Why Alternative Movie Investments Are Far Superior to Real Estate Investments
PART I - WHAT’S WRONG WITH REAL ESTATE INVESTMENTS?
Real estate is a popular avenue for individual investors hoping to generate a high ROI. Owning and renting out properties can be a great source of revenue for individual investors and can also be somewhat safe.
However, there are many downsides of real estate investing that make it a poor choice for individual investors. Despite the popularity of real estate as an investment opportunity, the number of individual investors who will get the ROI they hope for is very low.
In reality, only a small percentage of individual real estate investors succeed in the long run and enjoy the tremendous success that is advertised to them from real estate investment firms and other sources.
Some of the downsides associated with real estate investing include:
Buying a home is different than buying an investment property.
Unfortunately, not all properties appreciate in value - to make a return, rent needs to offset the cost of managing the property, paying the mortgage, landlords, real estate brokers, etc.
Returns on investment properties are possible assuming the property's value appreciates and the house remains filled with tenants.
However, with monthly taxes, upkeep, insurance, mortgage, and other fees, balancing the spreadsheet and generating a positive cash flow - especially in the first few years - is exceedingly difficult.
Even a couple of months spent trying to fill the home with new tenants can turn your investment property from a cash cow to a major cash-suck.
You cannot sell your real estate fast the way you can with other investments.
Many real estate investors go to sell their homes only to find it a time-intensive and laborious process. Dealing with real estate agents and regular showings doesn't just make the lives of the current tenants difficult but also doesn't necessarily guarantee the house being sold.
The illiquidity of real estate as an investment opportunity is a major downside.
Real estate is a naturally labor-intensive investment.
Dealing with real estate agents, tenants, damages, showings, landlords, and other employees takes a lot of effort that other investment opportunities do not require.
PART II - MOVIE INVESTMENT INTRODUCTION
The film industry has always been a massive opportunity for private and public investors alike.
Including home entertainment revenue, the global box office was worth $42.2 billion. Since film is such a vital part of society and culture, it makes sense that it has been (and still is) a major investment opportunity.
However, the mainstream film industry - as a source of investment returns and income - is risky. This is why Hollywood movie investing is usually reserved for institutional investors alone. The capital required to be substantial enough for a big-budget movie is far beyond what the average investor (including even high-net-worth investors) can afford to risk.
The caveat: movie investing doesn’t necessarily mean big-budget Hollywood movies.
Alternative movie investing has grown in popularity and appeal for individual investors due to the minimal risk and asymmetric opportunity for significant returns. Independent movies are appealing as investment opportunities because the investment capital required upfront is small compared to the unlimited potential returns.
Compared to other markets and industries, the movie business has a historic reputation for stability. Even during the worst of the last financial crisis (which brought dwindling stocks, banks destroyed, and worthless real estate), demand for movies remained stable.
Movies have continuously outperformed other investment options despite major market disruption periods. Many of the most profitable films of all time were made during world wars and major recessions! This 'protection' in the movie industry from periods of economic distress has been noted in many financial papers and discussions.
This history of non-correlation makes film an ideal alternative asset to hold against seesawing fortunes from other sectors. (Brown, 2016) Filmed entertainment as an attractive asset class
Independent movies are one of the most effective (and profitable) ways for individual investors to participate in the global film industry and the demand for motion picture entertainment.
PART III - INDEPENDENT FILM
‘Independent films’ are movies that are financed outside the major studio system. They are lower-budget than big-budget Hollywood films, making them cheaper to invest in yet offer investors a fairer and lower-risk recoupment position while also yielding much faster and better returns.
Since the 1960s, the independent film sector (which exists outside of the mainstream studio system) has emerged as a lucrative investment option. Because these independent movies focus on specialized market niches (without the need for big advertising budgets), they are occasionally 'unicorn' investments, requiring smaller upfront capital yet resulting in spectacular returns on investment.
