One of the financial secret weapons of the ultra-wealthy…that you can use too

Last week we talked about the different tiers of investing. This week, I’m going to teach you about how to get into some Tier 3 type investments and the tax advantages that come from them.

Without burying the lead here too much, most of these Tier 3 investments are able to provide tax saving and wealth building benefits because they are structured as “flow-through” investments according to the tax code.

Now not all of the Tier 3 investments are flow-through investments, but enough of them are that I thought it would be worth talking about today.

It’s this flow-through status, combined with the investments the entities make that make tier 3 investments one of the secret financial weapons of the ultra-wealthy and could be your silver bullet in your wealth-building arsenal.

What Are Flow-Through Investments?

First, let’s break it down. Flow-through investments include things like:

• Private Equity Real Estate: Think owning a slice of an apartment complex or a commercial property, but you’re not the one fixing toilets or chasing tenants for rent.

• Private Business Ownership (Limited Partner or Passive Owner): You invest in a business as a limited partner—you get a cut of the profits, but you’re not involved in the day-to-day grind.

Here’s the key: These investments “flow through” income, losses, and tax benefits directly to you, the investor, rather than being taxed at the entity level. Translation? You get some juicy tax perks.

What Tax Benefits Do They Offer?

These investments aren’t just about growing your money—they’re also about keeping more of it. Here’s how:

• Depreciation Deductions: Real estate investments let you deduct the property’s depreciation—even if the property’s value is going up. Imagine getting a tax break just for owning something that’s appreciating!

• Offset Active Income: Losses from passive investments can sometimes offset your W-2 income. If you’ve ever grumbled about taxes eating into your commissions, this is where the magic happens.

• Lower Capital Gains Rates: When you sell your investment after holding it for over a year, the profits are taxed at lower capital gains rates instead of higher ordinary income rates.

• Potential for Tax-Free Growth: Some flow-through investments, like those qualifying under Section 1202 for small businesses, can allow you to sell your shares completely tax-free under certain conditions.

But there are rules about who can make these investments

You’ve probably heard the term “accredited investor” tossed around. Here’s what it means:

To qualify, you need to earn at least $200,000 a year individually (or $300,000 with your spouse) or have a net worth over $1 million (excluding your primary home). This status is required for many flow-through investments because they’re considered higher-risk and are typically offered outside the stock market.

The upside? Accredited investors gain access to deals with serious wealth-building potential that regular folks can’t touch.

When Should You Consider These Investments?

Timing is everything. Here’s when flow-through investments might make sense:

1. You’re in a high tax bracket: The more you earn, the more valuable these tax-saving strategies become.

2. You’re looking to diversify: If most of your wealth is tied up in stocks (Tier 1 investments) or your primary residence, these investments can broaden your portfolio.

3. You’re ready for the long game: Flow-through investments often require a longer time horizon to see big payoffs. They’re not liquid like your brokerage account.

4. You want more passive income: If you’re crushing it in sales but dreaming of earning money while you’re at the beach, these investments can help make that happen.

How to Get Started

Curious about diving in? Here are your next steps:

1. Find a Trusted Advisor: Work with someone who knows the ins and outs of flow-through investments and how they align with your goals. (Hint: That’s us!)

2. Evaluate Opportunities: Not all deals are created equal. Vet them thoroughly to ensure they’re solid.

3. Understand the Risks: Like any investment, there’s risk involved. Make sure you’re comfortable with the level of risk before jumping in.

Why This Matters for You

As a high-achieving sales professional, you’re already working hard to grow your income. But why stop there? Flow-through investments let you maximize your wealth while minimizing taxes—so you can spend more of your hard-earned money on what matters most to you.

Remember, the government wants to incentivize investors who fuel the economy. By investing in real estate or private businesses, you’re not just growing your portfolio—you’re also getting rewarded for it.

Flow-through investments might sound fancy, but they’re one of the smartest ways to grow wealth for elite earners like you. Want to learn how to get started? Let’s chat about how these strategies can help you crush your financial goals—and keep more of your commissions in your pocket.

Schedule your free tax and wealth strategy session today using the link below, and let’s make your money work as hard as you do!