With inflation rising to levels not seen since the 1980s, many people are turning to alternative investments, such as real estate, to generate passive income and hedge against stock market volatility.
Commercial real estate accounts for 14% of the US investment market and is the third largest asset class after bonds and equities, according to Nareit, an association representing real estate investment trusts (REITs) and publicly traded real estate companies with an interest in the United States. Real estate.
While you might think that investing in real estate is a practical strategy that requires you to collect rent and maintain property, this is not always the case.
Here are three real estate investment strategies you should consider.
Investing in real estate investment funds
Real estate investment trusts, which are traded like stocks, own and manage income-producing properties. They own many types of real estate, including office buildings, warehouses, hotels, and hospitals. Finally, REITs hold more than $3.5 trillion in real estate assets across the country.
REITs outperformed the S&P 500 index last year. They returned 40.11%, compared to S&P 26.89%.
Many REITs, which typically provide investors with a steady income stream in the form of dividends, are listed on major stock exchanges. This means that if you need your cash, you can just sell your shares – as opposed to owning actual property that can take months or even years to sell.
Among the fastest growing real estate funds are Boston properties (BXP 1.28%)Ltd., developer, owner and manager of Class A office properties in Boston, Los Angeles, New York, San Francisco, Seattle and Washington. BXP shares are up 17.23% this year, and their annual dividend yield is 3.16%.
If you are interested in retail real estate, you can invest in it Kimco Realty, which focuses on grocery shopping malls. Kimco’s stock has ranged between $19.54 and $26.53 this year. The REIT’s dividend yield is 3.01%.
There are also industrial REITs such as Prologieswhich invests in warehouses, or hospitality REITs such as Summit Hotel Features or Apple Hospitality.
Own a stake in several properties
Crowdfunding gives investors access to privately owned real estate that may be too expensive to purchase outright.
CrowdStreet, for example, enables users to invest in institutional quality real estate across the United States. Since its launch in 2014, the platform has raised $3.16 billion in capital and returned $591 million to investors, according to the company’s website.
CrowdStreet’s investment options include diversified funds, individual deals, and tailored, professionally managed portfolios.
Another crowdfunding platform – DiversyFund – is open to all US investors, not just approved ones, and you only need $500 to get started.
The company raises capital for multi-family properties that it puts into a DiversyFund Growth REIT and uses the real estate cash flow to refurbish properties to add value. The average annual return is 17.6% and the company pays out quarterly dividends.
Own real estate as part of an alternative asset fund
For people who do not want to take an active part in their investments, funds like Hedonova may be worthwhile. The company has reported an internal rate of return of 55.2% since its inception in 2020. Real estate investments represent 11% of the 12 alternative asset classes in Hedonova’s fund.
Hedonova, which considers itself an open hedge fund for everyone, invests in all kinds of alternative assets, which helps reduce risks to a minimum. In addition to real estate, Hedonova invests in start-ups, arts and wine, and real estate. The company charges a performance fee of 10% on capital gains and a management fee of 1% annually.