Investing in Real Estate

With the pundits betting that the U.S. economy is headed for a recession, commercial real estate (CRE) is expected to suffer – but it is also likely to bounce back faster than other investment sectors.  Nevertheless, over the last 20 years through market cycles, CRE has generated an average annual return roughly of 9.5%, higher than the S&P over the same period[1].

Passive investing in CRE through top-notch sponsors provides investors with current income opportunities, diversification, and potential equity upside that is not correlated to the stock and bond markets.

Furthermore, property ownership in CRE may provide asset depreciation and tax-deferred exchange.

You may depreciate the value of the properties in what one hopes will be an appreciating asset.  And, in an inflationary environment, CRE often can offset its effects via adjustments to property rents.  Finally, unlike investing in stocks and bonds, your investment in real property will always retain a certain value[2] and, in most cases, should outperform inflation.

Investment opportunities abound within U.S. commercial real estate.  With 18,000 commercial management companies, a passive investor has no end of opportunities from which to choose.

But they are not alike.  Real estate investments come in multiple forms and offer unique benefits.  For those newer to this area of investing, Carofin has developed the following to help you become more conversant with the real estate sectors we plan to offer first.  These include:

  • Multifamily Apartments
  • Hospitality Properties
  • Triple Nets (NNN)

Other popular categories include Senior Living, Industrial,  Healthcare Real Estate, Single Family Rentals, Student Housing, and Low-Income Housing (Section 8).

Experience tells us that it’s more important to back the rider than the horse.  In other words, finding the right commercial real estate (CRE) sponsor, with the experience and track record in its niche, is a key to a successful investment.  Feeling confident we have the right sponsors, the following focuses for now on multifamily apartments, hospitality properties, and triple nets.

[1] These returns cannot be guaranteed, and past performance is not a guarantee of future results.

[2] While the property itself will retain value, it is important to consider your position in the capital stack in each CRE investment you make; if you are an equity holder, lenders to the fund or project would have first claim on this value in the event of bankruptcy or liquidation.





In the interest of accessibility, here are some terms that any investor should be familiary with.