For several years now, real estate has been one of the top-performing alternative asset classes thanks to historically low interest rates. And despite rates rising some this year, our belief, and the general industry consensus, is that real estate investments will remain a good option as long as rates don’t rise too far, too fast (which we don’t expect as of this writing).
A recent Reuters article quoted Prudential Global Investment Management (PGIM) as saying:
The outlook for real estate remains very strong, though investors will need to search to find attractive income streams and sources of growth that can deliver target returns, said the investment management arm of Prudential Financial Inc.
There is no evidence of mispricing in major markets, leverage has been reduced, and prime real estate is priced around fair value, said Peter Hayes, PGIM’s global head of investment research.
“There is no obvious trigger out there that would point to a collapse in real estate values,” he said. “There’s definite investor nervousness, that’s always been the case. But there’s no evidence of systemic risk,” he said.
And a report by research firm Preqin showed that “93% of institutional investors polled said that real estate met or exceeded their expectations in 2016, while over a three-year period 42% felt their expectations had been exceeded, more than any other alternative asset class.”
The study goes on to say that investors remain confident that real estate investments will help them fulfil portfolio objectives, with more than three-quarters (77%) of investors interviewed reporting there has been no change in their level of confidence in the asset class.
Over the longer term, the report says “the majority (54%) of respondents will be looking to maintain their allocation to the asset class. Further growth in capital flowing into real estate is expected: 36% of investors plan to increase their exposure to the asset class, while only 10% will be reducing their allocations.”
How to Get Into Real Estate Opportunities
In recent years, real estate investments have become more accessible than ever to the average investor, and today, there are two primary ways to get in on the action without needing to buy property outright:
- Real Estate Investment Trusts (REITs) — are part real estate and part stock. You simply buy shares from a company that owns or finances properties, similar to mutual funds. This gives you affordable access to real estate’s core benefits—diversification, steady income streams and long-term capital appreciation. The risk is lower, but so is your control on which properties the REIT selects and manages.
- Limited partnerships — give you a more direct real estate investment without the headaches of managing the properties themselves. With a limited partnership, you have the benefit of an acting manager who handles those issues for you. However, you need to understand going in that your investment may be difficult to liquidate quickly, but the potential returns may be well worth it. We highly recommend that you work with an experienced wealth advisor when seeking these opportunities.
If you have questions about the current real estate investment market and how to gain access to opportunities, then we’re happy to help. Just click here and submit your questions. We’ll get an answer back to you quickly. No strings attached.