Investment diversification is a fundamental strategy that involves spreading your investment capital across a variety of assets to mitigate risk. By allocating funds across different asset classes such as stocks, bonds, real estate, and commodities, investors can reduce their exposure to the volatility of any single investment.
Diversification helps cushion the impact of market downturns on a portfolio, as losses in one asset class may be offset by gains in another. Additionally, diversification can enhance long-term returns by capturing opportunities in various sectors and industries. However, it's important to note that diversification does not eliminate risk entirely, but rather helps manage it. A well-diversified portfolio should be tailored to individual risk tolerance, investment goals, and time horizon, ensuring a balanced approach to wealth accumulation while minimizing undue exposure to any single source of risk.
When thinking about allocation decisions, real estate can be an amazing product to provide stable returns with high potential upside. Portfolio theory used to be dominated by the Traditional allocation method of 60% stocks / 40% bonds. In 1985, a Yale economist & endowment Chief Investment Officer took a radically different approach, allocating 50% stocks / 30% bonds / 20% real estate. From 1985 to 2021, the Yale endowment outperformed the Traditional method by 41% on a yearly basis and became the de facto portfolio model, coined the "Yale Method."
Leveraging 50+ years of data from the US Federal Reserve and the Case-Shiller Home Index, we analyzed total returns of single family rentals vs. other asset classes. Single Family Rentals returned 39% more than the S&P 500 on an annual basis. Real estate is an essential product and should be included in every investment portfolio. There are several ways and product-types to invest in within the world of real estate. At mogul we love housing as a vertical and provide direct investment into real property through our easy-to-use platform. Single family rentals are a key element of the housing sector (and your life in general!), and is generally regarded as the perfect place to start, continue, or scale your journey as a real estate investor.
Standard deviation is a measure of variability or volatility around an investment's average return. The lower the standard deviation, the more stable an asset's return. Analyzing data from the past 30 years, Single Family rentals have demonstrated a 45% lower standard deviation (volatility) than the S&P 500, while returning 39% more. Our properties are no exception, with a minimum hurdle rate of 12% annually.
Single family rentals garner an incredible number of potential benefits. Potential for appreciation: Historically, single family rentals have shown the potential to appreciate over time, especially in desirable locations where demand exceeds supply. This appreciation can result in significant returns on investment, building wealth for property owners. Income generation: Real estate investments, such as single family rental properties, can provide a steady stream of income through rental payments. This income can serve as a reliable source of cash flow, especially when managed effectively to cover expenses and generate profit. Diversification: Real estate offers diversification benefits, as it is often less correlated with other asset classes like stocks and bonds. Adding real estate to an investment portfolio can help spread risk and reduce overall portfolio volatility. Inflation hedge: Real estate has historically acted as a hedge against inflation. As the cost of living rises, property values and rental income tend to increase, allowing investors to maintain purchasing power over time. Potential tax Benefits: Real estate investors may benefit from various tax advantages, such as depreciation deductions, mortgage interest deductions, and potential capital gains tax treatment. These tax incentives can enhance overall returns and improve cash flow.
mogul provides direct investment into single family rentals at a fraction of the cost, headache, and time that is associated with purchasing a home or investing through a REIT, syndicate, or crowdfunding platform.
We facilitate all of the back-office work when it comes to purchasing, capitalizing, operating, and ultimately liquidating equity in each investment opportunity so you don’t have to. And we do all of this for a flat 3% fee that is capitalized within the properties closing costs at closing. This means that your net underwritten return already includes the 3% property fee. And you receive all of the pro rate benefits of cashflow, appreciation, and potential tax benefits directly into your portal with no additional hidden fees or profit share.
Pushing forth innovation in the way we transact, operate, and capitalize our real estate we create endless efficiencies that ultimately translate into your bottom line annual return. Cutting down on closing costs, accessing the best mortgage rates, working with top property managers with fees over 50% below market, and unlocking new ways to provide both liquidity and cheap costs of capital drive direct investment returns. Oh, and that’s BEFORE our lowest platform fee in the game, which is already baked into your underwritten returns as it is capitalized with the property and never charged to you directly.
One of our many innovations is the ability to pass along valuable mortgage rates at a time where mortgage rates are proving to be a massive barrier to enter for buyers and investors alike. For example, mogul has unlocked the ability with specific opportunities to pass along loans from seller to buyer with incredibly beneficial costs of borrowing. So, with the average 30-year fixed mortgage rate around 8% at the time this article was published, mogul was able to pass along a 2.625% interest rate on our first property listed, the Bowser.
Real estate is great, and mogul makes it ever greater. Creating efficiencies, increasing access and building an efficient marketplace for you to make the decisions on how you should be allocating your direct investments into real estate. Let us do the busy work for you and take control of your real estate investment journey!
Get started with your real estate investment journey today and secure your future with mogul.