Banks Got You Scared? What High Profile Investors Are Doing

During times of economic uncertainty, investors look for different strategies for their portfolios, and real estate often emerges as an opportunity. 

Unlike stocks and bonds, which are volatile and heavily influenced by market fluctuations, real estate historically is one of the more stable and resilient assets because of its relative insulation from turbulent market conditions. 

High-profile investors, private real estate investment firms and institutional buyers often invest in real estate to diversify and grow their portfolios because of the resilience of the asset class.

During the 2008 financial crisis, home prices declined by an average of 33%, according to the Case-Shiller Home Price Index. Home prices quickly rebounded and by 2013 had returned to their pre-recession levels. 

The median home price increased by 98% between 2010 and 2020, according to the National Association of Realtors. People who invested in real estate during the housing price dip reaped the benefits once the market recovered and home values appreciated. 

Owning real estate generates two types of income: rents received and an appreciation in value. Rental income from residential properties has generally outpaced inflation, according to the Joint Center for Housing Studies of Harvard University. Home values also typically increase over time, generating profits for investors when they sell them.

The National Council of Real Estate Investment Fiduciaries (NCREIF) found the average annualized return for residential estate investment in the U.S. from 1990 to 2020 was 9.68%, outpacing the S&P 500 during that same timeframe. 

Additionally, real estate investments, whether residential, commercial or industrial, typically offer tax benefits for investors. Tax advantages such as depreciation deductions and the ability to defer capital gains through 1031 exchanges, help investors maximize their returns and reduce their overall tax liability.

Investing in real estate is usually difficult for average investors because of the high cost of acquiring investment properties and the expense of managing and maintaining it. Property management is often costly with the average amount spent on repairs and management falling between $4,600 and $5,400 per unit each year, according to the research organization Brookings Institution. 

But the advent of fractional real estate investment makes it possible for individual investors without the funds to buy entire properties to add real estate to their portfolios. Through fractional investment, investors can own shares of real estate without the hassle of property management and playing the role of landlord.

The Arrived Homes platform offers fractional real estate investments, making it possible for those without the financial wherewithal to purchase property to add real estate to their portfolios. The real estate platform offers shares of single-family rentals for as little as $100. 

Open to accredited and nonaccredited investors alike, Arrived Homes offers fractional ownership in rental properties as well as vacation rentals that get marketed and booked on popular travel websites such as Airbnb and VRBO. 

“We’re built for people who want to invest in real estate but don’t want to buy a whole home or deal with the operational headaches,” according to Arrived Homes. 

With new properties offered on the site weekly, prospective investors can stay up to date through Benzinga.