Alternative Investments

Comparing Merchant Cash Advances and Real Estate: Which Alternative Asset Fits Your Portfolio?

Alice Wilson November 19, 2024

Understand the strengths and challenges of MCAs and real estate to make more informed investment choices

 

In today’s article, we’re breaking down the key differences between Merchant Cash Advances (MCAs) and real estate.

 

From returns to risks and everything in between, we’ll help you decide which alternative asset—or combination—fits your own investment goals.

 

A woman holding a miniature house in one hand and a key in the other, for “Comparing Merchant Cash Advances and Real Estate: Which Alternative Asset Fits Your Portfolio?”
You’re thinking about diversifying with alternative assets, but how do you decide between different alts? We’re here to help

 

What Are Merchant Cash Advances and Real Estate Investments?

Merchant Cash Advances (MCAs) let you invest in a business’s future revenue, earning returns through repayments and fees. Real estate investments, like buying properties or investing in REITs, make money from rent or rising property values. 

Both can be attractive options if you’re looking to diversify beyond traditional stocks and bonds—a trend expected to grow, with two out of five fund managers predicting a dramatic rise in US investor allocations to alternatives.

 

Pros and Cons of Merchant Cash Advances

Pros:

  • High cash flow potential: MCAs have the potential to provide high returns, which is part of the reason the industry is growing so quickly. With a projected annual growth rate of 15% from 2021 to 2028, MCAs are becoming a go-to option for investors looking for strong cash flow opportunities.
  • Shorter investment terms: These can be helpful for investors wanting quicker returns or shorter commitments.

Cons:

 

A rising bar chart with Time on the X axis and Wealth on the Y axis, for “Comparing Merchant Cash Advances and Real Estate: Which Alternative Asset Fits Your Portfolio?”
MCAs are becoming increasingly popular, in part because of their potentially high returns

 

Pros and Cons of Real Estate Investments

Pros:

  • Capital appreciation: Properties can often increase in value over time, offering long-term growth potential.
  • Steady income: Rental properties or REITs could give you consistent cash flow through rental income.

Cons:

  • Illiquidity: Real estate is harder to sell quickly, which can tie up your capital.
  • Market dependency: Property values and rental income rely heavily on market conditions.
  • Management costs: Owning and maintaining properties can be time-consuming and expensive.

 

Which Type of Investor Should Consider MCAs vs. Real Estate?

Both MCAs and real estate have their strengths. 

MCAs can deliver higher cash flow over shorter timeframes, making them a potentially good choice for investors who prioritize liquidity. MCAs could suit investors aiming to fund short-term goals, such as expanding a business or building a cash reserve for upcoming opportunities.

Whereas real estate could offer steady income and the potential for long-term growth, though it requires a longer commitment. It’s a potentially good fit for investors focused on stability and generational wealth – like those planning for retirement or creating income streams to support their family’s future.

 

For a balanced approach, combining both can be a smart strategy. MCAs can offer more immediate income, while real estate can build wealth over time. That means you could target both short-term cash flow and long-term stability. 

The best mix depends on your own unique financial goals and risk tolerance.

 

What Can I Do Now?

Ready to dive deeper? Explore our educational resources and try one of our interactive quizzes to find the best alternative asset mix for your goals.

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This information is being furnished solely for informational purposes. This material does not constitute an offer to buy or sell, or a solicitation of an offer to buy or sell, any security. This does not constitute and must not be construed as investment advice. Investing involves risk and possible loss of principal capital. Potential investors must rely upon their own examination of the merits and risks involved. Comments by viewers or third-party rankings and recognitions are no guarantee of future investment outcomes. Supervestor, LLC (“Supervestor”) has a reasonable belief that the content posted by a third-party does not contain untrue statements of material fact or misleading information. The opinions expressed herein are those of Supervestor and are subject to change without notice. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions, and may not necessarily come to pass. Certain statements included in these materials, including, without limitation, statements regarding investment objectives and strategies, and statements as to Supervestor’s beliefs, expectations or options may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and are subject to risks and uncertainties. Actual results and developments could be materially different from those expressed in or implied by such forward-looking statements. Charts are for illustrative purposes only and are not to be relied upon as investment advice. Unless it is explicitly identified otherwise all returns information presented herein is net of applicable fees and expenses.

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