History of Results
The National Council of Real Estate Investment Fiduciaries (NCREIF), private market commercial real estate returned an average of 8.4% over the 10-year period from 2000 to 2010 (details). This strong performance was achieved even during the early years of the worst recession. Of course don’t forget past performance is not a guarantee of future results.
Typically private real estate has lower volatility relative to equities and bonds. Volatility is one type of risk, so by mitigating this risk and still maintaining relatively high returns the result is a compelling risk-adjusted return in real estate.
Typically private real estate is less correlated to stocks and bonds therefore has historically been a great hedge against market cycle changes in other parts of the economy.
There are the basic tax benefits of depreciation and interest deductions against real estate income available. However there are also exciting and more advanced tax benefits to real estate such as 1031 tax exchanges and the potential of investing in real estate through your tax-deferred accounts such as an IRA.
Unlike stocks and bonds an investment in real property is backed by a physical thing ie “bricks and mortar”. This means that it takes much more than just fear to devalue real estate whereas fear can decimate the value of other investments overnight.
Nothing herein should be regarded as investment advice or as a recommendation regarding any particular investment or course of action. All investments entail risks. There is no guarantee that investment strategies will achieve the desired results under all market conditions and each investor should evaluate its ability to invest for a long term especially during periods of a market downturn.