should Act On
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Nicole Spector
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Laura Bogart
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The American middle class holds roughly a quarter of the nation’s wealth, and though this isn’t totally abysmal, it can be pretty deflating when you consider that the top 1% of earners own more than that.
It’s complex and challenging to rise from “middle class” to “wealthy,” but it’s not impossible, and there are moves you can make to build and fortify your fortune. GOBankingRates spoke with financial experts to learn about seven wealth-building opportunities the middle class should act on if they want to be richer.
Real Estate Investing With the ‘Sandwich Lease Purchase Option’
You may have heard about the potential benefits of investing in real estate, which can appreciate in value and hedge against inflation. But what you may not have heard about is something called the “sandwich lease purchase option.”
Andrew Cordle, the CEO and founder at Money Is, recommends that middle-class folks looking to build wealth seriously consider this option.
“If I was in middle-class America right now and trying to create wealth, especially in the next down market, the option is just a simple strategy,” Cordle said. “Where you are, you’re going to see someone who maybe is losing their house in foreclosure, or … down markets come and they lost their job and they’re going to lose their house, or they [have] to move away to other states to take a new job, and they can’t stay in their house.
“Their house has no value for them inside it, and they can’t sell it, since the market is down.”
You come into the equation by leasing that endangered house from them and putting it on the lease market for a higher price than what you’re paying to lease it.
Invest In Small Private Equity Transactions
Middle class folks can learn from studying what the wealthy do, including investing in small private equity transactions. Cordle explained how this works.
“In layman’s terms, maybe a buddy of theirs, [who] already has a lot of success and wealth, is starting or launching a new company, and they will invest in their buddy’s company at a very early stage,” he said. “They typically buy shares or stocks in that company — not on the stock market, just between them and their buddies.
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“These are called private shares, and eventually, they are playing a game that, in the best case, that company goes public, and they sell those shares off at a significant return.”
If the company doesn’t go public but instead is acquired by a large hedge fund — a frequent occurrence — you can still reap financial rewards.
“Hedge funds are always looking to acquire certain companies and do roll-ups,” Cordle said. “One of the best things you can do is invest in private equity companies that are in the process of getting rolled up by bigger hedge funds.”
Consider Crypto
In the realm of finance, cryptocurrency is a particularly mercurial beast. It can make you mega money, but it can also go off the rails and cost you. That said, if you keep your finger on the pulse of the crypto space — and are comfortable with volatility and risk — crypto can be a worthy alternative investment to help you rise up in wealth.
“I don’t really care if you think that crypto is the way of the future or not,” Cordle said. “Set that aside for a second. Look at crypto almost as stock trading. And if you look at bitcoin, for example, if you were to find a stock that has that much upswing potential inside of it, with as low of a downswing as it has, it would be an incredible opportunity for you.”
Real Estate With a Rent, Refinance, Repeat Strategy
Here’s another somewhat complex real estate investment strategy Cordle brought attention to: real estate investing with a rent, refinance and repeat strategy.
“So essentially here, it’s buy, rehab, rent, refinance and then repeat it,” Cordle said. “That strategy has been around for a very, very long time. However, with interest rates going down again in today’s market … this strategy makes sense even for the average person.
“It is the idea that you can buy a rental property, rehab it, rent it out, then refinance it. You get your money back out, plus the new cash value, and then repeat that process. This is a way for you to build a long-term rental portfolio for your retirement.”
Real Estate Syndication
And then there’s real estate syndication. How does that work?
“In the investing world, when you want to say, ‘I own a multi-family unit,’ but you don’t have enough capital or knowledge or time to be able to buy a 300-unit apartment complex, you can do what’s called a syndication,” Cordle said. “This is where maybe one or two people who have a lot of experience and track record will find an apartment deal, and they will structure a deal where they will raise money from accredited investors, normally. They will raise that money from a group of people for the down payment of this apartment complex.”
With the down payment secured, you can go get a loan from a lender to finance the whole purchase.
“If you’re not accredited, you have to find a syndication that allows nonaccredited investors,” Cordle said.
Direct Indexing
Mo Al Adham, CEO and co-founder of Frec, an investment platform that provides consumers with access to investing products, recommends direct indexing, which enables investors to personalize their portfolios by owning individual stocks within an index, such as the S&P 500 — instead of investing in a mutual fund or ETF.
“By owning these stocks directly, investors can engage in tax-loss harvesting, a strategy that involves selling underperforming stocks to offset gains, reducing their taxable income,” Adham said.
Investing In Yourself
You may not have thought much about it, but you as an individual and a professional have, as Cordle put it, “the most and highest level of ROI humanly possible.” Thus, it’s critical to invest in yourself, specifically with the goal of building financial freedom and lasting security.
“To not invest in yourself would be the worst investing mistake you could ever make in the history of investing,” Cordle said. “So, the number one investment that someone should make is in themselves, and this would be investing in increasing their financial IQ, knowing what to do and not to do when it comes to money.
“On a micro level, it would be even the people reading this article — they are constantly trying to increase their financial IQ. If you keep pursuing that, it would be the greatest investment you ever make out there.”
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