As inflation hits 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 U.S. investment market and is the third largest asset class behind bonds and stocks, 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 may think that investing in real estate is a convenient strategy that requires you to collect rent and maintain a property, that’s not always the case.
Here are three real estate investment strategies you should consider.
Investing in REITs
REITs, which trade like stocks, own and operate income-generating real estate. They own many types of real estate, including office buildings, warehouses, hotels, and hospitals. In total, REITs own more than $3.5 trillion in real estate assets across the country.
REITs outperformed the S&P 500 last year. They returned 40.11%, compared to 26.89% for the S&P.
Many REITs, which typically provide investors with a steady stream of income in the form of dividends, are listed on major stock exchanges. This means that if you need your money, you can simply sell your shares, unlike owning real property which could take months or even years to sell.
Among the fastest growing REITs are Boston Properties (BXP -2.65%), 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 its annual dividend yield is 3.16%.
If you are interested in commercial real estate, you can invest in Kimco Real Estate, which focuses on malls anchored by a grocery store. Kimco shares have ranged from $19.54 to $26.53 this year. The REIT’s dividend yield is 3.01%.
There are also industrial REITs like Prologiswhich invests in warehouses, or hotel REITs such as Summit Hotel Properties or Apple Hospitality.
Own a share of multiple properties
Crowdfunding gives investors access to private real estate that may be too expensive to purchase outright.
CrowdStreet, for example, allows users to invest in institutional-grade 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 transactions and professionally managed bespoke portfolios.
Another crowdfunding platform – DiversyFund – is open to all US investors, not just accredited ones, and you only need $500 to get started.
The company raises capital to acquire multi-family properties which it places in its growth REIT DiversyFund and uses cash flow from the properties to renovate properties to add value. The average annual return is 17.6% and the company pays quarterly dividends.
Owning real estate as part of an alternative asset fund
For people who don’t want to take an active role in their investments, funds like Hedonova may be worth considering. The company has posted 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 the Hedonova fund.
Hedonova, which advertises itself as a hedge fund open to all, invests in all kinds of alternative assets, which helps to minimize risk. In addition to real estate, Hedonova invests in start-ups, art, wine and real estate. The company charges a performance fee of 10% when capital gains are realized and a management fee of 1% charged annually.