Article 5 of 5: Real Estate As An Investment Option

This is the final installment in a series of five blogs on how Owning Real Estate Complements Stock Risks.  The series addresses the attributes and differentiating factors of real estate that pair nicely with traded stocks.  The third & fourth segments review public real estate securities, and the advantages of private real estate offerings.  

Due to their sensitivity to economic cycles, investors should intend to hold direct real estate investments for several years.

Just as attractive stocks returns are increasingly certain the longer you own them, so are buildings.  Be advised that direct real estate programs can carry significant commissions, or no commissions, depending on the structure of your advisor.1

The previous blog outlined the Advantages of Owning Private Real Estate.  In summary, versus public securities, investors in private offerings will likely capture higher yields, realize a greater percentage of investment performance, and sometimes reap greater tax advantages as well. 

Interval Funds

are structured to trade like mutual funds but with limited liquidity.  These funds typically invest mostly in large institutional portfolios, keeping some public stock and debt for liquidity.  The cash need is to fulfill quarterly redemptions, typically 5% of fund value, for up to 20% annually.  They may also have a one-year hold required to avoid a short-term trading fee that stays in the fund. Unlike mutual funds they are only available through an advisor, who may collect a commission.


Net-Asset Value, or NAV REITS are perpetual funds building a portfolio of individual properties.  They have a stated objective, to hold certain sectors of real estate and may be solely U.S. properties or up to 50% international.  Dividends are paid quarterly, can be re-invested, and typically rise to maintain a rough percentage of an increasing share value.  Liquidity is similar to Interval Funds.  Federally, investors are required to meet moderate income and/or asset thresholds.  Many states also have requirements or limitations due to redemption limitations.

Private Placements

are relatively small, narrowly focused, and riskier investments.  They may be for new development, renovation projects or even rehabilitating distressed properties.  Utmost care must be taken to evaluate the sponsors, the strategy and track records.  There are no liquidity windows, and in some cases no income distributions.  They bring the higher Accredited Investor standard, which is for millionaires or exceptionally high earners.

Delaware Statutory Trusts

(or DST’s) are designed to accept 1031 Tax-free Property Exchange proceeds.  Current tax law allows real estate sellers to defer capital gains by reinvesting all proceeds, with no lower percentage of debt.  DST’s accept these proceeds into managed real estate with no more than 2,000 Accredited Investors, and may be illiquid for 10 years or more.

If you’re interested in learning more, reach out to us about your situation.  

1 Registered Representatives, that work through Broker/Dealers are entitled to charge these commissions, which are usually in the 6% – 7% range.  Investment Advisors, who are held to a Fiduciary Standard, do not charge commissions for investments.

To start from the beginning of our series