According to a recent survey of wealth advisors and commercial real estate professionals, accredited investors are expanding their allocations to commercial real estate (CRE), with the highest interest in multifamily at the top of the list, followed by industrial and self-storage close behind.
In the same survey, the motivation behind the increasing interest in CRE seems to be focused on the above-market returns CRE offers relative to other asset classes. The wealth advisors and the CRE pros reported that their accredited investor clientele was seeking annual returns in the 10-15 percent range.
There may be another motivation for the current spike in interest in CRE, and that may be due to rampant inflation. As inflation and inflationary fears drag down the traditional markets, investors are drawn to alternatives to soften the effects of rising prices. With payroll erosion from inflation, investors are seeking alternative income streams insulated from or – in some cases – propelled by inflation.
Check out the following headlines:
“The Cost of Rent Is Where Many Americans Are Feeling Inflation Most.” –wsj.com
“Inflation Hits Renters: 11% Overall Rent Increase in 2021.” –dwellsy.com
Smart investors have countered the effects of inflation through investments in tangible assets like CRE. Why?
Because unlike stocks, which typically shrink in times of inflation, CRE appreciates. Growth and rising rents are the two main factors investors are drawn to for leveraging inflation to boost a portfolio.
While some investors pursue CRE to chase yield, others seek it to insulate against inflation and, even in some other cases, profit from it. Those are just two of the benefits CRE investing savvy investors have been tapping into for years to boost their portfolios.
Other significant benefits include:
- Non-Correlation to Wall Street.
- Tax Benefits.
- Co-Investment Opportunities.
- Diverse Geographical Opportunities.
- Leverage of Experts.
- Leverage of Capital.
- Passive Investment Income.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.