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YOUR WEALTH
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Friday, September 10, 2021
Market Correc�on Preparedness
by L. Jake Carpenter, VP Investor Rela�ons
Are you concerned about the risks asso-
ciated with the stock, bond, and mutual
fund market? There is rising concern about
the inevitable market correc�on that is
looming at some point in the future. A
market correc�on means that the market is
going to fall. Typically, when the market
falls, it takes 4 to 5 years for it to rebound
and recover the losses. This is par�cularly
foreboding for investors of re�rement age
who depend on their investment income
and cannot afford to ride the wave through
the recovery period to regain their losses.
You have probably heard the adage, “To be
forewarned is to be forearmed.” In this
ar�cle, I will focus on the one type of in-
vestment that tends to provide the most
significant advantages for investors when it
comes to reducing risk, crea�ng be�er
diversity, and genera�ng more spendable
income.
In our 30+ years of experience in the
financial service industry, we have ob-
served that investor por�olios containing a
por�on in real estate consistently outper-
formed investor por�olios that didn’t.
There are many reasons to consider diversi-
fying some of your assets into income-
producing real estate in order to mi�gate
the risks associated with stock, bond, and
mutual fund exposure. First, income-
producing real estate typically provides
dividend income, anywhere from 5 - 6% or
more on the money invested. So, it will
generally provide $50,000 - $60,000 of
income per year for every million dollars
invested. The dividend income is not guar-
anteed like a fixed annuity, but where else
will you find a 5 - 6% income rate? Fixed
annui�es will be paying out somewhere
around 1.5 - 2.5% on average. Although the
advantage of a fixed annuity is the rate is
guaranteed.
The deprecia�on rate is a non-cash ex-
pense that you may be allowed to credit
against the income you take from the real
estate projects. This reduces the amount of
the net income that is subject to ordinary
income tax.
Another benefit of closely held, income-
producing real estate is that it usually con-
�nues to grow in value, even while taking
the dividend income. This is due to the
capital apprecia�on of real estate. The
property value goes up over �me, and
when the real estate holding is sold, the
capital apprecia�on is shared amongst the
investors. The dividend provides the
income, and the capital apprecia�on pro-
vides the growth.
Finally, there is an added benefit when
inves�ng in a real estate fund, like the ECP
Opportuni�es Fund I, LP, that has mul�ple
real estate projects in one fund. There is
diversity in the fund, with mul�ple real
estate projects contribu�ng to the fund’s
total value and cash flow. This further
reduces risk and stabilizes returns.
If your risk tolerance is low and you
want to limit your exposure to stocks,
bonds, and mutual funds, remember that
real estate historically has yielded stable
and predictable income. Though past per-
formance does not guarantee future
results, I recommend that you consider if
inves�ng in real estate is right for you.
Call today to learn more about our cur-
rent real estate offering. (509) 665-8349
EquilusCapital.Com
The second benefit to posi�oning some
assets into closely held, income-producing
real estate is that you may be able to take
advantage of the deprecia�on schedule.
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