Here’s why this happens:
A big-budget Hollywood movie (~$100 million budget) needs to make back $100 million to break even. Mainstream Hollywood movies can bring in billions of dollars in box office revenue. But, these returns are rare, so investing in Hollywood movies is typically reserved for large institutions and financial businesses.
This leaves alternative movies as a lucrative opportunity for individual investors to earn high returns in a booming industry, without needing the hundreds of millions required to invest in blockbuster Hollywood films.
Part of the appeal of independent film as an investment opportunity is the possibility of asymmetric returns on investment (as in, extremely high returns compared to the relatively small initial investment). In other words, the chance of investing in motion pictures that go on to see mainstream success - an occurrence that happens regularly - is what attracts so many individual investors to the independent film sector.
For individual investors, the ROI can be incredible. Take, for example, the movie ‘Get Out’; the budget was $4.5 million, and it made over $255 million from the box office alone (not including at-home rentals, streaming, etc.).
That is more than a 5,566% gross ROI.
What’s even more interesting is independent films become mass-market hits regularly.
Iconic movies like 'The Passion Of The Christ', 'The King's Speech', and 'Slumdog Millionaire' are just a few examples of independent movies that went on to astounding gross amounts of box office revenue, giving independent film investors an ROI (approximately 1,973%, 2,660%, and $2,420%, respectively) that is unlike anything found in other markets like real estate.
Roger Corman - Independent Filmmaker dubbed “The Pope of Pop Cinema” - is known for being a leader in the world of independent film, inspiring directors such as Martin Scorsese and Francis Ford Coppola - has made a profit on 280 out of the 300 motion pictures he has produced. (He even wrote a book about his success in film production called ‘How I Made A Hundred Movies In Hollywood And Never Lost A Dime”)
The success of independent movie producers and financiers like Roger Corman is not uncommon.
Independent film investing becoming more accessible to the average investor is a testament to the industry's profitability as a source of great returns.
With bond yields at nearly 0%, inflation on the rise, and an imminent major recession, independent movies remain an incredibly attractive investment opportunity for investors looking for safe opportunities to invest their money.
While traditional markets are determined by economic factors, films succeed based on their merit and appeal to the masses. This means investors can base their investment decisions based on who's involved in a movie, what it's about, how it's expected to perform, etc.
You have the basis for an attractive asset class, one that offers the potential of impressive — and sometimes extraordinary — returns but without being tightly correlated to other investments such as stocks, bonds, and real estate. (Brown, 2016) Filmed entertainment as an attractive asset class
PART IV - ALTERNATIVE FILM INVESTMENT VS. REAL ESTATE INVESTMENT
Here are some key benefits of alternative film, proof that being a movie financier pays more than real estate.
Unlimited Potential Return On Investment
Movies as an investment opportunity have unlimited return potential. You can make as much money as the film can sell and mitigate your investment from 20% to 100% before the first dollar comes in from sales.
This is not the case with the housing market. There is a limit on how much profit investors can make from a fixed size property, making independent film a much larger opportunity than real estate.
Real estate gains are typically small compared to the upfront risk involved, especially with real estate 'flips.' Compared to the huge potential margins and possibilities with independent movie investments, most real estate 'flips' make little to no money.
Shorter Lock-Up Period
With private equity and real estate investing, the lock-up period is usually 7-10+ years.
The lock-up period with independent film is typically only a few years (after movie distribution, 80% of cash comes in two years, while 98% comes in 3 years!)
Naturally, investments do take research to determine whether your money is likely to have good returns.
When it comes to real estate, extra time and research - compared to other investments - is needed. For example, real estate investments require public record research and hiring staff to evaluate the property (in addition to numerous other assessments).
With movies, most research can be performed online with Google. Also, most or all of the research is already completed by film financing companies (like Fourth Man Films, Inc.) and other third parties, including the risk rating.
Real estate is an inherently maintenance-heavy investment, requiring lots of upkeep and management to preserve (or increase) the property's value (the asset).
