How Do The Rich Invest In Real Estate?

The most common way for the average investor to invest through real estate is to purchase stock interests in a real estate investment trusts (REITs). This comes with three advantages: (1) You get diversification across hundreds if not thousands of properties; (2) You get professional management of the properties; and (3) you get liquid marketability of your investment because you can sell it instantaneously online as easily as a stock.

However, among households with net worths in excess of $2.5 million excluding the value of their primary residence, approximately 34% own real estate outright without any REIT investments, 18% own REITs exclusively, and 15% own both real estate outright as well as REITs. The advantage of owning real estate outright is that you get to benefit from the tangibility, control, and passive activity loss rules that buyers of REITs do not receive.

Continue Reading!