If you were to win the lottery, what would you do with the money? Perhaps purchase a $47 million mansion in Los Angeles, complete with a champagne room and DJ turntables?
That’s apparently what Powerball winner Edwin Castro has recently done, according to USA Today. The publication says it’s his third high-value property purchase since he won his $2 billion jackpot last year — he also bought a $25.5 million in the Hollywood Hills neighborhood and a $4 million home in Altadena, California.
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But financial observers believe Castro is making big mistakes with his newfound fortune. Experts interviewed by Fortune say that buying up luxury items like fancy cars and houses after a big windfall can put you on a fast track to bankruptcy.
Paul Karger, co-founder of wealth advisory firm TwinFocus, told the magazine that luxury homes often become “a major ongoing financial burden that took several years to sell.”
Simply maintaining a home can cost 1% to 4% of its value annually, which means Castro could potentially spend millions of dollars each year just to hold on to these properties.
So if real estate isn’t necessarily the best way to spend your fortune, what are other ways to diversify your investments?
Alternative real estate investments
Buying million-dollar homes may not be wise for lottery winners, but clearly nobody told Castro about alternative real estate investments. These are investments that get you in the real estate market without having to own a physical property.
Real estate investment trusts (REITs) are one of the ways to do just that. REITs own profitable real estate investments, like apartment buildings and shopping centers. You receive dividends from the rent that they collect – all without the hassles that come with being a landlord.
Read more: Thanks to Jeff Bezos, you can now use $100 to cash in on prime real estate — without the headache of being a landlord. Here’s how
Artwork investments
Billionaires don’t invest in art just for a pretty picture on the wall, but because it can be a great investment. ArcTactic reported a 64% increase in single-owner sales value in 2022.
Though some art pieces can sell for millions of dollars, you don’t need to win the Powerball to invest. You can become a “fractional investor” in a classic work of art. It’s similar to investing in a stock: you don’t own the entire painting, but just a share of it. Plus, you don’t have to spend hours scouring galleries for the right piece or store it yourself.
Alcohol investments
It’s said that wine gets better with age. That goes for taste and sometimes value as well, as bottles of fine wine become more rare with each passing year.
It’s possible to invest in wine by purchasing your own bottles — but that requires a place to store them at the right temperature, and wine cellars can cost tens of thousands of dollars.
But since not all of us have won the lottery, you can use a wine investing platform that does the hard work for you instead. That includes selecting, storing and insuring bottles of wine — and they’ll even suggest good times to sell.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