This includes constant repairs, property flipping costs, paying property managers, etc.
Film investing carries virtually no responsibility besides the initial investment.
Real estate and the housing market as a whole are historically unsteady and volatile. For example, the housing market crash of 2008 destroyed the portfolios of investors and wreaked havoc on the financial stability of the population overall.
As mentioned previously, the film industry is primarily unaffected by economics and other financial markets. Independent film is a relatively safe sector - this attracts individual investors who view it as a 'safe-haven from the volatility of different markets, especially compared to traditional investment opportunities like Real Estate.
Independent film producers (like Fourth Man Films, Inc.) prefer long-term partners.
As an investor, you get first look to invest in upcoming projects, adding to your diversification with multiple investment opportunities.
Movies As A Hedge
Even a smaller 2% to 10% investment allocation of your portfolio can act as a protective hedge investment.
Independent films are enough to balance the downside of your investment portfolio while also being a lot more fun, impactful, and easier to handle than hedging with something like gold (which doesn’t always perform like the hedge it is supposed to be).
Movies for Conservative Wealth Growth
Movies can act as the conservative protection of the wealth maintenance portion of your portfolio - you can mitigate up to 100% before the first dollar comes in from sales and enjoy only upside returns.
As the investor, you can act as a private lender or senior lender. The payback rating - according to the quantitative work - ranges from 98.6% to 100% of your invested capital.
Movies for Aggressive Wealth Growth
With its shorter-term rapid gains, movies can act as the aggressive growth portion of your portfolio. These gains can take decades to achieve in traditional and other types of investments.
Even if you are successful in real estate, it usually takes almost a whole lifetime of grinding it out to build up a portfolio of 10MM to 20MM. One successful film can potentially make that for you even if you are investing at the seed level.
Movies Versus Traditional Portfolio
With the traditional portfolio of 60% stocks and 40% bonds split, you have 40% of your portfolio, making little to no money or even consistently losing to inflation.
It would take 44 years to double your money with today's bond prices. It would take nine years to double your money with the S&P 500 which averages an annual 8% return rate versus just a few years with a successful Fourth Man Films, Inc. movie investment.
Movie theater crowds and home viewers now regularly stay to watch the credits after movies. The reason being; films now often include ‘hidden scenes’ after the final roll of credits.
Nearly all movie investment opportunities allow investors the privilege of being mentioned in the credits. This can either be the investors’ name or a visible brand logo.
This is yet another reason why investors are taking so strongly to independent films. The recognition, exposure, and authority from being listed in film credits can result in a positive ROI alone.
No Work or Staff
Arguably the most challenging aspect of Real Estate is managing people and employees.
Not only that, the need to either hire - or become - a landlord is a significant downside.
Investing in movies has almost no time or labor demands, meaning more free time and less personal labor on your part.
Faster Tax Deductions
Movie investments are 100% tax-deductible under section 168k in the IRS federal tax code.
Just like a 1031 exchange, you can rollover any over your real estate or passive income gains - tax-free - into independent movie investments, reducing your tax liability to zero.
Most accountants and financial advisors do not know about these deductions.
Make An Impact
Investing in independent movies offers individual investors the unique advantage of making an impact on the world.
Entertainment is a globally recognized business and a massive part of the culture.
Film as a whole presents investors with the privilege of getting involved with art and leaving a legacy behind for generations to come.
Although Real Estate is a mainstream alternative investment opportunity with potential upside, the risk and downsides of the market are overwhelming (especially in the 2020s).
Many individual investors would see more superior and faster returns with film financing, working alongside an independent film financing company like Fourth Man Films, Inc.
Alternative Investments can be life-changing if you do hit that home run. (Yoshida, 2019) Best investment ever? Some say alternative assets carry the day.
PART V - INVEST IN INDEPENDENT FILM
Independent film is one of (if not the only) alternative investments that offer individual investors tax incentives, exit strategies, and a 100% capital guarantee.
