Why Invest in Commercial Real Estate? The Importance of Diversification in your Investment Portfolio

Whether it be in operating-cash-flow properties or simply long-term holdings, the more diverse your total investment portfolio is, the less risk you'll expose yourself to. This also means a greater likelihood of hitting your target returns.

Most individual investors invest almost exclusively in stocks and bonds, while most institutional investors put a sizable portion of their funds—sometimes 15-20%—into real estate and other alternative investments for benefits you may not be able to find elsewhere.

Benefits of Real Estate Investing:

  • A hedge against inflation: Real estate has the potential to hedge against inflation because rents and property values typically increase as consumer prices rise.
  • Less reactive to changes in the stock market: A drop in the stock market does not necessarily correlate to a drop in commercial real estate as real estate is often a longer-term play. Extended lease terms, sensitivity to development activity, and various other factors give commercial real estate the ability to reduce portfolio volatility through diversification.
  • Tax advantages: Real estate investments can capitalize on various tax advantages, such as mortgage interest write-offs and depreciation deductions. 
  • Increased buying power and potential returns thanks to leverage fueled by debt (purchase loans). 
  • Potential for growth: Real estate investments may rise in value at maturity from appreciation, unlike bonds and other fixed income. 
  • Higher annual dividends: According to Real Capital Analytics the average cap rate for all property types in the United States in 2013 was 6.73%. The average dividend yield for S&P 500 was 1.9%

From office and industrial to retail and multi-family, Acquire analyzes each deal -- and invests in it ourselves -- prior to offering it to our clients. That means you can diversify your portfolio with confidence, choosing pre-screened, high-quality properties that suit your own investment goals and appetite for risk.

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