The Best REIT Alternatives for Passive Real Estate Investing

The post Best REIT Alternatives for Passive Real Estate Investing by Eric McConnell appeared first on Benzinga. Visit Benzinga to get more content like this.

When it comes to investing and building wealth, real estate investment trusts (REITs) have long been a preferred investment vehicle for institutional funds and private investors. The reasons are obvious. REITs are diversified portfolios of commercial real estate that fulfill several key roles for investors.

First, they provide a strong hedge against stock market volatility because, historically, real estate values ​​and stock prices have not been inextricably linked. Second, REITs offer investors a chance to double their profits as the REIT’s assets appreciate in value while providing passive income. While all of these things make REITs great investment options, there are other ways for investors to gain REIT-like benefits without actually buying into REITs. Keep reading to learn more about REIT alternatives.

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Why would investors want a REIT alternative?

It certainly appears that REITs offer an attractive package for investors. This raises the question of why anyone wishing to invest in real estate would seek out a REIT alternative.

One reason is that most REITs are publicly traded, which makes them vulnerable to stock market volatility. Most REITs that are not listed on a stock exchange are considered private REITs, in which the majority of investors are not allowed to invest.

Many private REITs have high investment minimums – sometimes as high as $50,000 or more – and are only available to accredited investors.

An accredited investor is someone whose annual salary is over $200,000 or whose net worth is over $2 million. It’s definitely a club any investor would want to be part of, but these membership requirements are pretty exclusive.

If you don’t meet the investor qualification threshold for private REITs but still want to invest in institutional-grade real estate without the wild price swings of the stock market, the good news is that there are very solid real estate funds that you can buy. in.

Not only do these funds have the potential to generate strong returns, but they are much more flexible in their investor needs.

Here are two great REIT alternatives

CalTier Multi-Family Portfolio Fund

Cal Tier is a San Diego-based real estate investment firm established with a mission to make real estate investing accessible to more people. To that end, she created the CalTier Multi-Family Portfolio Fund. This fund consists of eight to ten multi-unit residential properties in some of the fastest growing US real estate markets, primarily in the Sun Belt.

The Multi-Family Fund assets were chosen for their potential to increase rent and overall asset appreciation value. Most of the fund’s assets are value-added, meaning CalTier is banking on a combination of renovations, aggressive leasing and continued population growth in the markets in which its properties are located to deliver returns for investors.

The multi-family fund projects an 8% annual return for investors and accepts contributions from Individual Retirement Account (IRA) holders. Interested investors can purchase shares for $5 and the only entry requirement is the purchase of 100 shares. Additionally, CalTier offers early redemption options (with restrictions), which many REITs do not.

CalTier’s multi-family fund offers investors the ability to get a stake in institutional-grade real estate assets for just $500 and the flexibility that comes with a secondary market if they want to liquidate stocks sooner. It all adds up to a rock-solid REIT alternative.

Fund the IRA

Another obstacle to investing in REITs is that many REITs and real estate investment offerings do not accept contributions from Individual Retirement Account (IRA) holders. While the reasons for this are too numerous to list here, the net effect is that many IRA holders are shut out of real estate deals, which is ironic because real estate offers the kind of long-term returns for which IRAs are designed. This is where the Fund the IRA can help.

Fundrise is a well-respected online investment platform that prides itself on providing institutional-grade offerings to investors without the high fee structure that normally accompanies them. The Fundrise IRA offering is a diverse mix of multi-family, single-family and industrial rental assets.

These assets are strategically spread across several real estate markets, both to maximize upside potential and to minimize the effects of a downturn in one or more markets. Like a REIT, the Fundrise IRA pays investors a double portion of profits through dividends and appreciation of the property.

The holding period is set at five years, but there is also a limited secondary market for Fundrise shareholders. As is the case with all secondary markets and early stock liquidations, this is subject to restrictions, and IRA holders should take special care to ensure their withdrawals do not incur penalties. tax. With all of this, the Fundrise IRA remains a great alternative to a REIT for real estate investors.

Alternatives to REITs exist

Everyone would like to be an accredited investor wealthy enough to deposit $25,000 to $50,000 in a REIT and let that money earn passive income over a period of five to seven years. Unfortunately, not everyone falls into this category. On the positive side, the rise of real estate crowdfunding platforms and syndication has created a positive shift in investors’ ability to access institutional-grade real estate offerings.

In fact, some real estate fund offerings are of such quality that even traditional REIT investors would be wise to consider taking advantage of them. As always, every investment involves a risk of loss, so think carefully about any investment and consult your financial advisor before committing. In the meantime, keep your eyes peeled. Because there will probably be more funds opening up in the future.

Learn more about real estate investing

  • Complete Guide to Real Estate Investing
  • What are REITs?
  • Real Estate Crowdfunding – A Guide for Investors
  • An introduction to real estate syndication

The post Best REIT Alternatives for Passive Real Estate Investing by Eric McConnell appeared first on Benzinga. Visit Benzinga to get more content like this.


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