Despite the enthusiasm of individual investors for the opportunities that independent film investing offers, most asset managers, hedge funds, venture capitalists, private equity, accredited investors, angel investors, CPA’s tax attorneys, fund of funds, public and private companies are not aware of the space or don’t understand the possible ROI.
This leaves independent movies as a lesser-known investment for individual investors who are looking for a low-risk investment with potentially massive upsides.
The movie business has incredibly low capital entry requirements with possibly unlimited returns both in the short- and long-term.
Comparing the up-side potential vs. the risk, independent movies are better than blue-chip stocks, silver, gold, precious stones, silver, treasuries, futures, and yes, real estate.
The film business is a non-correlated asset class. If a few investors follow the asset class, the chances are good that prices will be set inefficiently, and excess returns can be achieved. (Brown, 2016) Filmed entertainment as an attractive asset class
PART VI - HOW TO ACCESS MOVIE INVESTMENTS
The best way to invest in film production and profit from it is to cooperate with a film financing company. This makes it easy for individual investors to invest in independent movies without having to qualify the movie first or perform extensive research.
Fourth Man Films, Inc. produces and controls projects from the original idea and script through distribution. We guide you through the process and suggest only the films that have great chances for success. Fourth Man Films, Inc. can also provide you with independent movie opportunities that are custom fit to your investment preferences, whether it be equity, debt, seed level, series A, series B, and at what level you want to invest and mitigate your investment.
Fourth Man Films, Inc. is an alternative investment company offering individual investors the chance to invest in films.
Every year, independent films become globally iconic movies, remaining as a cultural zeitgeist for decades. Fourth Man Films, Inc. makes it easy for individual investors to invest in movies that have massive potential for box office success, enormous returns for investors while also playing a part in a project that has a positive and inspiring impact on our country and world.
Depending on the amount of capital you’d like to invest, there are varying entry points.
These entry points include:
• Seed-Development Stage
• Series A-Film Production Stage
• Series B-Prints & Advertising Distribution Stage
Before investing in independent movies, ensure your investment meets as many of these qualifications as possible (this will dramatically increase your success rate):
• High Valued Intellectual Property aka Movie Script (Fourth Man Films, Inc. has the #1 Rated Intellectual Property in its niche genre based on Hollywood’s #5 rated script consultant)
• Original Intellectual Property
• Built-in Marketable Audience
• Set Private Placement Memorandum and Terms
THE PRODUCTION COMPANY SHOULD:
• Have Aligned Production Company and Investors
• Have a skilled producer with awareness in tax, mitigation, and high returns. (Most producers are there for the art or producer fees only, with no desire or ability to target sizeable outstanding back-end returns for its investors.)
• Have a Distribution Plan or P&A Money Sourced
• Have a Valid Comparable Revenue Range Model from a Third-Party Source
• Be focused on a Niche Genre
• Have Multiple Mitigation Strategies Available for Investors (including up to a 100% Mitigated Pre-Revenue Option)
• Be Willing to Debt Finance
• Have Domestic and Worldwide Potential
Fourth Man Films, Inc. Checks All the Boxes Above.
Investing in an Independent Movie Company like Fourth Man Films, Inc. is one of the Best Investments you can make in your Lifetime.
Fourth Man Films, Inc. has the #1 Rated Intellectual Property in its focused niche genre, based on Hollywood’s #5 Rated script consultant review.
Click the link below to book your FREE consultation today!
Corman, R (1998) How I Made a Hundred Movies in Hollywood & Never Lost a Dime
Fraser-Sampson, G (2010) Alternative assets: Investments for a post-crisis world
Brown, C (2016, May 24) Filmed entertainment as an attractive asset class (White Paper Part 1, 2, 3, 4) Filmonomics
10 proofs to show that film financing pays better than real estate investment (n.d.) Movie Investor
Yoshida, H (2019, Sep 3) Best investment ever? Some say alternative assets carry the day Forbes
Fourth Man Films, Inc.