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Alternative Investment Strategies

Alternative Investment Strategies

Alternative investment offerings, also known as private placement investments, may be a wise choice for those looking to diversify their portfolios and defer taxable gains. Private Placement investments can provide opportunities for investors to manage their portfolios that may be difficult to achieve using only public markets.  These opportunities are generally open to accredited investors who individually earn $200,00 annually or $300,00 combined income with a spouse over a consecutive two-year period.

Choosing a private market investment requires sophistication. A Registered Investment Advisor (RIA) like Wambolt & Associates, can evaluate the details of private market opportunities based on experience across this broad field. As an RIA, the firm may have access to private market opportunities that individual investors do not. Wambolt advisors also can help investors choose whether and which private market investments are a good fit with their individual portfolio.

Types of Private Placement Investments

1031 Distribution

  • Defers capital gains from the sale of a rental property.
  • Allows passive, fractional ownership in real estate that still qualifies as a “like kind”
    replacement property under IRS code.
  • Investors must declare their intention to engage in a 1031 Exchange prior to the sale of
    their rental property.

Qualified Opportunity Zones

  • An economic development to promote investment in distressed areas in the United States.
  • Defers capital gains tax until the sale of the investment or December 31, 2026, whichever
    occurs first.
  • After a 10-year holding period of investment, taxpayers can qualify for a step-up in basis in equity. Investment gains are tax-free.

Conservation Easements

  • An agreement to restrict use of land to preserve specific tracts from development.
  • A landowner who donates a qualifying conservation easement is eligible for a federal charitable deduction equal to the value of the easement.
  • The deduction is available if the contribution or gift is made to a qualifying organization with charitable intent and without the expectation of a direct or indirect benefit to the donor.

US Oil & Gas Drilling

  • Allows for a significant write-off for every dollar invested against ordinary income in the first year.
  • Quick return of capital
  • Payouts continue as long as wells are producing.

Renewable Energy Funds/Solar Credits

  • Solar energy/wind farms
  • Income focused with minor growth. For every dollar invested in solar credits, investors realize an average of $1.30 in depreciation.
  • Potential for modest tax savings

Art

  • Art within the fund is sold to auctioneers, private galleries, and collectors and the proceeds are distributed to the investor.
  • High growth potential and inflation hedge.
  • Typically requires a 3-10-year hold, depending on how quickly the artwork in the fund is sold.

Private REITS

Real Estate Investment Trusts that are not listed on a major exchange and generally only
sold to accredited and institutional investors.

  • Private REITs tend to pay higher dividend than comparable public REITs
  • Shares are generally illiquid.
  • Projects are externally advised and managed.
  • Low correlation to stock market
  • Opportunity for depreciation allowance

Types of real estate projects vary:

  • Multi-family housing
  • Storage units
  • Hospitals
  • Hotels & Resorts

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