Exempt Market Products, Real Estate, or Subway Franchise? A Case Study

Franchise, Condos, Apartment Buildings, or Exempt Market Products: Which Would you Choose?

Recently I had an extremely interesting conversation with an accredited investor living in Toronto. This gentleman owns a technology consulting business, is extremely intelligent and astute, and has achieved a level of success that affords freedom and choices. I love conversations with individuals who have carved their own path and taken the risk of starting a business. We can always learn something from true entrepreneurs.

I asked him how he ended up becoming an investor in exempt market products. He responded that, as he already has significant portfolio representation in the public stock markets, he also has a sizable portion of his portfolio in cash. His investigation led to a number of questions regarding investment options:

Should I start buying condos in Toronto, and develop a real estate portfolio, and follow the crowd?

Perhaps an apartment building in a suburban area?

Should I invest in a franchise such as Subway?

Are there additional investment products that can allow my capital to work harder than the 1.5% it is receiving in the bank?

Getting yourself informed is one of the keys to avoiding costly investing mistakes. He decided to roll up his sleeves and carefully investigate these options.

Option #1: Downtown Toronto Condos

After examining the real estate market in Toronto, he came to the conclusion that there are too many uncertainties associated with buying a condo for investment purposes. The market has shot up so much that it becomes difficult to overlay proper fundamentals on condos, and this leads to higher risk, and becomes speculative.

Private Apartments

Private Equity

Farmland

Conventional Energy Assets

Lending Strategies

Solar Energy Assets

By using the same amount of money that would be invested in the other options, this investor is currently diversified across 6 unique asset classes, reducing overall risk in comparison. He is also a passive landlord, collecting a monthly rent cheque with no hassle on the apartments. As there are professional managers making all the day to day decisions, his time commitment is almost zero, and he is free to dedicate energies to his consulting business.

While investing in exempt market products may not be for everyone, for this particular investor, it is an ideal fit. This gentleman already has a public stock portfolio to diversify his private holdings. And he is also holding onto some cash, in case circumstances change, or he decides to buy a building or franchise. By keeping some investments public, some private, and holding some cash, this investor is in an ideal situation to set himself up for future investment success. He has created an institutional-style portfolio that is far beyond the plain-vanilla stocks and bonds that most people purchase.

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