Making Passive Investments in Real Estate

Diversified investment portfolios, including investment in real estate, is more important than ever, according to Don Wenner,Founder and CEO of DLP Real Estate Capital, in a post on Forbes. Wenner notes that real estate is now a safe investment for a diversified portfolio, as we are now experiencing an unprecedented undersupply of housing, and this undersupply makes it unlikely that stock market volatility will lead to lower housing prices or that real estate will cause the next economic downturn.

“Also, unlike stocks, real estate is a tangible, physical asset that serves an ongoing purpose,” said Wenner. “Real estate investments provide portfolio stability in large part because society will always need physical facilities in which to live and work.”

Additionally, there are more types of real estate investment than flipping or renting. Wenner notes that importance of “passive” real estate investment, such as private real estate funds. These funds are available to the general public through firms like Wenner’s, and the fund does all the work with little to no investor interference or effort. The work falls on the manager of the fund.

For these passive investors, multifamily housing is outperforming single-family rentals in returns, particularly “workforce housing,” or housing “that can be reasonably afforded by a moderate to middle income, critical workforce and located in acceptable proximity to workforce centers.”

Despite the demand for multifamily, the single-family rental market is heating up. Data from CoreLogic’s 2018 SFR report indicates that its single-family rental index increased 4.1% since January 2018, noting that low rental home inventory, relative to demand is fueling the growth of single-family rent prices.

“Single-family rentals make up one-half of all residential rentals but are an overlooked segment of the housing market,” said CoreLogic Principal Economist Molly Boesel. “Much like the rest of the housing market, single family rentals are affected by market forces and fell rapidly during the Great Recession. They have since bounced back strongly from their low point in 2010, mirroring house price growth.”