Alex Rodriguez And Bill Gates Just Made Real Estate A Higher Percentage In Their Portfolios — Here's How You Can, Too

Celebrities and high-profile investors have turned to real estate as a vehicle for long-term appreciation and market-hedging diversification. 

In recent years, business magnate Bill Gates, the world’s fifth-wealthiest person, increased his investments in the historically stable asset class and become the largest private landowner in the United States. 

The former New York Yankees great Alex Rodriguez has heavily leveraged his earnings as the highest-paid player in Major League Baseball history into the real estate sector. Rodriguez founded A-Rod Corp, an investment firm focusing on real estate investment, and with his business partners co-founded real estate development firm Newport Property Construction. In a 2021 interview with investor Grant Cardone, Rodriguez stated, “I have two regrets in real estate. I didn’t buy enough, and I sold.”

With signs of a cooling real estate market as interest rates rise and inflation lingers, following the lead of Gates and A-Rod may not be a bad direction for prospective investors to pivot. 

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Real estate historically has been more resilient than other asset classes such as stocks and bonds. Between 1970 and 2010, the average annual return for U.S. real estate investments was 8.6% compared to 4.2% for stocks and 2.7% for bonds, according to an Urban Land Institute report. 

First-time buyers made up only 26% of homebuyers in 2022, according to the National Association of Realtors’ Profile of Home Buyers and Sellers report. This is a steep drop from 34% in the prior year and represents the lowest share of first-time buyers over the 40 years the organizaiton has been been tracking the information. Institutional investors and private real estate investment firms are increasingly filling the void left by everyday homebuyers squeezed out of the market. 

Although typically a long-term investment, real estate can generate passive income through rents received. The goal of real estate investment is to receive a steady and predictable stream of rental income while the property appreciates over time, creating equity and eventual profit down the line. 

The high cost of investing in real estate is a barrier to many everyday investors and maintenance and management also can be expensive. The average amount spent on repairs and management falls between $4,600 and $5,400 per unit each year, according to the research organization Brookings Institution.

Fractional ownership is an avenue to real estate investment for those without the means to purchase entire properties or keep up with management expenses. Shareholders are off the hook for maintenance costs as well as being a landlord.

With fractional investment, investors purchase shares of a property in exchange for passive income generated from rent payments in proportion to their percentage of ownership. When the property is eventually sold at the end of the designated holding period, profits yielded are also distributed based on owned shares.

Retail investors can browse fractional offerings on Benzinga’s Real Estate Investment Screener, which has investment options starting with as little as $100.

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Image source: created from Shutterstock and Carlos Correa and Alex Rodriguez meet before Game 4 of the 2015 World Series. Photo via Arturo Pardavila III, Wikimedia.